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Your Take: Does Unemployment Insurance Reward Laziness?

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Jobless Men Keep Going, Try Wall Street, They Pay BonusesThe Huffington Post shared the thoughts of Sen. Jon Kyl (R-AZ) on unemployment this week:

Unemployment insurance “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work,”

The title of the article is a little misleading. In quotes, Kyl said that benefits dissuade people from job hunting, not that they “make people not want to get a job,” as the title states. While I didn’t hear or read about the debate, it seems like a stretch to take the quotes and twist them to match the title.

However, unemployment benefits do act as a disincentive. You get unemployment benefits when you are unemployed, you don’t get them when you are employed. If you remain unemployed, you get paid for not working… so in that respect Kyl is right. Given that base unemployment benefits lasts 26 weeks (not including the extensions from the stimulus package), I’m inclined to think that it’s not unfair for Bunning, or others, to ask how we are going to pay for these things especially if we’re extending benefits again.

While the initial 26 weeks are funded by my employer and myself, through past payments, the extensions, in theory, aren’t. They’re funded by current workers and are taken from their future benefits, should they ever need them. I’m not well versed in how it all works but that’s just my layman’s understanding of it.

If I lost my job and was on unemployment, my initial sense of urgency at finding another job would be much lower than if I didn’t have unemployment benefits (once I got over the sting of being fired). If I just need to meet the job hunting requirements to receive unemployment benefits, I’ll do that while I search for the “right” job and not the “right now” job. I would rethink my career, a la Lemonade, and not rush to find income. Without unemployment benefits, I would be less likely to do it… so in a sense the benefits act as a disincentive.

What are your thoughts on unemployment benefits and whether they reward laziness? Did you think Bunning blocking the bill because he wanted the Senate to follow its own PAYGO rules were justified?

(Photo: notionscapital)

{ 190 comments, please add your thoughts now! }

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190 Responses to “Your Take: Does Unemployment Insurance Reward Laziness?”

  1. Ronald Jay White says:

    I think everyone handed a Government check (under the age of 65) should have to be drug testing before they are allowed to pick up their checks.

    • bub says:

      I agree. Guilty until proven innocent on the drugs that can not be taxed! And they should be allowed to win lotto either. What are they doing gambling if they are not working?

    • Shirley says:

      Kudos for that thought!
      CA might even balance their budget if that prerequisite was held throughout their many programs.

    • Ali says:

      AMEN! especially people in their 20’s and 30’s who are young enough to job search and work, but decide to do it the lazy way and draw unemployment from being laid off or fired.

  2. Izalot says:

    Unemployment is a joke. There is an incentive for an individual to sue a company if they felt they were “wrongly” fired and therefore entitled to unemployement benefits. If you are fired, laid off, etc… Spend your time and energy in looking for another job! If it means looking beyond your specialization so be it.

  3. Riaz Virani says:

    The devil is really in the details. The vast majority of those laid off weren’t high earners, so it’s reasonable to assume they might have become destitute if not for unemployment. Depending on the state, unemployment is not a very big sum of money. You can’t survive off of it. You can barely buy food off of it.

    The question isn’t whether unemployment insurance disincentivizes people in theory. The point is whether unemployment actually keeps people off payrolls. The answer in all but a few exceptions is no. Unemployment insurance is a small enough protection that it helps those fallen on hard times without really creating a dependence on those checks.

  4. Cathy Green says:

    There are two ways of looking at this. I personally have never lost a job and have never had to collect unemployment insurance. However, I do have some family members who have. Trust me, these are educated people who are not lazy. They wanted a job. And they have jobs now. My sister recently found herself unemployed in this crazy economy and she had to collect the insurance. Things happen. My sister now has a job.

    On the other hand, I own a maid service business and I have to pay unemployment insurance. I have seen first hand former employees take advantage and the state of Maryland is just awful in giving such insurance benefits to those who clearly don’t deserve it.

    Quickly: A woman came to work for me. She was the mother of 5 children and she was only 24 years old, unmarried. She cleaned 3 houses and I had to let her go for the fact that she was incompetent. To my surprise, the state of MD actually gave this woman unemployment checks, knowing that she only cleaned 3 houses before I fired her.

  5. All the times I have been unemployed over the past ten years due to layoffs has never stopped me from looking for work and taking anything I could get. Unemployment insurance obviously does not pay what I was earning in my previous jobs, and it does offer me group health insurance and another benefits and COBRA was always too expensive. Unemployment insurance just helped me pay rent and eat, and not much else. Unfortunately, I rarely earned enough to have a significant emergency fund.

