Are unemployment benefit extensions really "helpful" to the economy in the long term?

[Fern]

Are unemployment benefit extensions really "helpful" to the economy in the long term?

Of course not.

Unemployment benefits were NOT created to benefit the economy, anybody touting that as a reason for them is just spinning.

Unemployment benefits are humanitarian in nature. Their purpose is to help people during a hard time, keep them fed and off the street.

Of course giving money to people who are expected to spend it has some ancillary economic benefit. But if it were a true economic boon we could all just stop working, collect unemployment and watch the economy zoom right a long.

Any time we have situation where we see LT unemployment benefits we're looking at economic problems. Those peoples' work skills have evaporated etc. Getting them back in the workforce will be difficult.

Fern

 

[Craig234]

It's not that they simply don't care. That's not what I meant to imply. Let me break my thought process down point by point here.

If you extend unemployment benefits, it provides no incentive for companies to seek to create more demand. Henry Ford was essentially the forefather of this argument. His goal was to make cars affordable so that everybody would buy on. Conversely, he understood that people needed money to buy them, so he sought to create an employment marketplace which put money into peoples' pockets so that they COULD buy one. Provided profit margins exceeded payroll, it was self-sustaining.

When you put unemployment benefits into the mix, now the income is deferred away from the workplace. Companies are still able to sell product, but at the same time CUT expenditures due to the lesser need of payroll - their income is now subsidized by the government. There is no need for companies to put money into employee pockets in order to spend on said product, therefore there is no incentive for the company to hire. In fact there is now more incentive for the company to scale back now that its income is essentially government subsidized.

I guess what I'm suggesting is wouldn't it be healthier for the long term economy to not subisidize (long term) unemployment benefits? I'm sure companies wouldn't care initially, but once their revenues started falling to unsustainable levels, they might just wake up and realize they're as much to blame for this situation as anyone else is.

Hopefully that makes more sense.

It's just incorrect. No company says 'I wish all these unemployed people had money to buy our products, so let's create jobs to hire them so they can buy our products'.

 

[SunnyD]

It's funny how you liberals think it's opinion.

Economists have done studies and the overwhelming conclusion is that mid to long term unemployment insurance in fact does reduce the incentive to find work. Shortening UI motivates those that are unemployed to look for employment quicker, whereas with long UI people are motivated to maximizing their benefit in lieu of replacing the employment as soon as possible. This is not opinion, it is fact.

And conversely, if there's incentive for the labor force to find work, then there's incentive for the labor market to get cheaper labor. The more labor, the more money in the economy to spend. The more to spend, the more product/service companies can shift, which leads to more profits (by reduced cost of employment as well as a larger market). Hence my argument in the first place.

It's just incorrect. No company says 'I wish all these unemployed people had money to buy our products, so let's create jobs to hire them so they can buy our products'.

WHY is it incorrect? You're completely ignoring the point. If there's no market for product, a company wouldn't have reason to exist. It's blatantly obvious, but completely masked by the presence of government subsidy. You give a company enough incentive to create jobs, and they will. Long term unemployment removes that incentive. I don't know about you, but if I were a corporation, having people with the means and desire to buy my product... I'd consider that a GOOD thing.

 

[Fern]

-snip-
WHY is it incorrect? You're completely ignoring the point. If there's no market for product, a company wouldn't have reason to exist. It's blatantly obvious, but completely masked by the presence of government subsidy. You give a company enough incentive to create jobs, and they will. Long term unemployment removes that incentive. I don't know about you, but if I were a corporation, having people with the means and desire to buy my product... I'd consider that a GOOD thing.

A company will just move to where there are people who can afford it's products. It may not even need to do that, it might be able to just box up it's products and ship it to them (Like how China ships it's stuff over here where people have money to buy them).

A company will NOT try to create customer base where none exists, this is B school 101. A company cannot individually create that, and if they could they cannot be sure they aren't creating them for a competitor. As has been mentioned companies act as individuals, not collectively.

If your theory had merit, companies from all around the world would be over in Africa etc trying to create a customer base for their products. But they aren't.

