Protecting the Jobless

It's an election year, and partisan acrimony has escalated. Democrats and Republicans portray themselves as the nation's saviors and protectors against all the programmatic atrocities of the other side. Can we find a refuge of common-sense agreement amid this self-serving political din? Well, here's a modest proposal for the economy: enact a temporary extension of unemployment insurance from the standard 26 weeks to 39 weeks. There's nothing original about this; benefits have been extended in every recession except one since the 1950s. The proposal's virtue is precisely its modesty. It would directly aid obvious victims of the downturn: people who lost their jobs through no fault of their own. Although most unemployed usually find new jobs within the normal six months, the task becomes harder in a slump. Perhaps 3 million people will exhaust their benefits this year, estimates the Congressional Budget Office. The cost of added protection is also modest: about $13 billion for a proposal that recently passed the House Ways and Means Committee.

True, it's not yet clear that we're even in a recession. In the first quarter of 2008, the preliminary estimates showed that the economy's output of goods and services (gross domestic product) increased at a 0.6 percent annual rate. That's not much, but it's still growth and suggests the economy doesn't meet one basic test for a recession—two consecutive quarters of negative GDP. But that verdict comes with a big caveat: the job market is already in retreat.

Look at the numbers. Though the April unemployment rate of 5 percent is not historically high (the average for the 1990s was 5.8 percent), it's way up from the recent low of 4.4 percent in October 2006. The difference reflects an additional 900,000 unemployed out of a total of 7.6 million. For much of 2007, the number of new jobs was actually increasing, though not fast enough to absorb all the new entrants into the labor force. Even this growth has halted, and the number of jobs has begun to decline. Since December, payroll employment has fallen by 260,000.

How does employment decline in an economy that's expanding, even if feebly? Easy. Weak companies fail or shrink; the survivors don't hire more people to handle the extra business. In technical terms, productivity (old-fashioned efficiency) improves. Fewer workers do more work. By many indicators, the job situation may get worse before it gets better. For example, the Conference Board's index of online job vacancies is now dropping and is 16.4 percent below what it was a year ago; declines occurred in 44 of 50 states.

The great danger of unemployment insurance is that it worsens the very problem it's supposed to relieve. People are paid to be jobless. Benefits that are too generous or that last too long can raise unemployment. This is a problem in Europe, where benefits are relatively lavish. But it's a smaller issue here; some academic studies find that extending unemployment benefits by 13 weeks might slightly slow the flow of workers back into jobs. People don't start looking so quickly or are more picky. But the effects aren't large, because the benefits are fairly stingy.

For starters, only workers who are laid off can get them. People who quit or who are entering or re-entering the job market aren't eligible. Altogether, only about 36 percent of today's unemployed receive benefits, says Maurice Emsellem of the National Employment Law Project, a research and advocacy group. Nor are benefits particularly high. They now average about $300 a week; that's $7.50 an hour for a 40-hour week. (States set the benefit levels. Average weekly benefits range from $179 in Mississippi to $408 in Hawaii. The payroll taxes that pay for the program also vary by state.)