Another Perspective

An Alternative to Unemployment

Why do we pay the jobless not to work? Why not tie benefits to voluntary service?

By 8.26.11

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If there's any question that the Obama Administration is coming up dry with new ideas for job creation, Agriculture Secretary Tom Vilsack all but confirmed it last week. In an interview, Vilsack bragged that one in seven Americans are now on food stamps. Why brag about such a thing? Because, said Vilsack, every dollar from the food stamps program "generates $1.84 in the economy in terms of economic activity.… It's the most direct stimulus you can get in the economy during these tough times."

Seriously, this is what passes for economic thinking in the Obama Administration right now. By Vilsack's logic, if food stamps are such a boon to the economy, then why not put all Americans on food stamps? But it's this same faulty logic which seems to be governing the White House's plans for job creation. Even after extending unemployment insurance to an unprecedented 99 weeks two years ago, the White House seems prepared to fight any effort to eliminate the extension. 

Consider the explanation from White House Press Secretary Jay Carney on the economic "stimulus" of extending unemployment insurance: "It is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get. They're not going to save it; they're going to spend it."

The White House should know better, especially given what we already know about extending unemployment benefits. According to an analysis by the Federal Reserve Bank of San Francisco, extending unemployment benefits to 99 weeks increased the U.S. jobless rate as much as 0.8 percentage points. In fact, note the Fed economists, the long-term unemployed now account for nearly half of all people out of work.

This shouldn't come as any surprise. I saw this firsthand when trying to hire a nanny in the Detroit area. One otherwise-qualified nanny said she didn't want to start until her unemployment benefits ran out. In the context of some 13.9 million out-of-work Americans collecting up to two years of unemployment, we must wonder if our well-intentioned social programs are backfiring.

Losing a job is definitely one of the toughest setbacks in life, and certainly unemployment insurance helps soften the blow. But when unemployment compensation of such length actually discourages unemployed Americans from finding jobs, then it's time to question the benefits of yet another extension. Moreover, at a time when federal and state budgets are so deep in the red, we can't continue to perpetually fund a program that is now costing federal and state governments some $129.5 billion annually.

We must look for an alternative that might actually lead to job creation. One idea is to provide a shorter duration of unemployment insurance and then require those receiving these checks to volunteer at a non-profit for 20 hours a week. Whether it is a church, local government, or a charity, in these tough financial times when charitable giving is down, these non-profits will appreciate the support, as will the community they serve.

Just as important, the unemployed job seeker will benefit also. He or she can gain skills, contacts, references and maybe even a full time job. Moreover, studies have documented the psychological damage one endures while unemployed for an extended period. Sometimes, without meaningful work, a person simply gives up. By tying their benefits to performing meaningful work, we can help lift the person's self-esteem and confidence, which will keep them motivated to find a regular job.

A program like this doesn't require a new bureaucracy. It simply requires a non-profit official to certify the person's weekly 20 hours to the unemployment office, which is already equipped to certify when someone is eligible for benefits.

If the government is giving away taxpayer money for those who deserve it only because they lost their job, then we should have no problem attaching some strings. Tough times call for trying something new. But the Obama Administration seems willing to ignore the mounting evidence that extending unemployment insurance is only hurting job creation. As the old adage goes, if we try more of the same, we'll get more of the same.

Our choice doesn't have to be the stark choices offered by extremists in either party (pay or not pay two years unemployment). This "volunteering" third option is one which will help our nation, the Treasury, and the unemployed.

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About the Author

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA), the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own.