The latest employment numbers should contain a little warning for us: Sometimes it’s necessary to be cruel to be kind. Strict time limits on unemployment insurance payments is one of those times.
The grand difference between U.S. unemployment insurance and that in Europe has long been that the United States had very little long-term unemployment. As Richard Layard — no, he’s on the left — has been pointing out for decades, a major cause of this dynamic is that U.S. unemployment benefits usually expire at 26 weeks. In contrast, benefits in Europe can last forever. Or until retirement age, at least. Topline: Paying people to do nothing will lead to more people doing nothing.
Nearly every study so far shows that efforts to gain a job, any one, increase as the benefit cutoff point approaches. People act as if being entirely without an income is undesirable while a low income, even with little effort, suits some well enough.
Of course, extensions to unemployment insurance during the pandemic were sensible and just. But they had to end and quite possibly sooner than they did. That has rationale for another reason: Studies also show that the longer someone is unemployed, the more difficult they find it to reenter the world of work. It might be that employers don’t want to hire the long-term unemployed. It might be the loss of skills from their under-use. It might even be that some just get out of the habit of working. But it is observable. The longer someone is unemployed then the more likely it is that they’ll either struggle mightily to get back into work. Or that they never will.
Now consider that the latest unemployment numbers contain this quote:
“The number of long-term unemployed (those jobless for 27 weeks or more) declined by 185,000 to 2.0 million in December. This measure is down from 4.0 million a year earlier but is 887,000 higher than in February 2020. The long-term unemployed accounted for 31.7% of the total unemployed in December.”
That’s high, very high, by U.S. standards (a rough check here). Yes, this time is different. But it is still true that the one part of the European economy that America wants to miss is that huge amount of long-term unemployment, a problem that is almost impossible to shift once created.
There is a reason to have time limited unemployment insurance. Sometimes we really do have to be cruel to be kind.
