August 12, 2010 11:54 am ET
In an email to supporters yesterday, Newt Gingrich blamed Democrats for high unemployment and argued that "the extension of unemployment benefits has given people a perverse incentive to stay on unemployment rather than accept a job." Gingrich cynically warns that Democrats are making jobless Americans "get so used to being unproductive that they are willing to accept welfare indefinitely instead of taking a job." Gingrich is just the latest in a long line of Republicans to attack the unemployed for political gain. In reality, unemployment checks average about $300 per week, and cherry-picked anecdotes about "indefinite welfare" ignore the real source of high unemployment: a severe economic crisis brought about by Republican mismanagement.
Gingrich Cited Wall Street Journal Article In Arguing American Workers Prefer Unemployment Checks Over Wages. In an email to Human Events subscribers, Gingrich wrote:
An article in the Wall Street Journal Monday painted a frustrating picture of the joblessness situation, showing that, despite our high unemployment, many firms are having trouble filling job openings. According to the Federal Reserve Bank of Atlanta, if job openings were getting filled at a normal rate, the unemployment rate would be 6.8% instead of 9.5%.
So there are actually many jobs out there that need to be filled. Yet, in the worst recession since the Great Depression, many employers can't make hires.
The article cites several reasons for this phenomenon, a few of which are long term trends such as our education system not producing enough qualified engineers. But others factors fall squarely on the backs of this administration and Congress.
For instance, the extension of unemployment benefits has given people a perverse incentive to stay on unemployment rather than accept a job. The part-owner of a machine parts company, Mechanical Devices, is looking for as many as 40 new engineers, but is quoted in the article as saying many applicants at job fairs were "just going through the motions so they could collect their unemployment checks." The article also quotes an engineer who admits he turned down more than a dozen offers because the salary would have been less than he made on welfare.
This story encapsulates the problem of the long-term unemployed. The depth and length of this recession is at risk of creating a permanent pool of unemployed Americans, who get so used to being unproductive that they are willing to accept welfare indefinitely instead of taking a job.
[Gingrich Email, 8/11/10, emphasis added]
Below are just a few of the many examples of Republicans blaming unemployment on laziness brought on by government checks. For a more complete list, see our full fact check HERE and read more about the GOP's rhetoric on unemployment HERE.
Rep. Dean Heller (R-NV) On Extending Unemployment: "Is The Government Now Creating Hobos?" According to the Elko Daily Free Press: "[Rep. Dean] Heller said the current economic downturn and policies may bring back the hobos of the Great Depression, people who wandered the country taking odd jobs. He said a study found that people who are out of work longer than two years have only a 50 percent chance of getting back into the workforce. 'I believe there should be a federal safety net,' Heller said, but he questioned the wisdom of extending unemployment benefits yet again to a total of 24 months, which Congress is doing. 'Is the government now creating hobos?' he asked." [Elko Daily Free Press, 2/21/10, emphasis added]
Sen. Jon Kyl (R-AZ) Said That Unemployment Benefits Discourage Jobless From Seeking Work. According to the Huffington Post: "Sen. Jon Kyl of Arizona, the Republican whip, argued that unemployment benefits dissuade people from job-hunting 'because people are being paid even though they're not working.' Unemployment insurance 'doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work,' Kyl said... 'I'm sure most of them would like work and probably have tried to seek it, but you can't argue that it's a job enhancer. If anything, as I said, it's a disincentive. And the same thing with the COBRA extension and the other extensions here.'" [Huffington Post, 3/1/10]
Sen. Judd Gregg (R-NH) Said Congress Should Cut Off Unemployment Insurance "Right Now" Because It "Encourages People...To Stay On Unemployment." In an appearance on CNBC's Squawk Box, Republican Sen. Judd Gregg had this exchange:
Q: Senator Gregg, is there a point, you think, when the government has to sort of end these ever-continuing claims?
Gregg: Yeah, right now. This week, however, we're going to extend it again. And this has become counterproductive. We're basically undermining the cyclical event. Because you're out of the recession, you're starting to see growth and you're clearly going to dampen the capacity of that growth if you basically keep an economy that encourages people to, rather than go out and look for work, to stay on unemployment. Yes, it's important to do that up to a certain level, but at some point you've got to acknowledge that we're not Europe.
