The UI Battle

David Freddoso opposes extending unemployment insurance (UI), claiming that North Carolina proves it doesn’t help:

In July, North Carolina became the first state to end extended unemployment benefits altogether. As John Hood notes in the Carolina Journal, the number of employed in the state jumped by 39,000 between July 1 and Nov. 30, after standing still for the entire first half of the year. The state’s unemployment rate had taken more than two years to come down by 1.5 points to where it was in June (8.8 percent). Between July 1 and Nov. 30, it declined by roughly that amount (to 7.4 percent). During that same period, about 26 percent fewer workers were dropping out of the workforce each month than had been previously.

That’s at least enough to conclude that the world didn’t end. It may even suggest an upside to returning benefits to their normal duration. In a market with few good jobs available and long-term unemployment benefits, it was rational for earnest job-seekers to hold out for something better than what was there. But when the issue is forced, some job is better than no job at all. The supposed “new normal” is a permanently less dynamic economy. In that context, extended benefits are just adding months before people have to accept the disappointing, lower-paying jobs that eventually await them anyway. Nobody wants it to be that way — it just is.

Pethokoukis looks at the national numbers and argues for more relief efforts, not fewer:

The Long Emergency that is the US labor market continues, meriting both an extension on emergency benefits and UI reform that would be pro-work such as (a) giving unemployed workers a modest cash bonus when they secure employment; (b) paying jobless benefits monthly so workers who get a job at the beginning of a pay period could take in both unemployment compensation and a paycheck for that month; (c) temporarily reducing or eliminating the capital-gains tax on new business investment; (d) relocation subsidies to the long-term unemployed to finance a good chunk of the costs of moving to a different part of the country with a better labor market; and (e) significantly lowering the minimum wage for the long-term unemployed for at least the first six months after the date they begin work at their new job, and coupling that lower minimum with an expanded Earned Income Tax Credit or with wage subsidies exclusively available to the long-term unemployed.

Ryan Cooper contends that even the best conservative ideas on unemployment aren’t dealing with the real problem:

The basic analytical error here is ignoring the idea of aggregate demand. “Reforms” on labor supply might help some individual people get a job somewhat faster, but they won’t increase the total number of jobs.

If the problem is unemployed people who won’t get off their hind ends to hustle for work (“structural” unemployment), then you would expect to see persistent vacancies and rising wages in some industries due to a skills mismatch between job openings and the unemployed. This is what you find in countries like South Africa which really do have massive structural unemployment. But in the US, we don’t see anything like this.

Employment is down across the board (with a few tiny exceptions, like North Dakota) and job seekers outnumber job openings 3-1There just aren’t enough jobs. This realization: that otherwise well-qualified people who are trying their level best to find work and can’t do it, leads you inexorably to a basically Keynesian view of depressions. The problem is not enough spending, and the solution is more spending. Private, public, doesn’t matter, “You just fling resources in the general vicinity of the problem.” The vast majority of conservatives, needless to say, refuse to believe this, and their supply-side tinkering is just not even close to big enough to make a dent in unemployment even if all their ideas are right.

Sargent wonders whether Republican Senators from high-unemployment states will vote for a new UI extension bill:

The unemployment rate in Illinois (Senator Mark Kirk’s state) is 8.7 percent; in Tennessee (Bob Corker and Lamar Alexander) it’s 8.1 percent; in Arizona (John McCain and Jeff Flake) it’s 7.9 percent; in Georgia (Saxby Chambliss and Johnny Isakson) it’s 7.7 percent; in Ohio (Rob Portman) it’s 7.4 percent; and in Pennsylvania (Pat Toomey) it’s 7.3 percent. In many of those states, tens of thousands of people have already been cut off, according to stats compiled by Ways and Means Dems. [Rhode Island Senator Jack] Reed said many of who have lost benefits are “desperate,” and said he thought other Senators understood this. “Many of them are middle aged, have worked for a long time, and have found that it’s difficult to find jobs,” Reed said. Fellow Senators, he added, “are sensing back home, through editorials and newspaper stories, that these aren’t people who are enjoying collecting $300 or $400 per week. These are people who worked for decades. The reality is not this hypothetical where everybody will get a job.” But there’s still no indication Republicans will vote accordingly.

George Zornick weighs in:

Alas, many of those very senators are already on the record against an extension. Many of those states are deep, deep red—so even though polls show substantial, bipartisan support for extending the emergency unemployment program, and though many local media outlets are aggressively covering the issue, the senators in question have little to fear. There are certainly enough senators remaining who might deliver the needed ‘yes’ votes—say, someone like Republican Mark Kirk in Illinois, which is a blue state with a high level of long-term unemployment. And maybe that will work. But if it doesn’t, there are larger perils for the Republican party—Democrats are reportedly ready to once again embrace economic populism as a campaign message this year, and if Republicans block a meager benefit extension for those hardest hit by the recession, they play into Democratic hands. That should worry all GOP Senators regardless of where they’re from. Voting against a benefit extension may not hurt Senator Jeff Sessions too badly in Alabama, but it may do real damage to his chances of being in the majority at this time next year.

GOP rhetoric on the issue seems to be evolving:

“I’ve always said that I’m not opposed to unemployment insurance, I am opposed to having it without paying for it,” Sen. Rand Paul (R-Ky.) said Sunday on ABC. Rep. Peter King (R-N.Y.) likewise said Sunday on CBS that he could back an extension if Democrats agreed to vague compromises like easing “burdensome regulations.” And Boehner, too, has said he would be open to an extension with some conditions.

Democrats, meanwhile, are going on the offensive to keep the issue in the spotlight and put pressure on Republicans. Framing the debate as being between one party favoring benefits for the needy, and the other party opposing those same benefits, they think, is a winning campaign argument. Decrying a do-nothing GOP caucus at the same time would only be an added bonus. Then again, Republican calls for compromise could be little more than pre-election posturing. Blocking unemployment benefits out of hand probably won’t sit well with voters. But by blocking those benefits while claiming to back said benefits if paired with compromises, Republicans could deflect some of the blame from themselves, passing it along instead to everyone’s favorite scapegoat: Dysfunctional Washington.