Loss of Unemployment Benefits for Millions Poses a Serious Threat to Society


For the 13 million jobless workers, life is about to get worse. For the economy, there will be less money in circulation. The Great Recession wiped out a great number of jobs, many of which will not be coming back. Recovery is slow to non-existent here and abroad. Recent Federal law mandating cuts in spending and a Congress mired in the partisan politics of an election year all combine to stall progress for the rest of the year and beyond.

According to the National Employment Law Project (NELP), of all of those without jobs less than half are still receiving unemployment benefits and by next year that will drop to only one in four. The situation will be dire for all, especially those with families to feed reports Paul Davidson with USA TODAY. The legislation passed by Congress in February allows the states to scale back the extended unemployment benefits on a state by state basis determined by the job growth in that state. At the height of the program the Federal government spent $59 billion on subsidies for the period of unemployment benefits extended from 26 weeks to 99 weeks. The loss of the extended phase is painful as many have been tapping into savings as well during this period. NELP projects that the reduction of this emergency legislation will affect 600,000 recipients by December on top of the 500,000 who have already lost benefits this year and 2 million more by the end of the year. Jesse Rothstein, an economist at University of California-Berkeley, points out what should be obvious, “We’re still in a world where you can’t expect anybody to find a job within a specific period of time, because there aren’t enough jobs out there”.

Cuts in benefits further depress the economy. The unemployed are forced to spend all their money as soon as they get it. They can’t afford to save or send cash overseas to a private bank account. Unemployment benefits are generally only one-half of the recipient’s former salary. When there is no money to spend there is a greater reliance on charities, food stamps and Medicaid. Another source of income is Social Security disability benefits for those who cannot work for health reasons. This will put so much of a drain on the disability fund that projections from the Center for Retirement Research estimate that it will be unable to pay full benefits to all beneficiaries by 2016. Still all these other options depend on government spending which between the Federal government and the states is drying up.

A criticism of the extended unemployment benefit period is that it discourages people from getting that “less than perfect” job. There are a number of people who hope to get something comparable to what they lost though the negative impact is less than expected. Rothstein did a study recently to analyze the effects of expanded benefits and found that it boosted joblessness in early 2011 by 0.3 percentage points, most of which was due to older workers who kept looking for jobs to get benefits. Generally those older workers finally decided to retire and the economy was deprived of additional consumer spending.

In short, things could become quite dire. When millions are left homeless and without the ability to feed themselves or their families, our society faces a very volatile situation.