Introduction
It is not a secret that people need to work to control their lives. Some just require an opportunity to provide their families with the essentials while others are more focused on personal and professional development. Still, the majority of the population does need a working place to earn a living. Unfortunately, sometimes people are dismissed through no fault of their own. They may have no desire to quit and may perform their duties at a decent level with no cases of misconduct but still be fired. To deal with such situations, the Senate proposes unemployment insurance (UI) that is seen as a counter-cyclical program. According to it, states and the federal government provide insurance to support both people who lost their positions and economy. The first part of the payment for UI is made by the states. They cover 26 weeks of insurance including the tax. Then, the federal government takes this responsibility; it “splits the cost of extended benefits by collecting $56 per worker nationwide” (Thompson para. 4). The last 24 months are under Washington’s control. There is also a possibility to stay under this program for a longer time and to receive money from the deficit spending.
To collected UI benefits, a person needs to meet particular requirements. One should lose a job even though there was no his/her mistake and be in a search of a new one. Of course, UI does not provide people with their previous salary, but it offers up to 50% of it (the sum differs depending on the state) (Nicholson and Needels 50). The payment can be received during 60 weeks but in some situations, this period can be extended up to 99 weeks as shown on the Exh. 1 (Thompson para. 8):
The debate over UI exists because Republicans and Democrats have different views on it. The first ones consider that no extension should be made as the program requires $10 billion spendings a month while the second ones are sure that people who lost their jobs need support, and it should be discussed just like emergency disaster relief (Thompson para. 9). Thus, it seems to be not clear whether the benefits should be extended or not.
Arguments against Unemployment Insurance
Many professionals presuppose that the extension of UI is likely to increase the unemployment rate. Janice Peterson believes that the representatives of the general public who lost their jobs may exhaust their benefits before finding a new one. She states that more and more people prefer to use the financial support provided by the government of the states instead of making an actual attempt to become a part of the workforce again. Of course, these individuals are looking for some vacancies but realizing that there is an opportunity to have money without working, some of them tend to take advantage of the situation. As a result, the exhaustion rate for the program that was about 25% 65 years ago turned into 44% in the first decade of the 2000s (Peterson 455).
The same idea is supported by Thompson, who claimed that the extension of benefits is likely to serve as an impetus to remain unemployed (para. 11). As people receive some amount of money every month, they have a chance to wait longer and not to agree to work on the position that does not appeal to them. In this way, they exhaust the benefits in the attempt to find a better job even though they could already be working. For example, in San Francisco, 0.4% added to the unemployment rate, and Paul Krugman emphasized similar tendencies noticed in Europe (Thompson para. 12). Finally, Rugy deepens in this issue, stating that the privileges provided by UI discourage people to take into account jobs with a lower salary than they had or those that are in a different city. She refers to the words of financial experts and expresses concern about the increased duration of unemployment (Rugy para. 5). Thus, expended UI is likely to suppress personal savings, making the general public believe that the government is to care for them, which delays economic growth and has a negative influence on capital investment.
Another disadvantage of the UI extension is the increase in taxes. Rugy underlines that the money the government spends on the benefits for those who are unemployed under this program is taken from the payroll taxes. In this way, it can be logically presupposed that if the program is extended, the taxes are to be increased so that they fill the gap that occurs and covers all expenditures. Many states have already altered their UI taxes, which increased business spending and influenced job creation adversely (Rugy para. 3). Kia Murrell indicates that the payroll tax for employees was up by 2% and reached 6.2% at the beginning of 2013 (para. 2). More than $800 million were borrowed in 2012 to keep UI working and extend it. Of course, some decrease was be noticed when the loan was paid, but the taxes will still be high as unemployed people receive money for several more months (Murrell para. 6). Thus, it can be said that companies tend to spend more money on taxes and cannot afford to hire more professionals as a result. In this way, the program that is meant to cope with unemployment just creates more opportunities for it.
Arguments for Unemployment Insurance
Even though many people see UI extension as a negative change that makes more people unemployed and slows down economic growth, it has some benefits. For example, Kimberly Amadeo is sure that it is likely to stimulate the economy in the downturn (para. 1). The US economy expert believes that the main advantage of the UI program is that according to it, the federal government pumps money directly into the economy and allows it to prevent the situations seeing during the Great Depression. It can be proved by the fact that when an employed person spends one’s money on such basic needs as a house, food, and clothing, each $1 he/she pays creates $1.64 in demand.
It is called the ripple effect. The purchases made by the employed individuals stimulate stores, for example, grocery ones, to hire more staff to serve the buyers. At the same time, more farmers are motivated to grow food (Amadeo para. 7). In this way, more workplaces are created, and more opportunities to find a job occur. Beranek and Kamerschen develop this idea and claim that a larger amount of vacancies will significantly reduce the duration of unemployment (800). The researchers believe that in this way people will not need to spend much time looking for a job they want to as they will already have a wide range of options.
Unemployed people tend to be in a poor psychological and physical condition, but extended UI is likely to inspire them and encourage to find a new job. The fact that the government is ready to support unemployed people for a long time also turned out to be a great advantage for people who cannot find a job regardless of their attempts and desires. Being fired without having done anything wrong, many people get frustrated and powerless. McKee-Ryan et al. even state that unemployed individuals have rather low psychological and physical well-being in comparison to those who have a job (55). The UI benefits give them the strength to live further and search for a new position. Unfortunately, failing to get employed for a long, they tend to give up trying. In this situation, financial support from the government encourages them to remain in the workforce and continue searching (The Council of Economic Advisers and the Department of Labor 23). In this way, extended UI lets them realize that they are not forgotten by the rest of society, and there is still an opportunity to find an appropriate job.
Conclusion
Taking everything mentioned into consideration, it can be concluded that the extension of UI is likely to become a drag on the economy eventually. The government should not encourage people to remain unemployed for two more years always. However, it seems to be the best way out for now as unemployment often lasts longer than the period covered by standard benefits and the general public requires support.
Works Cited
Amadeo, Kimberly. Unemployment Benefits Are the Best Stimulus. 2015. Web.
Beranek, William, and David Kamerschen. Unemployment Benefits and Unemployment. Modern Economy, 2.5 (2011): 800-803. Print.
McKee-Ryan, Frances, Zhaoli Song, Connie Wanberg, and Angelo Kinicki. Psychological and Physical Well-Being during Unemployment: A Meta-Analytic Study. Journal of Applied Psychology, 90.1 (2005): 53-76. Print.
Murrell, Kia. Unemployment: Benefits Extended, Tax Increased. 2012. Web.
Nicholson, Walter, and Karen Needels. Unemployment Insurance: Strengthening the Relationship between Theory and Policy. The Journal of Economic Perspectives, 20.3 (2006): 47-70. Print.
Peterson, Janice. Unemployment Insurance Reform: Elements of a Social Provisioning Approach. Journal of Economic Issues, 42.2 (2008): 453-460. Print.
Rugy, Veronique. Arguments against Extending Unemployment Benefits. 2011. Web.
The Council of Economic Advisers and the Department of Labor. The Economic Benefits of Extending Unemployment Insurance, 2013. PDF file. Web.
Thompson, Derek.The Case For and Against Unemployment Insurance. 2010. Web.