TOPICS > Politics

Should U.S. Extend Unemployment Insurance Amid Federal Fiscal Uncertainty?

December 7, 2012 at 12:00 AM EDT
Businesses added 146,000 jobs in November, but Paul Solman reports the 7.7 percent unemployment rate was partially driven by Americans leaving the workforce. Jeffrey Brown talks to National Employment Law Project's Judy Conti and Heritage Foundation's Bill Beech, who debate the pros and cons of extending unemployment insurance.
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JEFFREY BROWN: More people found work in November and more people stopped looking for work. As a result, the number of new jobs came in better than expected today and the rate of unemployment was the lowest since 2008.

NewsHour economics correspondent Paul Solman begins our coverage.

CROWD: Three, two, one!

(CHEERING AND APPLAUSE)

PAUL SOLMAN: Washington brightened yesterday when the annual switch was flipped, the White House Christmas tree relit, and this morning, more holiday cheer, it seemed, in the form of the monthly jobs numbers; 146,000 new jobs were created last month, according to the survey of employers.

Unemployment dropped again to 7.7 percent, according to the survey of households, both numbers better than expected in the wake of Hurricane Sandy and fiscal cliff anxiety.

HARRY HOLZER, GeorgetownUniversity: So, it looks to me like Sandy is not going to affect the numbers, even after revisions.

PAUL SOLMAN: Georgetown’s Harry Holzer, former chief economist for the Labor Department.

HARRY HOLZER: In terms of the fiscal cliff, so far, we are just not seeing any big impact.

PAUL SOLMAN: Not even an impact on retail which, for all the talk of online supplanting bricks-and-mortar buying, added 53,000 jobs last month. Much of it was holiday hiring, no doubt, but a healthy 140,000 overall increase in the past three months.

Not all the new numbers were festive, however. Construction shed 20,000 jobs, though perhaps influenced by Sandy. Manufacturing dropped 7,000.

Grinchier still, job growth in September and October was revised down by 49,000 jobs. And for all the talk of a lower unemployment rate, its explanation seemed to be that several hundred thousand more Americans stopped looking for work in November and thus were counted out of the labor force.

Again, economist Holzer.

HARRY HOLZER: This month’s change was driven completely by the fact that some people stopped looking. Last month’s drop in unemployment really was driven by more people becoming employed.

So, the fact that the unemployment rate has dropped from over 10 percent over the last two or three years, part of that is real job-gaining by some people, and part of it is some people stopping looking for work.

PAUL SOLMAN: No wonder then that the number of unemployed still sat at 12 million people as December dawned, 40 percent of whom have been jobless for 27 weeks or longer. It’s a serious problem, says Holzer.

HARRY HOLZER: Perhaps one of the most serious problems, and that has been true for years now through this downturn. Very consistently, 40 to 50 percent of all the unemployed are long-term unemployed.

PAUL SOLMAN: And those unemployed are especially vulnerable this time of year, this year in particular, as the fiscal cliff beckons.

For many of the unemployed, the cliff is a clear and present danger. Unless Congress and the president act before the Times Square ball drops, many on unemployment insurance will be left to fend for themselves. That’s because federal extensions of those benefits, currently up to 47 additional weeks in some states, would suddenly expire.

That would make for an exceptionally unhappy holiday for an estimated two million unemployed Americans.

JEFFREY BROWN: And we take a closer look now at the standoff and stakes involving unemployment benefits.

Judith Conti is the federal advocacy coordinator for the National Employment Law Project, a workers rights group. And William Beach heads the Center for Data Analysis at the Heritage Foundation, a conservative think tank.

And welcome to both of you.

JUDITH CONTI, National Employment Law Project: Thank you.

JEFFREY BROWN:: Pick up first, Judy Conti, on what we just heard from Harry Holzer. Why is the amount of long-term unemployment so stubbornly high?

JUDITH CONTI: What’s happening now is, we’re starting to see job creation. We’re starting to see less people being laid off and people who were laid off getting their jobs back more quickly.

But those who have been out of work for a while are still facing the exact same barriers they faced throughout the entire slow recovery, not the least of which is a sentiment among employers that if you have been out of work for that long, there must be something wrong with you.

And therefore the people who are more recently unemployed or are currently employed are more attractive candidates, unfortunately.

JEFFREY BROWN: Does that sound right to you, that it sort of feeds on itself?

WILLIAM BEACH, Heritage Foundation: It really does.

And I think in the context of what we’re talking about tonight, we need to recognize that this was the most severe recession we have had for the labor market since World War II. This is the slowest recovery since the end of the World War II.

And here is the point of that.

You have millions of people whose job skills are simply not going to bring them back to the market. It may be easier for them now to drop out than to stay in. When people drop out of the labor force, they slow the economy. Their productivity is gone. Their contributions are no longer there.

So this is a different situation that we’re facing today than we faced I really think since the end of World War II.

JEFFREY BROWN: Now, before we get to the implications of the fiscal cliff here, but the system is — explain the system because it’s confusing, because different states have different impact on the unemployment benefits.

JUDITH CONTI: Right. Under normal economic times, this is a program that is governed by state law and administered by the state.

And states pay up to 26 weeks of benefits, six months for people who have lost jobs through no fault of their own.

But in bad economic times, historically, Congress has authorized additional levels of benefits. This time, it is a program called the Emergency Unemployment Compensation System.

And there are four different tiers, depending on how bad your state unemployment rate is. Every state gets 14 weeks. Nine states get up to 47 additional weeks. And the rest are in between. But you have to be over 9 percent to get that additional 47 weeks.

JEFFREY BROWN: All right, so it is this program that is now caught up in the fiscal cliff negotiations.

WILLIAM BEACH: Right. And it’s unique this time around.