Fern

 

[WHAMPOM]

I was reading up on Obama's proposed job benefits bill that he's going to try to present here tonight, and it got me wondering about unemployment benefits and how they really affect the economy.

Disclaimer: I have had to use UI before, and am grateful for it being the safety net I needed. I do see a clear need to have some sort of short term benefit.

Now, the real question is whether or not extending benefits are really helpful to the long term economy. On one side, you arguably don't want more people running out of money, going homeless, etc. It looks like a recipe for financial ruin.

On the other side, you continually give out benefits which causes companies to really not care about providing new jobs. They're still getting money for product, and have no incentive to hire (or rather pay employees, putting money in their pockets allowing spending). This in turn stagnates job growth, puts more inflation on the table (due to more debt), looking like a longer term road to financial ruin.

The only thing I can't seem to decide is which one is actually worse. It's almost like the question of sacrificing a few for the greater good. The only problem is determining which one is the greater good.

Your cause and effect bear no relation to each other, please get yourself a clue.

 

[Craig234]

WHY is it incorrect? You're completely ignoring the point. If there's no market for product, a company wouldn't have reason to exist. It's blatantly obvious, but completely masked by the presence of government subsidy. You give a company enough incentive to create jobs, and they will. Long term unemployment removes that incentive. I don't know about you, but if I were a corporation, having people with the means and desire to buy my product... I'd consider that a GOOD thing.

No, I'm not, but we're clearly not communicating.

Do you want good healthcare? Then obviously, you want to be a doctor to make sure you get it. Right?

Now, when you tell me no you don't, and why, how about just repeating, you want good healthcare, so you want to be a doctor.

Yes, businesses want markets for their products. That's not the issue.

Hiring people they otherwise wouldn't so they have the money to buy their products isn't the way to get consumers.

It's by definition a money loser. Even if the person spent every cent they're given on the product, all you've done is give them money and get it back.

Businesses want OTHER businesses to hire people, sure. Not themselves.

So unemployment is the stimulus you mention - not hiring.

This is sort of the chicken and egg problem Keynesians would explain - it's a bad cycle, lower sales, lay people off, less spending, lower sales, repeat.

That's why, given there are three drivers of the economy - business, consumer, and government spending - when business and consumer are down, the stimulus to turn it around is government. That might be government hiring, unemployment, whatever. That gets money purchasing, creating jobs, creating goods and services, increasing wealth, driving the economy.

Is it making sense yet?

 

[fskimospy]

Of course not.

Unemployment benefits were NOT created to benefit the economy, anybody touting that as a reason for them is just spinning.

Unemployment benefits are humanitarian in nature. Their purpose is to help people during a hard time, keep them fed and off the street.

Of course giving money to people who are expected to spend it has some ancillary economic benefit. But if it were a true economic boon we could all just stop working, collect unemployment and watch the economy zoom right a long.

Any time we have situation where we see LT unemployment benefits we're looking at economic problems. Those peoples' work skills have evaporated etc. Getting them back in the workforce will be difficult.

Fern

No, they were specifically created to help the economy. Anyone saying that wasn't a reason for them is simply ignorant. What you are saying is the exact opposite of reality.

Unemployment benefits exist in order to enable US productivity factors to find better fits with the economy as opposed to people being forced to accept immediate and poorly fitting other jobs. ie: you don't want an electrical engineer being forced to take a job as a janitor because he can't afford to wait a few weeks to feed his family.

I'm not sure how people don't know this.

 

[Nemesis 1]

Unemployment bennies have out lived its usefullness . Its to costly it places a burden on those who are working. and never ever drew from it . Its just not right younger people get these bennies and the older folks never used . Same as SS the younger people may never get to use it . So cut the programm its basicly for construction workers anyway . Whos labor sucks any way . Get rid of it the young can figure out another way to put food on table.

 

[rchiu]

No, they were specifically created to help the economy. Anyone saying that wasn't a reason for them is simply ignorant. What you are saying is the exact opposite of reality.

