There has been a ton in the news lately about unemployment. Not only are their articles and polls tracking sentiment, consumer confidence, regional and local unemployment numbers but, now the President has signed a new piece of legislation that will help to increase the benefits received by those in need of Unemployment Insurance. On December 17th the President signed off on an additional 13 months of benefits to help those who are unemployed stay afloat while they continue to look for work. What I wanted to do today was talk a little bit about what's going on with all this new information and what unemployment really is and isn't.
First of all what I love most about this is all the flaming you hear/read about letting people's benefits just dry up is the only way they will be motivated to find work or better still become contributing members to society again. It's so easy to get fired up or to just spit out these blanket generalizations about those in need of these benefits without actually giving much thought or research into the claims. Everyone has an opinion - and most of the time its unsubstantiated. Now I'm not defending our system because it is far from perfect. But it is the best we have at the moment. On the other hand, not everyone taking advantage of these benefits are necessarily doing all that they can to find work - which leads me to my first little bit of education.
What is unemployment? Well when you are talking about unemployment in the mass media sense you are really talking about a few different groups of people. You have the entire adult population, those that are able to and are activley looking for work (unemployed), then those that are working. The labor force is made up of those that are, as I've defined them, the unemployed and the employed. Everyone else not in those two categories are deemed removed from the labor force. Now when you are talking about those who are unemployed that group is broken up into about six sub groups: U-1 through U-6 and each sub group represents those that are unemployed for different amount of time (measured in weeks) and for different reasons. The biggest and most important part of being unemployed, as I see it, is the active job search. I know (first hand) that it's not always easy to just leave one job and instantly find another. Heck, I never found one and just decided opening shop on my own - which is very OK too. What happens though is that some people have so much trouble finding work they become discouraged and end up removing themselves from the labor force, even if just temporarily. Here's where I think a big kink happens.
Now because there is such a huge demand for the benefits and because budgets for federal workers are being cut all over the place it's not always easy or possible to give people the help and coaching they need. Those that are receiving unemployment benefits should be also receiving coaching and at least reporting in on their efforts to find work. Their "job" while they are receiving benefits is to be looking for work. What really happens sometimes is that people just go through the motions and try to catch the check for as long as they can or 99 weeks (max benefits) - which ever comes first. It's because of those extra stresses that make it harder for those trying to do the right thing to keep their benefits when they really do need them.
Unemployment benefits also come in a few flavors. There are tiers that people have to make their way through to continue to receive benefits for as long as they need them. The tiers have an application process to each tracking progress and making those interested in them evidence their need in an attempt to minimize fraud. Just a bit of a note before this latest legislation there would have been about 250,000 people who were expecting benefits not receiving them this week. This bill also allows for those who were out of time in one tier to at least apply to be considered for additional benefits - which for those staying honest to the intent of the benefit is huge.
I found a neat little chart from the Employment Development Dept. of California that I thought was worth sharing. This will give you a little bit of visual of the available benefits for those unemployed. There might be some differences from state to state but for the most part they will be pretty similar.
UI Benefits Provided During This Recession
|UI Claims||Maximum Weeks of Benefits Provided||Deadline for Starting This Type of UI Claim|
|Regular UI Claim||Up to 26 weeks of benefits||Once someone becomes unemployed|
|1st Tier of Federal Extension||Up to 20 weeks of benefits||December 25, 2011|
|2nd Tier of Federal Extension||Up to 14 weeks of benefits||January 1, 2012|
|3rd Tier of Federal Extension||Up to 13 weeks of benefits||January 1, 2012|
|4th Tier of Federal Extension||Up to 6 weeks of benefits||January 1, 2012|
|Separate FED-ED Extension||Up to 20 weeks of benefits||January 8, 2012|
|POTENTIAL TOTAL MAXIMUM BENEFITS||Up to 99 weeks of benefits|
Unemployment isn't necessarily a bad thing, it will be around even in the best of economic times because farmers can't farm in the winter and snow plowers can plow in the summer. People are constantly changing careers and entering/exiting the labor force. It's natural for an economy to have some type of unemployment and the benefits are designed to keep people spending and an economy moving forward even when some of its participants aren't producing. It's easy to dismiss those on unemployment as lazy or taking advantage of "the system". It's easy to blame them for increased taxes and the current state of the economy. It's hard to not group everyone together like that and actually give credit to those who are doing their best to get back in the work saddle. People will try to game and take advantage of systems everywhere but eventually they will be weeded out. We just have to keep that in mind and hope that these benefits do what they are intended to do - keep an economy spending and moving forward so that interest rates and everything else can expand.
Lastly if you will indulge my very oversimplified economic flow chart - You know just to summarize:
More spending -> increased need for inventory -> increased need for production -> increased need for labor :) -> increased need for plant/equipment -> increase in economic investment -> increased GDP -> increased labor -> increased interest rates = happy economy.
Leave your comments on the new legislation or how you see unemployment. If you have any great stories I would love to see them!