Thursday, April 19, 2018
Opinion

Column: Economic argument for extending benefits

The opposition to extending long-term unemployment insurance rests on three major objections. First, it "pays people not to work." On this view, it's a safety net that after a while becomes a hammock, with workers slacking off in their job search because the insurance money is plenty to live on. Second, the federal budget is already in deficit and should not be made worse by this additional cost. Any extension should require that an equal amount of other government spending be cut. Third, there is no plan to put people back to work, and thus extending unemployment insurance is futile.

It is designed precisely not to create a hammock. Rather than pay people not to work, unemployment insurance pays people only if they are looking for work, and pays them at a rate far less than they were making while working.

Since it costs time and money to search for work, the payments make it more feasible to continue the search process. True, the payments make job seekers somewhat less desperate, but that means they have time to search within the skill set they previously acquired.

Without unemployment insurance, job-seekers would be more likely to accept employment requiring considerably lesser skills. Not only would job-seekers over-crowd and depress the wages in those lesser skilled segments of the labor market, some of their "human capital" would atrophy through disuse, and a vital asset to both the worker and the economy would be lost.

Another key problem with the hammock analogy is that data show that not enough jobs are out there to employ the long-term unemployed. Currently, the number of job-seekers remains roughly three times the vacancy rate, making it arithmetically impossible for all the unemployed to find work in today's economy.

Normally after the worst of a recession, the number of job vacancies and the number of job-seekers come into rough equality in about two years. Not so today. Consequently, rather than tie the cut-off of unemployment insurance to a specific time period, we should instead tie it to prevailing economic conditions at the time such a cut-off is being contemplated. Fortunately, forecasters are predicting improved economic conditions in 2014, so perhaps better times will bring job vacancies and unemployment rates into agreement. Rather than lose patience with the long-term unemployed, we should wait until economic conditions improve before cutting off their lifeline.

Aside from the hammock story, U.S. House Speaker John Boehner has a two-part objection to the extension of unemployment insurance. First, he claims that we should have a policy that will put people back to work. The irony is that for the past five years President Barack Obama has been promoting an infrastructure repair and maintenance program that would not only provide badly needed investment in our public assets — roads, broadband, ports, school buildings, sewer and water systems — but would also increase the demand for labor. Repair and maintenance of these long-lived capital assets would give a lasting boost to the productivity and global competitiveness of the U.S. economy.

To gain these benefits all we need do is repair the infrastructure that our predecessors built. Doing this would be just the sort of jobs program that the speaker claims he wants but has blocked reflexively for years, helping to extend the time that unemployment insurance is needed.

Second, Boehner seeks to pay for the extension of unemployment insurance with a matching reduction in spending elsewhere in the budget. By demanding such a "pay for," he denies the importance of total spending, including government spending, in sustaining economic activity. Economists estimate that to "pay for" a proposed extension of unemployment insurance would require reducing government spending by $6 billion over three months, and $24 billion for the year.

For a one-year extension, such cuts will reduce GDP by 0.2 of a percentage point, reducing employment by 200,000 jobs. "Pay For" creates a problem instead of solving it: inhibiting progress toward full employment that would allow unemployment insurance benefits to be safely stopped.

We are paying heavily for the failure to apply basic economics. The policy of "pay for" requires us instead to "pay more."

William L. Holahan is emeritus professor of economics at the University of Wisconsin at Milwaukee. Charles O. Kroncke, retired dean of the College of Business at UW-M, is also retired from USF. They are co-authors of Economics for Voters. They wrote this exclusively for the Tampa Bay Times.

Comments
Editorial: Improving foster care in Hillsborough

Editorial: Improving foster care in Hillsborough

A new foster care provider in Hillsborough County is poised to take over operations in May, only months after its predecessor was fired for what was alleged to be a pattern of failing to supervise at-risk children in its care. Many of the case manage...
Published: 04/18/18

Another voice: Back to postal reform

President Donald Trump is angry at Amazon for, in his tweeted words, "costing the United States Post Office massive amounts of money for being their Delivery Boy." Yet in more recent days, Trump has at least channeled his feelings in what could prove...
Published: 04/17/18
Updated: 04/18/18
Editorial: Congress should protect independence of special counsel

Editorial: Congress should protect independence of special counsel

A bipartisan Senate bill clarifying that only the attorney general or a high-ranking designee could remove a special prosecutor would send an important message amid President Donald Trump’s attacks on the investigation into Russia’s inter...
Published: 04/16/18
Updated: 04/17/18
Editorial: Donít fall for Constitution Revision Commissionís tricks

Editorial: Donít fall for Constitution Revision Commissionís tricks

The Florida Constitution Revision Commission has wasted months as a politically motivated scam masquerading as a high-minded effort to ask voters to improve the stateís fundamental document. The commission on Monday added amendments to the November b...
Published: 04/16/18
Editorial: Rednerís court win on medical marijuana sends message

Editorial: Rednerís court win on medical marijuana sends message

Florida regulators have done far too little to make voter-approved medical marijuana widely available for patients suffering from chronic illnesses. A circuit court judge in Tallahassee ruled last week there is a price for that obstruction, finding t...
Published: 04/15/18
Updated: 04/16/18
Editorial: Hillsborough commission should quit expanding urban area

Editorial: Hillsborough commission should quit expanding urban area

Any movement on modernizing local transportation is welcome, even small steps like the million dollars the state recently approved to design a Tampa Bay regional transit plan.But the region wonít make any progress on transportation, its single most p...
Published: 04/13/18
Updated: 04/18/18

Editorial: Fight harder on citrus greening

A new report by scientists advising the federal government finds no breakthrough discovery for managing citrus greening, a chronic disease killing Floridaís citrus industry. This should be a wake-up call to bring greater resources to the fight.The re...
Published: 04/11/18
Updated: 04/13/18

Editorial: Floridians should focus more on health

A new snapshot of the nationís health shows a mixed picture for Florida and the challenges that residents and the health care community face in improving the quality of life.Americans are living longer, exercising more and doing better at managing th...
Published: 04/11/18
Updated: 04/13/18
Editorial: 5 key issues where Scott, Nelson differ in Senate race

Editorial: 5 key issues where Scott, Nelson differ in Senate race

Gov. Rick Scott kicked off his U.S. Senate campaign last week by reciting tired lines about career politicians and mischaracterizing himself as an outsider. That pitch may have worked during the tea party wave eight years ago, but now the Republican ...
Published: 04/10/18
Updated: 04/13/18
Editorial: St. Petersburg should move carefully on banning straws

Editorial: St. Petersburg should move carefully on banning straws

St. Petersburg city officials are exploring how to cut down on single-use plastic straws, a commendable effort to make the city even more environmentally minded. But to succeed, City Council members should craft a modest, reasonable restriction that ...
Published: 04/10/18