Should Unemployment Benefits be Free to Collect?
Mobilizing the out-of-work workforce
Mobilizing the out-of-work workforce
This may be a controversial topic, one you may presuppose is going to be unbalanced — it’s not.
I live by the beach and tourism during summer takes a toll on the environment. There is trash everywhere. People discard their child’s dirty diapers and the remnants of smashed glass-bottles that used to hold alcohol are strewn across the paths.
As I was walking my dog through this proverbial minefield I saw a group of volunteers in high-visibility gear, trying to clean up the mess from the previous weekend’s footfall.
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They were unpaid, so they only have limited free time and often it’s not enough to complete the work that’s needed.
I immediately thought, how would an economist solve this problem? What group of people do we already pay, but yet don’t have any responsibility for work?
The answer, those who are currently unemployed.
How many people claim unemployment?
Obviously, during COVID, the number of people claiming unemployment has risen sharply. Globally it’s uncertain how many of those people will even be allowed to go back to work at all — or if there’s even a business to go back to.
Let's talk about unemployment incentives…
The typical unemployed American was receiving about $930 a week from late March to late July. That’s over $48,000 (approx £36,000) per year. More money than many of my employed friends earn.
After talking to those friends and client’s in the United States, they told me that some people even quit their jobs because they realised unemployment was more lucrative than working.
“In the United States especially, politics and economics don’t mix well. Politicians have all sorts of reasons to pass all sorts of laws that, as well-meaning as they may be, fail to account for the way real people respond to real-world incentives.” — Steven D. Levitt, Superfreakonomics
Where is the incentive to work when you can reduce the risk of getting sick, do nothing and get paid more than you were before, to be unemployed?
How long do they collect unemployment benefits?
In the UK, only 44% of people who claim a ‘Job Seekers Allowance’ (recently re-branded as Universal Credit) claim for less than 6 months, as they’re able to find another job.
That means that over half (55.7% to be exact) keep collecting this free income for 6 months or more — 22% of that claim for 104 weeks or more.
Put simply, 1 in 5 unemployed people claim benefits for 2 years (or more) to help them look for a job.
I ask you this… How hard are they really looking?
Now that might sound like a lack of compassion on my part, but it’s clear to see that unemployment benefits, although absolutely necessary, are being somewhat abused by at least half of the people that collect them.
A potential solution — mobilize that workforce
We have an unquestionable need for more community service, charity work and unskilled-labour. We also have an out-of-work workforce that we currently pay without seeing a return on.
The cost vs benefit ratio is completely unbalanced. Could we not put those collecting ‘unemployment benefits’, if healthy enough to do the work, to work?
“There’s no such thing as a free lunch.” — Milton Friedman
The solution seems relatively simple, however, there are some obstacles to overcome.
Would it become a new form of slavery?
The argument you could make against this proposal is that traditional ‘unemployment benefits’ are significantly lower than the legal minimum wage.
To expect people to work for less than minimum wage would normalize a new form of slavery. The unemployment benefit divided by the average number of hours worked per week (37.5) would equal £1.98 ($2.53) per hour.
That’s around 77% less, per hour, than anyone working for minimum wage.
I wouldn’t work for £1.98 per hour and I don’t expect others to either.
It could potentially stop their search for work
Another major belief against mobilizing those out of work is that if they’re busy working, they can’t spend that time looking for a ‘real’ job.
After helping to serve the community for 8 hours, the last thing anyone will want to do is to go home and apply for jobs. Often, the jobs that need doing are manual and tiresome. Thus, sapping the potential candidate’s energy to look for work each day.
Can we overcome this in any way?
To allow enough free-time to look for work and to bring an equilibrium to the cost/benefit ratio of unemployment payments, the simplest solution would be to have those people work but work less — in line with the minimum wage threshold.
In the UK the national minimum wage for anyone over 25 years old is £8.72 ($11.16) per hour. So the benefits received could pay for slightly over 8 hours of work at that rate per week.
Unemployment benefits / minimum wage = 8.4 hours of eligible work
When rounded to the nearest whole number, that would mean those working on unemployment would work for slightly over 20% of what those working a full-time job would. Leaving the other 80% of that eligible working time, to look for work.
Fans of the 80/20 rule will be satisfied, but it’s also, successfully I might add, not undervaluing those out of work, or exploiting their labour.
Of course, that number of eligible working hours will be different per country and/or state.
What could we expect from actioning this?
Ideally, the unemployed members of each county would work on locally-driven community service tasks and charity work.
This could mean:
Charity shop work
Refuse collection (public bins)
Running errands for the elderly
Helping to support and organise after-school programs
Volunteer policing to aid in community safety
Feeding the homeless, etc
We see this work already carried out, in some cases by prison-reform programs and volunteers, but the difference would be that those people aren’t currently being paid and those collecting unemployment are being paid.
Not only would the fulfilment gained from work create a positive psychological impact, both in self-esteem and purpose, but it would also create massive improvements in everyone’s community.
A side benefit would be the learning of new skills for each unemployed individual. Upskilling the workforce is the fastest way to get them back to work.
If an unemployed-individual struggles to find employment for a long period of time, it’s because they don’t have better skills than their peers applying for the same job. Others get hired instead of them. Gaining more skills via this initiative would make them more attractive to potential employers.
By ensuring their eligibility for work directly correlates with the government’s minimum wage requirements, you’ll ensure that government-funded departments or private businesses can’t exploit these workers either — choosing this ‘free’ workforce instead of creating jobs. It will make it counter-productive.
So what do you think? Should we require the unemployed to work for those benefits?
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