November 6, 2011
The Next Fight Over Jobs
The way the job market is going, it will never be robust enough to bring down the unemployment rate, now at 9 percent, or 13.9 million people. Monthly job growth has slowed to an average of just 90,000 new jobs a month over the past six months, a pace at which growth in the working-age population will always exceed the number of new jobs being created.
High unemployment and low job growth, which have plagued the economy all through the current “recovery,” hurt both consumer spending and economic growth. But don’t count on government to do the obvious and urgent thing — intervene to create jobs.
Tragically, the more entrenched the jobs shortage becomes, the more paralyzed Congress becomes,with Republicans committed to doing nothing in the hopes that the faltering economy will cost President Obama his job in 2012. Last week, for instance, Senate Republicans filibustered a $60 billion proposal by Mr. Obama to create jobs by repairing and upgrading the nation’s deteriorating infrastructure. They were outraged that the bill would have been paid for by a 0.7 percent surtax on people making more than $1 million.
Things may be about to get worse.
Federal unemployment benefits, which generally kick in after 26 weeks of state-provided benefits, are scheduled to expire at the end of the year. That would be a disaster for many of the estimated 3.5 million Americans who get by on extended benefits — an average of $295 a week. It would also be a blow to the economy, because it would reduce consumer spending by about $50 billion in 2012 — which would mean slower economic growth and 275,000 lost jobs. Unfortunately, given Republicans’ demonstrated willingness to ignore human needs and economic logic, it is more likely than not that jobless benefits will be a major battle in the months ahead.
There are no plausible arguments against an extension — in fact, Congress has never let federal benefits expire when the unemployment rate was higher than 7.2 percent. But there are many specious arguments, chief among them that providing benefits reduces the incentive to get a new job. The evidence says otherwise.
A recent paper by Jesse Rothstein, an economist at the National Bureau of Economic Research, shows that benefit extensions in early 2011 raised the jobless rate by about 0.1 to 0.5 percentage points, but most of that was due to benefit recipients staying in the labor force and actively looking for work during the time they are collecting benefits, rather than, say, dropping out in despair.
Unemployment benefits are the first line of defense against ruin from job loss that is beyond an individual’s control. In a time of historically elevated long-term unemployment, they are an important way to keep workers connected to the job-search market. They are also crucial to ensuring that the weak economy doesn’t weaken further.
They clearly need to be extended, though we have no illusion that it will happen without a fight.