This particular end of the month is a clear cutoff time. We have…

JEFFREY BROWN: In the past, it was phased out.

WILLIAM BEACH: It was phased out.

JEFFREY BROWN: Right.

WILLIAM BEACH: And as Harry said and your Solman piece pointed out, this is really the worst time of the year for this to happen.

So what we need to do now is not just say, oh, let’s just extend it. I think everyone thinks something like that has to happen.

And it needs to be for a period of time that will be humane for the millions of people who are unemployed. We still have a very high unemployment rate.

I think it’s time now to do some experiments. How do we combine the extension with mandatory training to make sure that people are skilled up when they reenter the labor force and don’t take this bad decision, in my view, of simply dropping out?

JEFFREY BROWN: Why do you think we need to do those experiments now, rather than just continue or extend further?

WILLIAM BEACH: Well, this is the time to do it.

Congress is focused on extension. Let’s focus them also on changing the program subtly. I think maybe Judy and I might even agree that some experiments could happen — now, we’re talking experiments — to see whether or not you could, say all right, you want to get an extension.

We will give you the extension if you will participate in this say online training program, learn to type. Change your skill set.

You really have to do something like that, because they can’t find work because their skills have been usurped. They have been out so long.

JEFFREY BROWN: Before I ask her that, who pays, though? Who pays for that?

WILLIAM BEACH: Well, it will be paid by the private sector. It will be paid by the public sector. There are ways to structure this.

JEFFREY BROWN: OK.

WILLIAM BEACH: You are talking $30 billion anyway.

 

And, you know, we need to understand the key to the economy is the labor force. It isn’t the capital structure. That comes second. Let’s attend to it very closely.

JEFFREY BROWN: So, what do you think about an experiment like that, requiring training in exchange for extending benefits?

JUDITH CONTI: Well, there are certainly many long-term unemployed workers who could benefit from training.

Unfortunately, what we have seen over the last few years is the public funds for training have been slashed and burned at every turn. So while it is a big talking point that workers need training, there is less money for it.

The fact of the matter is, too, there are plenty of workers out there that have all of the marketable skills they need. Perhaps their job search has been part of the problem at least that kept them unemployed for so long.

So NELP would propose that we also focus on people from the moment they get unemployed and give them high-quality reemployment services, where they get targeted help with resumes, with job search, with the public job matching function, where a work force development professional will network an employer with an open job with a worker who has those skills, which is the way the employment service used to function.

So that’s one of the other things we’d like to experiment…

JEFFREY BROWN: You are thinking of that as an experiment, but in the meantime, you’re pushing for this extension of — I mean, what should happen as of Dec. 31?

JUDITH CONTI: As of Dec. 31, we think the program should be reauthorized as it is today. The measures of long-term unemployment have not changed at all since Congress reauthorized this program.

So we want it to stay the same and we want to make sure that families have that income support so they can stay attached to the work force, so they can stay out of poverty, and hopefully get back into the system, back into working as quickly as possible.

JEFFREY BROWN: Are you for extending — I know you want to experiment, but are you also for extending?

WILLIAM BEACH: Well, you can’t go back to 14 weeks. And 26 weeks is probably going to be insufficient.

But let’s keep in mind that we would extend for humanitarian purposes. The economic evidence is fairly clear that extensions well beyond that 26 weeks actually adds to the period of time that people are unemployed. There is about a 5 percent increase in that, because the incentive isn’t there to get back to work.

JEFFREY BROWN: Well, that — you have argued that before when we have talked to you.

WILLIAM BEACH: I argue it every time I talk to you.

JEFFREY BROWN: Yes, but that it is a disincentive for people to go find work.

WILLIAM BEACH: Yes, exactly.

And the evidence is coming from Alan Krueger. He is — the White House Council of Economic Advisers, Mark Zandi, and many other economists, that we have to keep that in mind. That is not a reason not to extend, but it’s a reason to say how far should the extension go.

I say — here’s what I think. We should extend. And the extension should be tied to some creative way of infusing new skills in people who have — particularly the 5.5 million who have been out for that 40 weeks. You know, they are going to have a hard time getting back in.

Here is my final point on this — or maybe not my final point.

(LAUGHTER)

JEFFREY BROWN: We will decide.

WILLIAM BEACH: The unemployment rate fell this time by two-tenths of a percent. Everybody is happy about that. It fell because we lost 350,000 workers out of the labor force.

JEFFREY BROWN: But do you buy the disincentive argument, or do you think things have changed in this economy?

JUDITH CONTI: I think it’s different.

First of all, when you look at those studies, it shows a fairly negligible impact of 0.4, 0.5 percent on unemployment.

And a study done by Professor Jesse Rothstein at University of California, Berkeley, last year demonstrated that at least half of that is because unemployment insurance keeps people attached to the job search and attached to the work force, which we want.

The Heldrich Center out of Rutgers did a study as well around this time last year showing that workers who are unemployed who are receiving unemployment do more job search activities than those who don’t get unemployment benefits and are willing to settle for lower-paying jobs than those who are not getting benefits.

JEFFREY BROWN: You get a final last word.

WILLIAM BEACH: Certainly true in the first few weeks of unemployment. You are out there. Your job skills are fresh. You are used to getting up in the morning and getting to work.

The longer that goes on, the less you are doing all of those things. And now the structural problem is this. We have a huge body of people who have been out of the labor force so long that their skills are really fallow. We need to attend to this difference. So, extending unemployment for humanitarian purposes, we probably should do that. Let’s change the system so we have training involved.

JEFFREY BROWN: Bill Beach and Judy Conti, thanks so much.

JUDITH CONTI: Thank you.

WILLIAM BEACH: You’re welcome. Thank you.