Jobs logic not what you'd expect
Note: All quotations of Sen. Jon Kyl come from the Congressional Record, Vol. 156, No. 28, posted March 2, 2010, at gpoaccess.gov/crecord/index.html. The Congressional Budget Office's testimony is here.
Sen. Jon Kyl, arguing March 1 that legislation before the U.S. Senate was being called a "jobs bill" while many provisions of the legislation did not involve job creation, bolstered his point by saying, "What of the subject of unemployment coverage extension, which we have just been debating? That doesn't create new jobs."
Who could argue against that? Unemployment benefits do not create jobs. That seems like sound logic.
Kyl then went one step beyond and said, "In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work."
This statement, coming from a senator who represents a state where unemployment benefits currently top out at $265 per week and where the unemployment rate was 9.2 percent in January and job creation is at a standstill, is the height of dogmatic ideological rhetoric, unsupported by the facts.
Sure, he included the "if anything" to point out that this was something of a rhetorical argument. And, he seemed to backpedal a little bit: "I am sure most of them would like work and probably have tried to seek it, but you can't argue it is a job enhancer."
The purely political point about it's not being a "jobs bill" is made, but his rhetorical emphasis on the disincentive effect of unemployment benefits is out of proportion to the reality of that effect.
The nonpartisan Congressional Budget Office, looking at the proposal to extend unemployment benefits that Kyl was talking about, said about that proposal and an accompanying proposal to extend federal aid to the unemployed for COBRA health insurance payments: "Both policy options could dampen people's efforts to look for work, although that concern is less of a factor when employment opportunities are expected to be limited for some time." So the CBO concedes his point that these measures could be a disincentive but argues that it's probably not a big concern because employment opportunities in the near future are so dim.
More importantly, the CBO estimated the impact on the economy of extending these benefits would be to "raise output cumulatively between 2010 and 2015 by $0.70 to $1.90 per dollar of total budgetary cost." That's $0.70 to $1.90 growth in GDP for every dollar the federal government puts into aid to unemployed workers.
In addition, "CBO also estimates that the policies would add 8 to 19 cumulative years of full-time-equivalent employment in 2010 and 2011 per million dollars of total budgetary cost."
"Full-time-equivalent employment" is another way to say jobs, encompassing 40 hours of work a week, whether by an actual full-time employee, a set of part-time employees, full-time employees working more than 40 hours or some combination of any or all of the above. That's a range of 8 to 19 FTEs, or jobs, added in 2010 and 2011, per $1 million spent.
The specific assumptions that the CBO is making are not far-fetched. "As a very rough approximation, economists might expect $1 million to create about 10-12 new jobs in the economy, particularly if the spending was in services or retail," economist Lee McPheters of the W.P. Carey School of Business writes in an e-mail.
Responding to Sen. Max Baucus of Montana, who protested Kyl's remarks, Kyl reiterated his own point and conceded that the current unemployment picture may not stem from any disincentive to seeking work: "If my colleague will yield, I said it is not a job creator. If anything, it could be argued it is a disincentive for work because people are being paid even though they are not working. I certainly did not say, and would never imply, that the reason people don't have jobs is because they are not looking for them. It is true that a lot of Americans have gotten so tired of looking for jobs or believe they are not going to find them that they have stopped looking and, as a result, the unemployment numbers are probably higher than the roughly 10 percent that is quoted now. Some people believe it could be as much as 17 percent. This is why I have supported every extension of unemployment benefits. I have voted for them. As my colleague says, there are five people looking for every job that exists. If they cannot get the jobs, they needed support. But what I said is true, and if my colleague can find a source that says it is not true, show me. But providing unemployment benefits doesn't create jobs."
But to his last point, CBO's analysis about the growth of the economy and full-time-equivalent employment, issued Feb. 23 for Congress' Joint Economic Committee, argues that the statement that unemployment benefits don't create jobs is not necessarily correct.
How does this make sense? People who have no money, can't spend. People who get unemployment benefits while they search for work actually spend that money, which can help save other people's jobs or even stimulate some job creation or, at least, spur increases in hours worked among those already employed.
Let's point out that some of the best advice available to the unemployed sounds a lot like what Harvey Mackay writes in his recent book "Use Your Head to Get Your Foot in the Door": "Getting a job is not a nine-to-five job. It's a sixteen-hour-a-day proposition, from the moment you get up until the moment you go to sleep."
If that's the case, the unemployed who are looking for jobs are not being paid unemployment benefits for not working but are being paid to pursue a job search to take them off the unemployment rolls.
11 Mar, 2010 >
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