  6. Rick says:

    When I was still working if you were fired you
    could not get unemployment. About 45 years ago
    I had a disagreement with a fellow worker. He
    got upset and walked off the job. There was no
    physical altercation involved. I went back to work and finished the day. By the way my other
    fellow employees were applauding me as they as
    had problems with this individual as well. The next morning when I went to clock in I was told
    not to bother,by the foreman.I asked do I tell
    them I was fired or laid off. He said tell them
    you were laid off. I did this I was called
    into a back office and interviewed. I told what
    had happened to the gentleman.I also relayed my
    conversation with the foreman. He told me that

    they said I was fired. He said I believe you but that he would have to penalize but it would be the minimum which was a week. There is more to the story but I will not go into it. I will say that former employer tried to
    hire me back. I said no. Unemployment was based on a fraction of what you made and believe me that was not enough to live on. I
    never did but knew some guys who would work
    under the table while drawing unemployment.

  7. thomas says:

    I’d fully take advantage of any “free” money being thrown my way. Unemployment isn’t as much of a disincentive as welfare, but I might enjoy a few months off – get stuff down around the house, pen the next great American novel, etc.

  8. eric says:

    I’m a bit on the fence. I think unemployment benefits should exist but should NOT be extended if funds are not available. As long as the money is coming from the employer/employee through past payments, then there is a reason to use those designated funds. However, bothering against the future is a lose-lose situation in my opinion and shouldn’t be done.

  9. I do not see it as lack of motivation. Most households live paycheck to paycheck. When that stops, it is very hard. This is not going to equate to the amount you were making, it is only a bridge and allows you go into survival mode (cutting expenses to the core)

  10. aua868s says:

    I heard from a colleague that they percentage of population getting unemployments is not included in the total unemplyment rate….and also that it if included that would make the total rate about 20%

    • aua868s says:

      sorry for the typos…..I heard from a colleague that the percentage of population getting unemployment benefits is not included in the total unemployment rate….and also that if included that would make the total rate about 20%

      • jsbrendog says:

        this is just another example of how you can’t trust numbers when theya re thrownn at you to try and sway you to their side or to prove a point. numbers can be manipulated to make someone look good or bad. in this case the numbers seem to be (if this is true) twisted to make it seem better than it is.

        it is like the disclaimer in little text at the bottom of the pizza hut all pizzas 10 bucks commercial that says stuffed crust $1 extra.

        or it brings to mind anchorman:

        wes mantooth: yeah but that doesn’t take into account houses with more than one tv set!

    • freeby50 says:

      That is not correct. People taking unemployment insurance are absolutely counted among the unemployed.

      They were probably talking about people who are “underemployed” meaning they took a part time job or job lower than what they are qualified for.

  11. Libby Davis says:

    I didn’t read all of the comments but find myself appalled at those who think it is a disincentive to work. Are there individuals who abuse the system – yes, absolutely, there are in every system – public or private. I saw one commenter who described unemployment as prison. I somewhat agree with that sentiment.

    I, for one, would be living on the street right now had it not been for unemployment.

    My company was acquired right at the same time the sky fell in the fall of 2008. I started looking for work anticipating a layoff could happen a few months beforehand but jobs were already drying up and as someone with 15 years work experience I was more qualified than most of the available jobs and HIRING MANAGERS wouldn’t give me the time of day regardless of the fact that I was 100% willing to take a lower paying job.

    Fast Forward to 13 months of unemployment; tried starting my own business – one of thousands in the mix, volunteered, networked, didn’t just rely on the send-in-my -resume-and-hope-something-happens method and it STILL took 13 months to get a job. At a 55% pay cut.

    $350 a week was a big hit from $140K a year but helped pay the mortgage. I had a contingency fund that I could have lived off for 8 months but then what? Those last 5 months I would have been homeless. By having unemployment I could pay my modest home payment, then use my savings for crazy things like electricity, gas and food. And lucky me there is still a tiny bit left in that fund now that I am working again.

    I had to turn in job search reports to the unemployment office and check in on a regular to keep my benefits. In the end I officially applied for over 300 jobs before finding one.

    Like I said, sure abuses occur and some effort to curtail that should move forward, BUT these are different times. Legislators are picking a bad time to get indigent about something that has been a problem for years. Try to address the problems but realize there are many many people who never imagined they would end up on unemployment for a year or more..I sure never did. and for anyone to suggest that ALL people who take the unemployment benefits have no incentive to find a job I say walk a mile in some of our shoes, then try to say that.

