The Good, The Bad, And The Ugly Side of Unemployment Benefits



What originally began during the Great Depression as a New Deal program designed to be a temporary safety net for unemployed Americans has become an American institution and a powerful political tool wielded by politicians from both parties eager to please their constituencies, but not the least bit concerned about the business owners who must truly bear the cost. Consequently, unemployment benefits originally intended to last for a few months at most can be extended, extended, and extended again while legitimate businesses struggle to find good, qualified, available workers.

In today’s unpredictable economy, unemployment insurance can be a real wild card for businesses, especially larger ones with intermittent production schedules. A few layoffs here and there, and before you know it instead of a manageable sum you’re paying the full 6% on the first $7,000 in wages, per year, per employee. If you have a lot of employees, like temp agencies do, that can add up really, really fast. In fact, speaking for temp agencies (since I work for one), given the nature of the service we provide, if unemployment costs are not controlled it can quite literally put us out of business!

Risk management is one of the key selling points staffing agencies have in their quiver, and unemployment insurance risk is no different. Staffing is an excellent way to mitigate risk for companies with varying, intermittent, or seasonal production schedules. Laying off full-time employees on a regular basis can quickly spell disaster, so it’s much simpler and easier to lay off temporary employees. The temp agency can and must then minimize their unemployment tax costs by offering those employees work elsewhere. It should be a win-win, but not everyone sees it that way.

Unemployment isn’t just a cost for businesses; it’s also a concern, albeit often an unrealized one, for the unemployed themselves. Needless to say, there are many who abuse the system. Some will try to draw unemployment even if they quit a job or were terminated for good cause. Others may have been legitimately laid off from one assignment yet make themselves unavailable for additional assignments, hoping to draw a check instead.

In 2011, the Wall Street Journal reported that 49.1% of the population lives in a household where at least one individual gets a government benefit of some sort. When the Senate recently opened the floor for consideration of yet another unemployment extension bill, President Obama said, “The long-term unemployed are not lazy. I can’t name a time when I met an American who would rather have an unemployment check than the pride of having a job.”

Despite the President’s contention that he’s never met (nor apparently exists or has ever exited) a lazy long-term unemployed American, human nature begs to differ. Is everyone who draws unemployment lazy? Of course not! There is certainly a place for a helping hand, especially for those who have become unemployed through no fault of their own. But dependency, especially the dependency created by government, leads to a cycle of further dependency, which eventually leads to despair and hopelessness. People caught in it lose not only the job skills they once honed every day, but the diligent work habits that played such an important role in their past career achievements. Is an extra year (or two) of dependency really worth the long-term price?