As the Politics Play Out, Key Jobless Benefit Lapses

From The Wall Street Journal:

An emergency jobless-benefits program due to expire this weekend would pinch the finances of more than a million Americans, setting the stage for the what could become lawmakers' first flashpoint of the midterm election year.

While the program's end would barely dent the broader economy, the money at stake is meaningful. The federal Emergency Unemployment Compensation, launched during the middle of the recession, pays on average $300 a week to 1.3 million long-term jobless who have exhausted the roughly 26 weeks of unemployment insurance benefits most states provide. If extended, the program would transfer about $25 billion in 2014 from the government to the unemployed, the Congressional Budget Office calculates.

 

Some opponents of continuing the program say the roughly $25 billion price tag would be more effective at rehabilitating the labor market if put toward creating jobs, rather than extending a safety net. Some analysts also describe the Emergency Unemployment Compensation program as a recession-era holdover no longer needed in an economy—and labor market—that has been recovering for more than four years.

 

"This is an emergency program," said Chris Edwards, of the Cato Institute, a libertarian think tank in Washington. "The emergency has long been over."

"It is to an individual's advantage—as soon as they are unemployed—to really try to get employed again," Mr. Edwards said. "The curious thing about emergency unemployment benefits is that [they] induce people to wait to start searching for a job and that ends up kind of hurting them."

 

If the federal program isn't renewed, Mr. Edwards said he expects "a lot of people will make the tough decisions to take lower wages, change careers or jobs, or take a job that is less pleasant than they were hoping for."

 

Research has shown that such insurance may permit some job seekers to take more time in their searches, rather than accepting the first opportunity regardless of suitability. The benefits keep recipients—who are supposed to be looking for jobs in order to qualify—in the work force, rather than dropping out of it. Today's less-than-robust labor market—with almost three unemployed people for every opening—is particularly grim for the long-term unemployed.

 

The long-term unemployed who face expiring payments are found in every state except North Carolina, which had its extended benefits cut off earlier this year after failing to meet federal guidelines. Since extended unemployment was eliminated in the state, its jobless rate has tumbled. But much of the decline is from people dropping out of the labor force.

 

After previous downturns, going back to the 1950s, the federal government has stepped in to help the jobless with benefits. The current Emergency Unemployment Compensation program has been renewed more than 10 times since July 2008. As the national labor picture has slowly improved, the combined state and federal benefits have been dialed back, from 99 weeks to 73 today. EUC benefits last between 14 and 47 weeks, depending on factors such as a state's unemployment rate.