    • aua868s says:

      i admire your perseverence and the ability not to fall into the “oh-this-job-is-loo-for-me” crap/trap…kudos

    • govenar says:

      I don’t think most people are arguing that unemployment benefits should be completely removed, just that it’s excessive to extend them for such a long period of time. For example, in your case you really needed 5 months of unemployment; doesn’t 99 weeks (around 24 months), as some states give, seem excessive?
      Also, you said you were paying your mortgage with your unemployment benefits? Is owning a house really so necessary for survival that the government should pay for it? What about renting a cheaper apartment or moving in with family?

      • Shirley says:

        First, yes, 24 months does seem excessive.

        Consider that “modest home payment” could be well below the cost of even a “cheap apartment” and home sales were definitely in the basement. Foreclosure would only add tobthe woes. Moving in with family may not be an option. It sounds to me like Libby was doing everything possible to alleviate a bad situation and had made prior efforts to try to avoid it.

        This case is one where UI was necessary, deserved, and well used. It is a classic scenario of the intent of the program.

      • Anonymous says:

        not when there’s 26000 jobs for over 900000 people out of work

  12. Jim Juber says:

    I will tell you an abuse of the system. Ask any construction in the road business, pool business or any other business that sees its work in the warm months. These guys work for 8-10 months. During these 8-10 months that they work, the clock a lot of overtime. When it gets too cold to work, the companies lay them off. In the two months they are unemployed, they collect unemployment insurance. The next season, the employer rehires them. Essentially, the employer and the employee are gaming the system.

    I mean, in all honesty, every school district could pull that stunt. Hell, every athlete in professional sports could pull if the teams “fired” them at the end of the season.
    Sounds like a scam to me.

    • Employers pay rates based on their experience. If they’ve had a very high rate of unemployment, they pay higher FUTA rates. In its INTENDED form, unemployment is administered by the government, but not funded by it.

  13. Jim Juber says:

    For folks making between 25k-35k here in Indiana, it would be a disincentive. Here, the max is 390/wk. Add the extra 25 from the fed and that makes 415/wk. Thats 21k/yr NOT to work. If that person/family was paying daycare services, which is about 600/month, you can see how NOT working is not so bad. If the person is single with no dependents, its quite easy to downsize and live off the gov. I have talked to several folks who are doing exactly what I mentioned about. They say, its a “mini vacation”, I will find a job when they about to run out.

    Even if I was laid off tomorrow, I would not sweat it, I could scrap by on the 390/wk by cutting a few luxuries. I would be in no rush to flip burgers or push carts. I would definitely look for a job comparable to what im making now.

  14. Edwin says:

    Unemployment benefits definitely decrease the incentive to find a job. Let’s be more specific though, it’s only really an incentive to not take the first job you find out of desperation even though you would be much more productive and valuable at another job if you had the time to look for it.

    It is a fact that more generous unemployment increase frictional unemployment (the natural rate of unemployment increases), you can see this clearly in European nations which have very good benefits but also a high natural rate of unemployment.

    The problem is people use this reasoning combined with anecdotal situations of people they know or have heard of who really are just coasting on unemployment happily (I know one, and it angers me).

    But that is no argument for whether it’s a good or bad program. I think it’s a good program as it gives a safety net for responsible people in bad situations. This then allows them to spend a little more time finding a job that suits them, pays more, and in which they contribute far more to society than they might if they took a local fast food job.

  15. jsbrendog says:

    unemployment makes people not feel the need to find a job or to even worry about it until it is necessary. a friend of mine, instead of loking for a job cause his unemployment was running out brought in a room mate and cut expenses so “he could wait longer to try to find a job”

  16. There was an experiment in 1985 where the state of Illinois offered a group of randomly selected unemployed a $500 bonus if those receiving benefits found a job within 11 weeks. In the control group, unemployment averaged 18.3 weeks, but in the bonus group, it lasted only 17 weeks. This reduced the average unemployment spell by 7 percent.

  17. TJ says:

    It is amazing that you post your entire argument about unemployment being a disincentive to look for work without ever even mentioning how much unemployment is! I was unemployed for almost a year after working for and advancing at the same company for several years straight out of college. We had massive layoffs and so did other companies where my skills would transfer. I was making a little over $100k before I was laid off but also just faced some massive medical bills for my daughter that our health insurance wasn’t covering which ate up most of our savings (low six-figures). Unemployment came out to $405 per week which barely covered anything. It helped for sure, but it doesn’t work out to much better than minimum wage. So it was not ONE BIT of a disincentive to look for work. The only people it MIGHT disincentivise are people who earn minimum wage, but then again they wouldn’t even be eligible for the maximum weekly amount which is $405 here in New York. They would get much less.

  18. Edwin says:

    Lets not forget another benefit of unemployment insurance which is that the money they gain is being pumped back into the economy, increasing demand.

    This is particularly important right now because it is one of the most efficient, and politically viable, ways for the government to close a little bit of the demand gap we are experiencing.

