Extending Unemployment Benefits: Arguments For and Against

Introduction to Unemployment Insurance

Unemployment insurance is compensation provided to workers who become unemployed through no fault of their own. It offers compensation for a specific period of time, or until a worker finds a new job. Regular unemployment insurance provides benefits for up to 26 weeks, based on the number of weeks that the unemployed person worked during his or her claim year (Doyle, 2011).

Extended unemployment benefits provide compensation for a longer period and are available to workers who have exhausted their regular state unemployment benefits during periods of high unemployment. In addition, the unemployed may be eligible for additional benefits funded by the federal government, including Emergency Unemployment Compensation (EUC). The state in which a person lives and the date he or she became unemployed determine which benefits they are eligible for. EUC benefits are based on both the number of weeks of unemployment and the state unemployment rate (Doyle, 2011).

Initial unemployment benefits are paid by states for a period that usually lasts up to 26 weeks, funded through employer taxes. Benefit levels are set and administered by each state and vary widely from state to state (PRWeb, 2011b). Once the maximum amount of state assistance is exhausted, federal emergency extension funds provide coverage for a period of up to 99 weeks. Over one million people had already exhausted their last federal unemployment extension at the time of this writing (Unemployment Extension, 2011).

The Scale of the Unemployment Crisis

According to the U.S. Bureau of Labor Statistics, as of June 2011, the unemployment rate stood at 9.2%, with the number of unemployed persons at 14.1 million. An additional 2.7 million people wanted and were available for work but were not counted in the official figures because they had not looked for work in the preceding four weeks, as defined by the submission of unemployment claims (Bureau of Labor Statistics, 2011).

These historically significant numbers are often discussed in comparison with the Great Depression, yet even such comparisons fail to convey the full urgency of the situation. CBS News reported that 6.2 million Americans had been jobless for more than six months — the highest number since the Great Depression (Tracy, 2011). One-third of the unemployed had been jobless for more than one year, and the number of people on Social Security disability had grown by 17%, or 1.2 million people, since the start of the Great Recession.

When Congress passed legislation extending unemployment benefits through 2011 due to record levels of unemployment, it required many states to change their laws in order to make the extra benefits available to their residents. This in turn prompted extensive debate in several state legislatures as they attempted to accommodate special-interest and partisan political considerations (PRWeb, 2011b).

The most recent unemployment extension at the time allowed for benefits of up to a total of 99 weeks. However, not all states passed legislation to accommodate all 99 weeks. Michigan became the first state to reduce the standard 26 weeks of unemployment benefits to 20 weeks for newly unemployed workers. Missouri cut initial benefits to 20 weeks as well, starting immediately. Florida passed a law reducing maximum state benefits from 26 weeks to 23 weeks, with fewer benefits available when the jobless rate fell below 10.5%; Florida could provide as little as 12 weeks of benefits if unemployment fell to 5%. These states and others were attempting to manage the drain on state-funded unemployment benefits in order to balance the burden between employers and the unemployed, while shifting a greater share of the burden to the additional benefits provided by the federal government (PRWeb, 2011b). In June 2011, President Obama authorized federal unemployment extension benefits for another 13 months, allowing eligible workers to continue collecting maximum benefits while seeking new employment.

Arguments Against Extending Benefits

Several arguments have been advanced against extending unemployment benefits. The most frequently cited is that the United States simply cannot afford the cost of extended benefits. Another common argument is that extending unemployment benefits does not promote economic recovery. Opponents also contend that unemployment extensions actually encourage unemployment, arguing that extended benefits discourage people from seeking work because they receive more money collecting unemployment than they would earn working a 40-hour-per-week job (Allmandblogs.com, 2010).

In a similar vein, opponents argue that benefits must expire at some point, claiming the country cannot afford to pay them indefinitely. Approximately 30 states had borrowed more than $44 billion from the federal government to continue payments — borrowing made necessary by the sharp increase in the number of unemployed, which drained many states' reserve funds dedicated to benefit payments (PRWeb, 2011).

Tony Fratto, former assistant to President Bush, argued that extending benefits would adversely affect the unemployment rate by keeping it elevated longer than would otherwise be the case. He asserted that the longer benefits remain available, the longer workers will take to find a job. Fratto also dismissed claims that extending unemployment benefits produces a significant economic stimulus, stating: "Facing an uncertain future, people receiving benefits tend to spend only what they must and save or pay down debt with what's left over" (CNBC.com, 2009).