Unemployment benefits exist in order to enable US productivity factors to find better fits with the economy as opposed to people being forced to accept immediate and poorly fitting other jobs. ie: you don't want an electrical engineer being forced to take a job as a janitor because he can't afford to wait a few weeks to feed his family.

I'm not sure how people don't know this.

BS, what's stopping EE to take a job as janitor and continue to look for a job and switch after he finds appropriate job?

 

[Doppel]

Some degree of it makes sense. I'm in good company to question the point of being a 99er, though. Really at some stage you need to cut the cord and force people to do something they wouldn't otherwise do, like change careers. Two years is a long time to try and find work and if you can't in your given profession it's the wrong one.

 

[piasabird]

If more people were destitute they would be more eager to get rid of illegal aliens or what I prefer to call Mexican Invaders. This also applies to all the people who come to the USA on visas and just never leave.

 

[rudder]

Companies aren't trying to create demand by hiring workers. Any individual company's impact on overall demand is just a drop in the bucket, and they don't act collectively in that way. It's just not possible for employment to work in the way you describe.

I wish someone would tell this to obama. Thus far his jobs plan has been to offer tax incentives for companies to hire more employees. It is good to see that people realize that when a company can grow, this creates the demand for more employees.

 

[rudder]

Some degree of it makes sense. I'm in good company to question the point of being a 99er, though. Really at some stage you need to cut the cord and force people to do something they wouldn't otherwise do, like change careers. Two years is a long time to try and find work and if you can't in your given profession it's the wrong one.

http://www.mikeroweworks.com/2011/08/unfilled-jobs-across-america-manufacturers-want-you/

One example is Gentex in Michigan (you know where they make cars).. they can't find people intelligent enough to work in their manufacturing facility. The company has plans to expand. With 9.8% unemployment nationwide one would think some people would spend those two years on unemployment upgrading their skills.

Part of the problem is the value of a college education being oversold... but I digress.

 

[SunnyD]

Is it making sense yet?

Yes, it is. Basically two out of the three parties involved are waiting for someone else to blink. In our case, it's the government that always blinks first.

This is my point - we need to take the government out of the equation here, and let the other two parties involved hash it out. It's the only way we'll get anywhere other than a "band-aid fix on the Hoover Dam."

 

[Ausm]

What makes you think that companies base their desire to create new jobs on the number of people collecting unemployment? It's not like they look at the job market and say 'man, lots of people don't have jobs, we better make some for them'. Companies hire if they see an opportunity for more employees to make them more money. That has to do with the demand for their services, which more unemployment $$$ in the economy increases, not lessens.

I agree there is NO incentive at all for companies to hire especially when they found out they can cut tons of workers and make the people who still have a job work 2X harder to accrue record profits.

 

[JS80]

No, they were specifically created to help the economy. Anyone saying that wasn't a reason for them is simply ignorant. What you are saying is the exact opposite of reality.

Unemployment benefits exist in order to enable US productivity factors to find better fits with the economy as opposed to people being forced to accept immediate and poorly fitting other jobs. ie: you don't want an electrical engineer being forced to take a job as a janitor because he can't afford to wait a few weeks to feed his family.

I'm not sure how people don't know this.

^loliberal armchair faux economist in action here. So funny when people dispute facts and replace it with their opinions.

 

[fskimospy]

^loliberal armchair faux economist in action here. So funny when people dispute facts and replace it with their opinions.

lol@ guy who can't even manage his household budget trying to talk about nationwide fiscal policy.

 

[JS80]

lol@ guy who can't even manage his household budget trying to talk about nationwide fiscal policy.

Hah nice personal attack on someone you don't know

 

[fskimospy]

Hah nice personal attack on someone you don't know

I thought so too, thanks! If you want I can keep going.

 

[bfdd]

So honestly, what do you propose happen to the millions who would have been without work and any income source had they not been extended?

It's not like jobs are being created, at least not in the US, by American companies. You make it sound like it would be so easy to just step out your door and find a job today. That being the case where are the companies begging for applicants?

You think your country is in the shitter now let millions more have literally nothing. Good luck in that America.

