unemployment insurance benefits
Where’s the line between a helping hand and a crutch?
Last week, Congress approved a measure to extend unemployment benefits to 99 weeks and expand the home buyer’s tax credit first adopted in early 2008. The ministimulus plan includes two needy targets — the unemployed and the housing industry — but it’s hard to think of the help as temporary.
Ninety-nine weeks on the dole is about a month shy of two years, and that sounds like an eternity for workers in the United States. It’s almost four times longer than usual and 50 percent longer than any previous period.
Even in Texas, where drawing unemployment can be difficult, some residents are now eligible for 93 weeks of aid.
The extra six weeks’ aid goes to the 26 other states whose unemployment rate is at least 8.5 percent.
It’s understandable that lawmakers want to help.
Unemployment is the highest since 1983, and more than 1 in 3 jobless people have been looking for work for six months or longer, the most ever recorded in this country.
That helps explain why the Senate passed the bill by a vote of 98-0. The House approved it 403-12. And President Barack Obama signed the bill on Friday, the same day the government announced that national unemployment had reached 10.2 percent.
The question is whether the gestures will have unintended consequences. In softening today’s economic hit, will they extend the downturn, slow the recovery or lock politicians into an expensive precedent?
Research shows that job hunters work much harder when their benefits are about to expire. One study found that unemployed workers put in 70 minutes a day on job searches during their last week of benefits compared with 20 minutes a few months earlier.
It’s no surprise that the sense of urgency grows as the day of reckoning approaches.
Stakes are even higher today because so many jobs are gone for good. That means many people have to reinvent their careers, sometimes get training and reset their family finances.
In this economy, the old standard benefit — six months of unemployment insurance — isn’t enough. So the feds added 20 weeks of additional benefits in the summer, along with 13 extra weeks for states with "high unemployment."
In February, as part of the stimulus, 20 more weeks were added, raising the maximum to 79 weeks. And after Friday, states added 14 to 20 weeks.
With unemployment insurance, policymakers try to strike the right balance between helping people get through a rough patch and being fiscally responsible. They also don’t want to create a welfare mentality, which has hamstrung some countries in Europe, where aid can be unlimited.
There is plenty of incentive to get back to work in the United States, even beyond the emotional rewards of being productive. In general, unemployment insurance replaces only about half of previous income, up to a maximum of about $400 a week. Most people lose their health insurance with their job, and they have to pay for a COBRA plan to remain covered. That’s an expensive proposition that eats up much of the monthly benefit.
As part of the stimulus in February, the government subsidized COBRA payments for up to nine months. And in testimony in a Senate hearing, one expert said Congress should carefully weigh the trade-off in ending that support and extending unemployment insurance again.
While many workers let their health coverage lapse, others depend on it to treat their family’s medical conditions.
"For these workers, access to basic health insurance may be much more important than eligibility for a few extra weeks of unemployment benefits," said Gary Burtless, an economist at the Brookings Institution.
He also said Congress’ extensions are establishing a precedent.
Most of the extra aid is set to expire in January, with one tier approved through May. But people who are laid off in the next few months will expect to have more than 26 weeks of help.
The job market usually remains weak even after economic recovery begins.
Unless we’re sure that we have the funding and political will to continue to provide extended benefits, many will feel they weren’t treated equitably, Burtless said.
And what should home buyers and sellers expect? The bill extends an $8,000 credit for first-time buyers and adds a $6,500 credit for those moving up. Couples who earn up to $225,000 are eligible.
Some economists say the incentive will artificially prop up prices rather than move a lot of excess inventory, because the tax credit has been around since early 2008.
Supporting prices may be part of the goal, but for two years, the housing market has been trying to find a natural, sustainable price level.
It’s been a painful process, and much of the industry finally seems to be near a bottom. In the latest S&P/Case-Shiller Index, 17 of 20 metro areas showed month-to-month gains.
While prices are still lower than last year, home prices in 20 cities rose an average of 1.6 percent from July to August.
The government has been helping real estate in a big way by keeping interest rates low and pushing lenders to let troubled borrowers remain in their homes. With 30-year mortgages at 5 percent and selling prices far off their peaks, it’s an attractive time to buy.
The tax credit adds another element, and analysts say it can be leveraged as a down payment. After the housing bubble, is that a good thing?