[CNBC, 5/24/10 via Wonk Room, emphasis added]
Republican Senate Candidate Rand Paul (KY) Suggested Unemployed Are Refusing To Take Jobs With Lower Wages. According to the Lexington Herald-Leader: "Republican U.S. Senate candidate Rand Paul on Friday urged Americans who have been unemployed for many months to consider returning to the workforce in less desirable jobs rather than continue relying on government unemployment assistance. 'In Europe, they give about a year of unemployment. We're up to two years now in America,' Paul said on Sue Wylie's WVLK-AM 590 radio program. 'As bad as it sounds, ultimately we do have to sometimes accept a wage that's less than we had at our previous job in order to get back to work and allow the economy to get started again," Paul said. "Nobody likes that, but it may be one of the tough love things that has to happen.'" [Lexington Herald-Leader, 6/18/10]
Republican Senate Candidate Sharron Angle (NV) Suggested Unemployment Insurance Spoils Workers And Discourages Job Seekers. According to the Washington Post, Republican Nevada senatorial candidate Sharron Angle stated in an interview: "What has happened is the system of entitlement has caused us to have a spoilage with our ability to go out and get a job...There are some jobs out there that are available. Because they have to enter at a lower grade and they cannot keep their unemployment, they have to make a choice now. We're making them make a choice between unemployment benefits and going back to work and working up through the ranks of that job and actually building up a good wage again... What we need to do is make that unemployment benefit go down, not just completely remove the safety net from them while they go out and go to work." [Washington Post, 6/30/10, emphasis added]
Republican Senate Candidate Ron Johnson (WI): Unemployed Won't Really Look For Work "Until Their Benefits Run Out." In an interview with Wisconsin Public Television, Republican Wisconsin senatorial candidate Ron Johnson said: "Quite honestly, one of the economic advisors to President Obama actually wrote a paper or made statements a few years ago talking about the extension of unemployment benefits actually prolongs unemployment. When you continue to extend unemployment benefits, people really don't have the incentive to go take other jobs. They'll just wait the system out until their benefits run out, then they'll go out and take, probably not as high paying jobs as they'd like to take, but that's really how you have to get back to work. You have to take the work that's available at the wage rates that's available." [Wisconsin Public Television, 6/11/10]
Depart Of Labor Statistics Show There Are At Least Five Job Seekers For Every Opening. According to the New York Times:
In June, there were fewer than five unemployed workers for each job opening, according to new Labor Department data. That is a less discouraging ratio than earlier this year, but the improvement may mainly be a result of workers who have given up looking for a job.
The chart below shows the jobless worker/job opening ratio going back to 2000, the earliest year that the Labor Department keeps data on job openings.
[New York Times, 8/11/10]
Key Researcher On Unemployment Benefits Says His Old Findings On Unemployment Benefits Are Outdated. According to the bipartisan Joint Economic Committee: "While earlier research suggested that the unemployment insurance program in the 1970s and 1980s had important disincentive effects, the current consensus is that these dated studies overstated the effects of unemployment insurance benefits on job search behavior. The older studies noted a jump in the fraction of workers who found a job just before they exhausted their benefits. In contrast, in testimony before the Joint Economic Committee, the author of one of the seminal papers in this earlier wave of research, Dr. Lawrence Katz, said that 'the most compelling research shows only modest impacts of UI extensions on the search effort and duration of unemployment of unemployment insurance recipients.' [...] Katz pointed out that these studies overstate the overall impact of unemployment insurance benefits on the length of unemployment spells 'by ignoring the spillover effects of shorter unemployment spells for the other unemployed workers not receiving UI benefits.'" ["Does Unemployment Insurance Inhibit Job Search?" Joint Economic Committee, July 2010, emphasis added]
Other Economists Who Study Unemployment Agree That Extended Benefits Do Not Significantly Prolong Unemployment. According to the bipartisan Joint Economic Committee:
Dr. Katz is not the only economist who holds these views. Dr. Till von Wachter, in testimony before the Joint Economic Committee, also shared Katz's opinion. "It is likely that in severe recessions, the benefit of extended UI outweighs the costs," argues von Wachter. Analyzing data from Germany that was of much higher quality than most other studies on the disincentive effects of unemployment insurance, von Wachter found that 'extended UI would lead to a moderate increase in the rate of unemployment.' He also inferred that the increase in the unemployment rate would be smaller in the United States right now because labor market conditions are tight and jobs are scarce. Another prominent economist who has studied unemployment insurance and other social insurance programs, Dr. Raj Chetty, has reached similar conclusions. In one paper, he and coauthors showed that even though there is a "spike" in exit rates from unemployment insurance at the time of benefit exhaustion, the probability of reemployment doesn't change significantly. In other words, many of those who exit the unemployment insurance rolls as their benefits are about to expire are not moving on to another job. Furthermore, Chetty argues that "work disincentive effects" are likely to be small because people are "likely to take any job they can get" in the current economic downturn.
