Congress should not have gone on recess without extending unemployment benefits. Not only should those benefits be extended; they also should be increased.
With unemployment at 9.5 percent, and benefits already having run out for more than 1 million people, there’s less excuse now than ever for inaction.
Today, more than 14 million workers — nearly 10 percent of the U.S. labor force — are officially unemployed. The long-term unemployed represent a staggering 46 percent of the total, higher than at any time between 1948 (when the federal government began collecting these statistics) and 2009.
If unemployment insurance lasted longer and replaced a higher percentage of workers’ wages, it would not only help the jobless, but would also buoy up the gross domestic product and the wages of employed workers.
For the unemployed, a monthly benefit check can make the difference between paying the bills and seeing them pile up month after month. An unemployment check can make it possible to pay the mortgage instead of facing foreclosure, or to pay the rent instead of facing eviction.
Unemployment benefits can also help ease the severity of the recession. They act as an “automatic stabilizer” during a recession, limiting the drop in spending, production and employment. When workers lose their jobs and incomes, they may have no choice but to cut back their spending sharply. This means less demand for goods, so businesses cut back production and lay off still more workers. Unemployment insurance limits this vicious cycle. Economist Mark Zandi of Moody’s Economy estimates that for every dollar the government spends on unemployment benefits, overall GDP increases by more than $1.60.
Unemployment benefits also act as a wage floor, much like the minimum wage. When unemployment is high, there are plenty of jobless workers available for employers to hire, and employed workers are afraid of losing their jobs and possibly facing long bouts of joblessness. This means workers have little bargaining power, making it easier for employers to cut workers’ pay or squeeze more work out of each employee. By contrast, a higher monthly unemployment check would give all workers more bargaining power and make it harder for employers to push down wages.
The members of Congress who blocked the extension of unemployment insurance acted with extraordinary callousness toward the millions of jobless. And they have done the rest of us no favor, either.
We should all be demanding extended and expanded relief for the unemployed, now.
Alejandro Reuss is an economist and historian and a frequent contributor to Dollars & Sense magazine (dollarsandsense.org). He can be reached at email@example.com.
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