Where’s the line between a helping hand and a crutch?
Last week, Congress approved a measure to extend unemployment benefits to 99 weeks and expand the home buyer’s tax credit first adopted in early 2008. The ministimulus plan includes two needy targets — the unemployed and the housing industry — but it’s hard to think of the help as temporary.
Ninety-nine weeks on the dole is about a month shy of two years, and that sounds like an eternity for workers in the United States. It’s almost four times longer than usual and 50 percent longer than any previous period.
Even in Texas, where drawing unemployment can be difficult, some residents are now eligible for 93 weeks of aid.
The extra six weeks’ aid goes to the 26 other states whose unemployment rate is at least 8.5 percent.
It’s understandable that lawmakers want to help.
Unemployment is the highest since 1983, and more than 1 in 3 jobless people have been looking for work for six months or longer, the most ever recorded in this country.
That helps explain why the Senate passed the bill by a vote of 98-0. The House approved it 403-12. And President Barack Obama signed the bill on Friday, the same day the government announced that national unemployment had reached 10.2 percent.
The question is whether the gestures will have unintended consequences. In softening today’s economic hit, will they extend the downturn, slow the recovery or lock politicians into an expensive precedent?
Research shows that job hunters work much harder when their benefits are about to expire. One study found that unemployed workers put in 70 minutes a day on job searches during their last week of benefits compared with 20 minutes a few months earlier.
It’s no surprise that the sense of urgency grows as the day of reckoning approaches.
Stakes are even higher today because so many jobs are gone for good. That means many people have to reinvent their careers, sometimes get training and reset their family finances.
In this economy, the old standard benefit — six months of unemployment insurance — isn’t enough. So the feds added 20 weeks of additional benefits in the summer, along with 13 extra weeks for states with "high unemployment."
In February, as part of the stimulus, 20 more weeks were added, raising the maximum to 79 weeks. And after Friday, states added 14 to 20 weeks.
With unemployment insurance, policymakers try to strike the right balance between helping people get through a rough patch and being fiscally responsible. They also don’t want to create a welfare mentality, which has hamstrung some countries in Europe, where aid can be unlimited.
There is plenty of incentive to get back to work in the United States, even beyond the emotional rewards of being productive. In general, unemployment insurance replaces only about half of previous income, up to a maximum of about $400 a week. Most people lose their health insurance with their job, and they have to pay for a COBRA plan to remain covered. That’s an expensive proposition that eats up much of the monthly benefit.
As part of the stimulus in February, the government subsidized COBRA payments for up to nine months. And in testimony in a Senate hearing, one expert said Congress should carefully weigh the trade-off in ending that support and extending unemployment insurance again.
While many workers let their health coverage lapse, others depend on it to treat their family’s medical conditions.
"For these workers, access to basic health insurance may be much more important than eligibility for a few extra weeks of unemployment benefits," said Gary Burtless, an economist at the Brookings Institution.
He also said Congress’ extensions are establishing a precedent.
Most of the extra aid is set to expire in January, with one tier approved through May. But people who are laid off in the next few months will expect to have more than 26 weeks of help.
The job market usually remains weak even after economic recovery begins.
Unless we’re sure that we have the funding and political will to continue to provide extended benefits, many will feel they weren’t treated equitably, Burtless said.
And what should home buyers and sellers expect? The bill extends an $8,000 credit for first-time buyers and adds a $6,500 credit for those moving up. Couples who earn up to $225,000 are eligible.
Some economists say the incentive will artificially prop up prices rather than move a lot of excess inventory, because the tax credit has been around since early 2008.
Supporting prices may be part of the goal, but for two years, the housing market has been trying to find a natural, sustainable price level.
It’s been a painful process, and much of the industry finally seems to be near a bottom. In the latest S&P/Case-Shiller Index, 17 of 20 metro areas showed month-to-month gains.
While prices are still lower than last year, home prices in 20 cities rose an average of 1.6 percent from July to August.
The government has been helping real estate in a big way by keeping interest rates low and pushing lenders to let troubled borrowers remain in their homes. With 30-year mortgages at 5 percent and selling prices far off their peaks, it’s an attractive time to buy.
The tax credit adds another element, and analysts say it can be leveraged as a down payment. After the housing bubble, is that a good thing?
