Unemployment benefits and the law of unintended consequences
We often point out the unintended consequences of government actions simply to make a point to those who think government is the answer to all problems. Those that believe that need to closely consider the results of government “solutions”. For instance – let’s extend unemployment benefits and extend and extend them some more. How could there possibly be a downside to that?
In a state with the nation’s highest jobless rate, landscaping companies are finding some job applicants are rejecting work offers so they can continue collecting unemployment benefits.
It is unclear whether this trend is affecting other seasonal industries. But the fact that some seasonal landscaping workers choose to stay home and collect a check from the state, rather than work outside for a full week and spend money for gas, taxes and other expenses, raises questions about whether extended unemployment benefits give the jobless an incentive to avoid work.
Members of the Michigan Nursery and Landscape Association “have told me that they have a lot of people applying but that when they actually talk to them, it turns out that they’re on unemployment and not looking for work,” said Amy Frankmann, the group’s executive director. “It is starting to make things difficult.”
Of course, what is happening is those drawing the benefits are dutifully applying for jobs as required by the state in order to continue to draw unemployment benefits. But, when it comes down to actually taking a job, they’re not at all interested – they applied to continue to qualify for the unemployment compensation, not actually get a job.
So wait a minute – are you saying that a landscape worker can’t make as much as someone on unemployment. Well, yes, but not for the reason you think:
The average landscape worker earns about $12 per hour, according to the Michigan Department of Labor and Economic Growth. A full-time landscaping employee would make $225 more a week working than from an unemployment check of $255.
But after federal and state taxes are deducted, a full-time landscaper would earn $350 a week, or $95 more than a jobless check. The gap could narrow further for those who worked at other higher-paying seasonal jobs, such as construction or roofing, which would result in a larger benefits check.
The maximum weekly benefit an unemployed Michigan worker can receive is $387.
Some job applicants are asking to be paid in cash so they can collect unemployment illegally, said Gayle Younglove, vice president at Outdoor Experts Inc. in Romulus.
“Unfortunately, we feel the economy is promoting more and more people and companies to play the system and get paid or collect cash money so they don’t have to pay taxes,” Younglove said.
Heh … ya think?!
Michigan offers unemployment benefits for up to 26 weeks (6 months). When those benefits run out, unemployed can apply for extended federal benefits up to a maximum of 99 additional weeks.
The federal jobless benefits extension “is the most generous safety net we’ve ever offered nationally,” said David Littmann, senior economist of the Mackinac Center for Public Policy, a free-market-oriented research group in Midland. The extra protection reduces the incentive to find work, he said.
It’s impossible to know exactly how many workers are illegally declining employment, but 15 percent of Michigan’s economy is underground, where people trade services, barter or exchange cash without reporting it to the government, Littmann said.
No incentive to go back to work and have a large portion of one’s earnings go to taxes and a large incentive to game the system andcontinue drawing the benefits while engaging in (and growing) the underground economy – all of these unintended consequences provided by?
Government – which as usual doesn’t know when to get out of the way.
But, this will come as a comfort, I’m sure:
A person becomes ineligible for benefits if he or she fails to accept suitable work, said Stephen Geskey, director of Michigan’s Unemployment Insurance Agency.
Yeah, I’m sure that’s strictly enforced and working out very well saving taxpayer dollars – don’t you?