["Does Unemployment Insurance Inhibit Job Search?" Joint Economic Committee, July 2010, emphasis added]
Economic Policy Institute: Claim That "Unemployment Benefits Make People Less Likely To Find Jobs" Is A Myth. According to a Washington Post opinion piece by Heidi Shierholz of the Economic Policy Institute:
Unemployment insurance replaces a maximum of half of a worker's prior wages (up to a cap), and when we're not in a prolonged recession, it gives laid-off workers a little breathing room to find a job that matches their skills and experience. This is one of the goals of the unemployment insurance system, since the economy works best when people are in jobs that maximize their skills. Today, however, unemployment insurance isn't providing breathing room -- it's providing a lifeline. There are now roughly five unemployed workers for every available job. That doesn't mean there are five applicants for every job opening; there may be scores of applications for every posting, as people apply for many jobs. Instead, it means there literally aren't jobs for four out of every five unemployed workers. This is why nearly half of the unemployed have been out of work for more than six months, the maximum duration of state unemployment benefits. In this environment, allowing extended unemployment benefits to expire would indeed make workers who have exhausted their aid more desperate to find work. But it wouldn't make them more likely to find work, because the jobs don't exist.
[Washington Post, 7/25/10, emphasis added]
Average Unemployment Insurance Payments Are Not Sufficient To Support A Family. According to the bipartisan Joint Economic Committee: "The best evidence suggests that during this current economic downturn both the unemployment rate and duration of unemployment were minimally impacted by unemployment insurance benefits and the extensions of benefits. To the extent that the unemployment rate even rises, UI may be providing an enormous social benefit by preventing people not from taking jobs, but from dropping out of the labor force altogether (and often permanently), relying instead on more costly programs like disability benefits. Unemployment benefits are not particularly generous - average weekly benefits are just 74 percent of the poverty threshold for a family of four. So it is unlikely that extended unemployment benefits inhibit individuals' job search efforts." ["Does Unemployment Insurance Inhibit Job Search?" Joint Economic Committee, July 2010, emphasis added]
Average Unemployment Check Is $293 Per Week. According to MSN Money:
The average unemployment check in the U.S. is $293. Below you'll find a state-by-state list of maximum weekly benefits. The amounts vary dramatically, though, from a maximum of $230 in Mississippi to $628 in Massachusetts. But some relatively high-income states pay very little. The just-passed economic stimulus law provides an additional $25 a week on top of the current benefits. That extra money isn't reflected below. Amounts in the chart are generally for a single unemployed person. Because some states increase payments for families with children, those maximum benefit amounts may be higher. [...]
Weekly unemployment benefits by state
District of Columbia
[MoneyCentral.MSN.com, 2/23/09, emphasis added]
A worker making $8 per hour gets paid $320 per week before taxes, assuming a 40-hour work week.
2008: Poverty Hit An 11-Year High. According to the Los Angeles Times: "The government's first broad look at the recession's effect on the nation's households in 2008 showed the poverty rate jumped to an 11-year high, incomes sank across the board and the number of people without health insurance rose to 46.3 million. As bleak as these statistics were from the Census Bureau on Thursday, they captured only part of the devastating effects of the economic downturn that worsened last fall and into this year. Experts said they expected the official poverty rate, which rose to 13.2% of the nation from 12.5% in 2007, to keep climbing this year and next, reversing the progress made in the 1990s. With the U.S. unemployment rate averaging 8.9% this year and increasing almost every month, compared with 5.8% in 2008, incomes are likely to deteriorate further as well. The median household income -- the point at which half were more and half were less -- fell 3.6% to $50,303 last year from 2007, the Census Bureau said." [Los Angeles Times, 9/11/09, emphasis added]
Job Statistics Trend Shows Recovery Act Is Working. Below is a graph prepared by the Speaker's office showing net private sector job gains or losses per month since December 2007.
[Job Totals Per Month Since Dec 2007, The Gavel, 7/9/10]
The Private Sector Has Added Almost 600,000 Jobs In Six Consecutive Months Of Job Growth This Year. PolitiFact.com recently checked Treasury Secretary Geithner's claim that the private sector has added jobs for six months in a row, and rated the claim "True":
During the July 25, 2010 segment of ABC's This Week, Treasury Secretary Tim Geithner defended President Barack Obama's economic track record. He specifically brought up the successes that the administration has had in boosting activity in the private sector... In December 2009, the private sector shed 83,000 jobs. That was significantly smaller than the average drop for the year, since the private-sector employment losses averaged 388,000 per month during 2009, according to the report. And so we come to 2010. How have we fared for the past six months? Here's a quick monthly summary of jobs added:
Data for the month of July --which wasn't over when Geithner spoke -- won't be released until August, so that's the most up-to-date data available. The report notes that data for the two most recent months are preliminary. But unless there's an unusually big after-the fact correction for either month, it's pretty clear that Geithner was correct. We've seen positive job growth in the private sector from January to June. We rate this True.
We Have Had Four Straight Quarters Of Positive GDP Growth. Below is a graph showing quarterly GDP growth since early 2008.
[The Atlantic, 7/30/10]
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