The Washington Monthly is running an article by Steve Benen titled, “Republicans just don’t like the unemployed.” Feel free to read the post, but the title really says it all. Democrats like Steve (generally) think that extending unemployment benefits will help ‘fix’ the jobs problem here in the United States. They suggest that if you oppose extending jobless benefits you are somehow mean or heartless. I think Democrats like Steve are missing the point, on purpose.
Republicans (generally) believe that by extending unemployment benefits you will reduce the incentive to find employment. Democrats argue there aren’t enough jobs as they cite their favorite (un-sourced) statistic: “Nationwide, there are five applicants for every one opening”. The truth is probably at lot more complex and perhaps distasteful. Over the past two years we have seen a severe contraction in the job market, but prevailing wages (i.e. the amount someone is willing to pay someone else for a given job) have declined.
Republicans assume someone earning $50,000 who loses his job is likely to hold out for a $50,000 position while utilizing his unemployment benefits. If his jobless benefits expire before he finds a position he may be forced to accept a lower paying job – say $35,000. Ironically, the job seeker will still make more than he made on unemployment and he is gaining valuable job experience and will likely be able to move back up the wage ladder as the economy grows and recovers. Extending jobless benefits may allow the job seeker to avoid accepting a lower paying job keeping him out of the employment market longer potentially making him less and less attractive to potential employers. It is hard for most workers to accept that they aren’t worth the $50,000 they made last year to accept that $35,000 position – but it is most likely the best economic decision they could make.
The new issue for many facing long term unemployment is that they created lifestyles they can no longer afford. Imagine earning $120,000 per year and spending every penny on your house and other non-discretionary expenses. Your biggest fixed cost is your house and you can’t sell it. What do you do if you lose your job? The bad news is that unemployment benefits don’t even come close to solving your problem – the real answer is for you to change your lifestyle. Giving you another six months of benefits won’t do you a bit of good.