Democrats on the House Ways and Means Committee wrote a letter on the Tuesday before Thanksgiving to Rep. Dave Camp, Michigan Republican and Ways and Means chairman, urging him to devote some committee time to extending federal unemployment benefits. At issue is the Emergency Unemployment Compensation (EUC) program, enacted in 2008 to offer qualifying unemployed workers benefits above and beyond what are available during normal economic times. Typically, the federal-state Unemployment Insurance (UI) system offers 26 weeks of benefits to qualifying unemployed workers. Given the severity of the Great Recession, Congress and the president correctly decided to extend the maximum duration for which workers could receive unemployment compensation. Partly because of EUC, some unemployed workers could receive benefits for up to 99 weeks. Even in the depths of the recession, “99 weeks” became notorious in certain conservative circles.
The program has been extended several times, and is scheduled to expire again three days after Christmas. An estimated 1.3 million workers who have been unsuccessfully looking for a job for 27 weeks or longer (the “long-term unemployed”) will immediately lose benefits if the EUC program is not extended.
The expiration of EUC thus provides an opportunity for conservatives to consider their response to the serious problem of long-term unemployment. The left’s answer is clear: Extend UI benefits. What should the conservative response be?
Some conservatives dislike unemployment insurance, arguing that it amounts to the government “paying people to stay unemployed.” If the government were to cut off benefits, the logic goes, then the unemployed would search harder for jobs, be more willing to take a less-than-perfect-but-still-adequate offer, and the unemployment rate would fall.
There is a kernel of truth here, of course—in order to qualify for benefits a worker must be unemployed. But there are other qualifications to receive benefits in addition to being unemployed: among them, that the worker must be able to work, available for work, and actively seeking work.
Even given these conditions, it is easy to imagine some unemployed workers fitting the conservative stereo-type; you can probably picture a young, unmarried man, without any kids, laid off in a reasonably good economy, taking a couple of weeks of government-funded vacation before really starting his job search in earnest. And the weight of the evidence is that unemployment insurance does extend the duration of jobless spells, even if the magnitude of that effect is relatively small during serious economic downturns.
Having said that, it is quite hard to imagine that a significant number of workers who have been unemployed for 27 weeks or longer are engaged in a halfhearted job search because they don’t want to lose the leisure time their $300-a-week check allows. It is also hard to believe that UI is significantly contributing to long-term unemployment, given its demographic makeup. A report released this summer by the Urban Institute found that nearly half of the long-term unemployed in 2012 had at least some college education. More than 1 in 10 were college graduates, and 4.5 percent held advanced degrees. Nearly two-thirds of the long-term unemployed were in their prime working years, between the ages of 26 and 55. Nearly one-third were parents, and a little over one-third were married.
In other words, a large share of the long-term unemployed are people with relatively high earnings potential and personal responsibilities that extend beyond themselves. It is hard to imagine an educated worker in her prime working years with a kid at home having allowed a $300-a-week check to stand between her and a strenuous job search for over half a year.
Why, then, are the long-term unemployed finding it so hard to get a job? Simply put, the labor market has yet to heal. Aggregate demand is still weak. The 7.3 percent unemployment rate is quite high. The share of the population aged 25 to 54 with jobs fell by a staggering 4.9 percentage points during the recession, and has recovered only 0.6 percentage points of that loss. The ratio of unemployed workers to job openings has fallen to 2.9 from its July 2009 peak of 6.7, but it is still considerably higher than its pre-recession average. On top of a lousy labor market, there is growing evidence that the long-term unemployed are unattractive to employers simply because of the length of their unemployment. Hiring managers are asking, If no one else has taken a chance on this worker, why should I? Maybe previous employers have seen something wrong with this worker that I haven’t yet.