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Robert Reich: Why A Civil Society Extends Unemployment Benefits

September 1, 2010

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By **Robert Reich**

I have the questionable distinction of appearing on Larry Kudlow’s CNBC program several times a week, arguing with people whose positions under normal circumstances would get no serious attention, and defending policies I would have thought so clearly and obviously defensible they should need no justification. But we are living through strange times. The economy is so bad that the social fabric is coming undone, and what used to be merely weird economic theories have become debatable public policies.

Monday it was Harvard Professor Robert Barro, who opined in that day’s Wall Street Journal that America’s high rate of long-term unemployment is the consequence rather than the cause of today’s extended unemployment insurance benefits.

In theory, Barro is correct. If people who lose their jobs receive generous unemployment benefits they might stay unemployed longer than if they got nothing. But that’s hardly a reason to jettison unemployment benefits or turn our backs on millions of Americans who through no fault of their own remain jobless in the worst economy since the Great Depression.

Yet moral hazard lurks in every conservative brain. It’s also true that if we got rid of lifeguards and let more swimmers drown, fewer people would venture into the water. And if we got rid of fire departments and more houses burnt to the ground, fewer people would use stoves. A civil society is not based on the principle of tough love.

A record number of Americans is unemployed for a record length of time. This is a national tragedy. It is to the nation’s credit that many are receiving unemployment benefits…That a noted professor would argue against this is obscene.

In point of fact, most states provide unemployment benefits that are only a fraction of the wages and benefits people lost when their jobs disappeared. Indeed, fewer than 40 percent of the unemployed in most states are even eligible for benefits, because states require applicants have been in full-time jobs for at least three to five years. This often rules out a majority of those who are jobless—because they’ve moved from job to job, or have held a number of part-time jobs.

So it’s hard to make the case that many of the unemployed have chosen to remain jobless and collect unemployment benefits rather than work.

Anyone who bothered to step into the real world would see the absurdity of Barro’s position. Right now, there are roughly five applicants for every job opening in America. If the job requires relatively few skills, hundreds of applicants line up for it. The Bureau of Labor Statistics says 15 percent of people without college degrees are jobless today; that’s not counting large numbers too discouraged even to look for work.

Barro argues the rate of unemployment in this Great Jobs Recession is comparable to what it was in the 1981-82 recession, but the rate of long-term unemployed then was nowhere as high as it is now. He concludes this is because unemployment benefits didn’t last nearly as long in 1981 and 1982 as it they do now.

He fails to see—or disclose—that the 1981-1982 recession was far more benign than this one, and over far sooner. It was caused by Paul Volcker and the Fed yanking up interest rates to break the back of inflation—and overshooting. When they pulled interest rates down again, the economy shot back to life.

The Great Jobs Recession is far more severe. It’s continuing far longer. It was caused by the bursting of a giant housing bubble, abetted by the excesses of Wall Street. Home values are still 20 to 30 percent below where they were in 1997. The Fed is powerless because consumers cannot and will not buy enough to bring the economy back to life.

A record number of Americans is unemployed for a record length of time. This is a national tragedy. It is to the nation’s credit that many are receiving unemployment benefits. This is good not only for them and their families but also for the economy as a whole, because it allows them to spend and thereby keep others in jobs. That a noted professor would argue against this is obscene.

Copyright 2010 Robert Reich

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This entry originally appeared at RobertReich.org

Robert Reich.JPGRobert B. Reich is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books (including his most recent, Supercapitalism, which is now out in paperback). Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s Marketplace are heard by nearly five million people.

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One comment for Robert Reich: Why A Civil Society Extends Unemployment Benefits

  1. Comment by Michelle on September 1, 2010 at 9:37 am

    As someone who has been unemployed now for a year, and the longest of my life, in California, for every position open, 1,000 people apply and this is for a job requiring a college degree with experience of 5-7 years.

    With many parts of the state with unemployment as high as 15 percent, what else can we do as polite society but help those of us who were employed consistently most of our lives? I do not like the collection calls, that I can not pay, because, I have no money for anything except the basics, but until I have a job, that’s the way it is.

    I apply to the black hole of jobs to never hear a thing, because the employers are overwhelmed with applicants. Day to day you wonder how much more can I take? It is very discouraging. I know why families are taking their lives? They feel there is no hope. By having unemployment, we are extending the lives of many,who were and will be productive members of our society again, with a job.

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