I propose they keep looking for work and if they can't find it. To go after those to blame, our politicians. If it's that bad, they can rise up and over throw those they feel have wronged them. who really fucking cares? anything is better than simply trying to placate them with more money, money we don't have. people should be angry and they should be pounding the streets letting everyone know they are. but they aren't because our "leaders" are smart enough to you can just keep throwing money at people to shut them up.

 

[Craig234]

Yes, it is.

Apparently, it's not.

Basically two out of the three parties involved are waiting for someone else to blink. In our case, it's the government that always blinks first.

This is my point - we need to take the government out of the equation here, and let the other two parties involved hash it out. It's the only way we'll get anywhere other than a "band-aid fix on the Hoover Dam."

It's not about 'blinking'.

Look, let's say for the sake of discussion that society agrees putting a man on the moon will generate great economic benefits making it a good investment.

But, any company who pays for it, will lose a fortune, while others get the benefit.

So, they all agree it should be done, but no company is willing to take a big loss.

So they wait for other companies to pay for it. And wait. And wait.

Then the government says, "OK, this is a good idea, but the private sector incentives don't work for the private sector to do it. So, we'll tax and pay for it."

They do, and the business community pays taxes and is glad it was done.

That's a little like this scenario. They aren't 'blinking' over the issue - it simply doesn't make any sense for companies to spend a lot (hire) to make a tiny return.

But if the GOVERNMENT taxes and invests and keeps the economy moving, businesses are glad it is. Hopefully, the investment is on something more useful than war - but even that horrible investment spent on things left in scrap on the battlefield helped the economy recover with WWII. It needed the government to borrow a lot of money - which then grew the economy and let the debt go down.

 

[woolfe9999]

But if it were a true economic boon we could all just stop working, collect unemployment and watch the economy zoom right a long.

Fern

Wow that's quite a logic fail. You are arguing that continuing unemployment benefits aren't an economic benefit by comparing people being on unemployment with people working? That isn't the RELEVANT comparison as no one claims that people being on unemployment is better than people working. The comparison is with people being out of work and having the benefit versus not having it. Since the benefits stimulate consumer spending versus not having them, they prevent further job loss, which incidentally prevents even more unemployment payouts. That is the theory of it. You can argue against the theory but your comments suggest that you do not understand or are straw manning it.

While you're at it, perhaps you can answer a related nagging question I have. If tax cuts are supposed to stimulate the economy by putting money in people's pockets that they will then go and spend, how is it that unemployment benefits don't do the same thing, or provide, as you claim, only a minor or incidental benefit? Seems to me the entire GOP notion of "stimulus" is tax cuts so perhaps you are disagreeing with that concept. If you don't think unemployment benefits are all that stimulatory then you certainly don't think tax cuts are either, at least not for the middle class or the poor.

 

[Craig234]

No, they were specifically created to help the economy. Anyone saying that wasn't a reason for them is simply ignorant. What you are saying is the exact opposite of reality.

Unemployment benefits exist in order to enable US productivity factors to find better fits with the economy as opposed to people being forced to accept immediate and poorly fitting other jobs. ie: you don't want an electrical engineer being forced to take a job as a janitor because he can't afford to wait a few weeks to feed his family.

I'm not sure how people don't know this.

Following is a link to a document from the period the program was created.

It suggests that the thinking was primarily that this was a more efficient approach to meeting society's humanitarian obligation to workers.

But the benefit that it also helped the economy keeping demand up was noted.

http://www.larrydewitt.net/SSinGAPE/UI1937book2.htm

 

[quest55720]

I think after 52 weeks people need to have to do community service. That way there is no incentive to sit there and leech off the system. Let them pick up trash along the highways or work in a homeless shelter. There is to much incentive for many to not take any job unless it is a dream job.

 

[ultimatebob]

I think after 52 weeks people need to have to do community service. That way there is no incentive to sit there and leech off the system. Let them pick up trash along the highways or work in a homeless shelter. There is to much incentive for many to not take any job unless it is a dream job.

52 weeks? Make it 26. If I can live off government handouts for a year, what's my motivation to find a job earlier than that?