    So for all the haters of unemployment benefits: extending benefits is helping us get out of this recession.

    • Jim says:

      Heh, I think the demand gap is bitter than “a little bit” at the moment. 🙂

      • Edwin says:

        The demand gap is huge, it’s just the unemployment benefits extension that closes a very small portion of it.

        • Kate says:

          Even if the demand gap is huge and Unemployment only covers but so much it help allot. If the choose to cut unemployment as I have said there will be a great DEPRESSION! Do we actually want a depression? I don’t it’s hard enough that people like Edwin who came from making 100K to getting $405 a week of unemployment can’t even pay for his duaghter health insuarnce right now. How would those of you feel if you got laid off and your child was sick. Yeah I’m sure he had some type of money saved but savings can’t cover the same as being employed can, so he had to take most of it and make sure his child was okay. The money he is earning he has worked for it’s not the same us welfare. He didn’t go to Uncle Sam and ask for foodstamps and a check to help him because he didn’t take the job offer. No, He worked and paid Uncle Sam for the time that he spend working so if he ever need it Uncle Sam’s help he would be intitled to it. That’s called helping out your brother when he is in need(UNEMPLOYMENT) not giving to the neighbor when she because she has nine kids and can’t feed them all but had them anyways(WELFARE).

          • Kate says:

            Sorry that was TJ who has the daughter.
            Edwin you have some good points about unemployment yet they cant just stop it and then expect the economy to get better.

  19. Rose says:

    Try finding a job with no money. You work much harder looking for a job and it is considerably more stressful if there is no food for the family. Homeless, you burn out even faster. Just require proof of job search to get benefits. Remember, we paid for “limited” coverage and this insurance premium is deducted from our paychecks whether we want it or not!

  20. e148 says:

    Unemployment no matter the climate is not a disincentive. I have never gotten close to what I made when I worked and I had only had it a few months. I have had less than 1 year worth of benefits. The last time only about 1 1/2 months worth. I have not worked 6 out of the past 8 years. I wondered if it was worth it to have the benefits, when I did have them. I have been laid off 3 times in the past 8 years. Only twice did I even get any benefits.

  21. aua868s says:

    any idea how much the unemployment benefit is? (monetarily)…is it based on number of people in a household or % of what you were making when you were employed?

  22. WR says:

    The benefit is different state by state and is funded differently (employee, employer)

    For most states it should be called “Partial Income Replacement insurance”. Most times it is based on your prior income.

    After reading several of the posts above, it is clear that just the word “Unemployment” carries with it all sorts of social and emotional baggage.

    Most people do not ‘game’ the system and have been and will continue to fund their states system. Most of these people are desperately trying to get a job. Right now, in our current economy, special measures needed to be taken to extend these payments.

    What will it cost the state and society for the Fed Gov NOT to make these payments? I would suggest a lot more than $325 a week.

  23. It seems that there are really two questions here.

    Jim’s question was “Does Unemployment Insurance Reward Laziness.” I think the answer to this is “yes”.

    The implicit question that many people are focusing on seems to be “Are most people on unemployment lazy, gaming the system, and thus being rewarded for laziness?” I think the answer to this is “no”.

  24. renee says:

    What’s the difference of people who are generational welfare rats who won’t look for a job because it may cut into there food stamps, housing, heat, free phone, free money for toilet paper, soap, or anything else that they can buy with cash that are not a necessity. At least when you get unemployment benefits you have worked for them and put money into the system just in case you did get unemployed. Why don’t they cut welfare a little bit or have them be on welfare for so long and quit their benefits. They get free health care for their kids that they breed likes there’s no tomorrow. If we want insurance we have to pay for it ourself. Why aren’t we c/o about them being on our tax dollars and they haven’t put one red cent in the system except to take up our air and some people are c/o about extending the unemployment benefits?! What’s wrong with this picture. I have collected unemployment about four times due to underemployment. I resent that people who have worked all their lifes have to put up with this shit. Why aren’t we c/o about the welfare rats????????? Who I should add that are sucking the system dry!!!!!!

  25. ElmerD says:

    I know Sen. Kyl’s comments were taken out of context, but the state he represents (Arizona) has some of the lowest unemployment benefits in the country. Now THAT is an incentive to find a job. It’s hard to get by on $60 to $240 a week ($240 is the max). Now I know someone who is unemployed and was planning to move to Illinois to collect their higher weekly benefit. I deflated her idea by pointing out she will get Arizona’s rate since she filed here. I told her the only way she could qualify is to move to Illinois and get a job, work, lose it and then file! Of course, she could do that here in AZ! She is actively looking now.

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