The myth of unemployment insurance
Posted by Ray on April 29, 2010 under Main | 
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First, the weekly initial claims data today was another squishy soft 448,000 and continuing claims dropped a tad, but are way too high. This confirms that job shedding is still the order of the day, 2 ½ years later, and that is not good news. To think that we can post strong job growth or that “employers are on the verge of hiring” with numbers like this is absolutely ludicrous and I would question what drugs one would be taking to suggest otherwise. Seriously, if employers are about to hire why are weekly claims still in nose bleed territory? Why is the work week at 33 hours? Why are wages, the trend at least, lower? Sure, the numbers are better, but less bad is simply less bad.
Now to the myth, conservatives and some economists suggest that unemployment insurance keeps people out of work longer than if they did not have the insurance. The people who make this claim point to old studies or junk science studies to verify this claim. So there is no mistaking my thoughts on this let me be succinct about this, they are utterly and hopelessly wrong. Either they saw what they wanted to see in the data or did not understand what they were looking at.
Studies, and I know this to be true after authoring several of them in my career, rarely surprise the author in regards to their actual conclusion versus the prewritten thought of what the results will be. Essentially, a person’s bias always comes through in the writing and how the data is interpreted. In even worse cases the results will confirm the person who actually pays for the “independent” study thoughts or position, shocking, but very true. Try, for example, to find a study written for the insurance industry that is harsh on insurance industry product. This is what happened with these unemployment insurance studies, they are literally junk science.
Anyone who suggest that receiving $300 a week is worth passing up any job is clinically insane and disqualified right from the beginning. Yet, that is what most of these studies suggest. What they conclude is that a person receiving unemployment benefits will pass on jobs that paid less than their last job and, by some miracle, the person will only accept such a job if their benefits are about to run out. I am not making this up, this is, basically, what these studies conclude. What the person who wrote this nonsense has not done is think through why the previous stated result actually happens, which is why these studies should be disqualified as nonsense.
I am sure you have figured out why people will take any job right before their benefits run out, but let’s talk through it anyhow. Since the person is living large on $1,200 a month unemployment benefits, when their apartment costs $1,500 a month plus other cost of living expenses, they will pass up a $60,000 a year job because it pays them less than their previous $150K a year job. Why would that be? Perhaps this is because they need to make that level of income, because of kids and a lifestyle built on the $150K a year income, or they like not doing any work and collecting $1,200 a month in unemployment benefits. After all, who doesn’t like deficit spending? The intellectual heavyweights claim that this is evidence that unemployment insurance keeps people from taking “any” job and causes people to stay on the benefit until the very end.
Again, that conclusion is nonsense. I agree that some jobs may be passed up because it pays people a lot less than what they were making before, but we are talking about a huge disparity between what the person actually made before and the proposed new income, usually 30%+ disparity in past and potential income opportunities. I highly doubt any of the authors of the study would take a 50% pay cut to “take any job” versus waiting to take the right job with similar income. They literally think that a person who is unemployed should take any job, that is reckless thought and employers would disagree with this conclusion.
Employers often turn down well qualified candidates because they are “over qualified,” why would that be? Simple, because the employer knows the person is just taking “any job” and will leave when another opportunity arises. That is why people who are overqualified are not hired as employers know that high turnover will be disruptive to customers and his/her business and add additional expenses down the road. Instead the employer waits for the right employee to come along. This aspect of the unemployment insurance studies is completely ignored and, instead, the authors say that employees and employers, to a certain degree, should act recklessly and take any job that comes along which will cost employers, nationwide, billions of dollars in future expenses all because unemployment insurance is making people lazy.
Can you see how the studies on this topic are inaccurate and misleading? They reject reality and replace it with their own fantasy land beliefs. What is really funny is that they would never, unless they actually had no choice but to take it, a job that would pay them ½ of what they are currently making, but everyone else should because they are on that “generous” public dole of $300/week. The results are skewed because of the authors bias and because people will take any job if their unemployment benefits are about to run out. However, that is not an example of “these people are lazy” it is an example of “these people are desperate and will take any job.” Even though the taking of just any job is out of desperation the authors accept this as a “see, I told you so” which is a very disturbing way of interpreting the data.
Sponsored studies should not lose their integrity and confirm the sponsors predetermined conclusions, but they almost always do. This is why when a study is quoted the sponsor should also be disclosed so the person reading or watching can figure out that the study is biased towards a certain conclusion. You may be asking yourself, why are these sponsored studies biased towards a preconceived conclusion and rarely differ? It is because the research business is a tough business and if one firm will not do it another will, for $50,000 to take a little piece of one’s soul and integrity. You will never get rid of sponsored hit pieces, but if the sponsor is disclosed you might be able to figure out which way it is biased towards.
The bottom line is that unemployment benefits are a good thing and we need to keep them. No one is secretly getting rich off of these benefits, but merely using the benefit to pay the basic bills and feed their family. To suggest anything different is insane and merely ideology coming to the surface. But I can assure you of one thing, if they were unemployed they would not turn down the benefit which makes them a hypocrite.
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