The Employment Costs Of Generous Unemployment Benefits

Yesterday, Michelle Malkin posted a column reminding us that the multiple extensions of unemployment benefits cost more than just (borrowed) tax dollars.  They also cost jobs

That is because the cost of the unemployment benefit program is borne by employers.   As a result, extending unemployment benefits from 26 weeks to 99 weeks, or increasing the number of unemployed eligible for extended benefits, imposes additional costs on hiring.  Employers are taxed on a portion of wages paid to each employee to pay for benefits paid to the unemployed.  Therefore, it becomes more expensive to hire new employees. 

Who pays? Dentists, tavern owners, maid services, mom-and-pop shops — small businesses that are the backbone of the American economy. In my home state of Colorado, small and mid-size firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year. The businesses that have the lowest claims histories are getting punished the most to make up the jobless benefits fund deficit.

Generous unemployment benefits impose another cost as well.  Denver’s 9News has a report out today about job applicants who are only willing to accept work if they get paid in cash under the table so they can also continue to receive unemployment checks (while avoiding income and payroll taxes):

Ed Sleeman, owner of Colorado Drywall Supply, posted two new jobs eight months ago.

Dozens of applications later, Sleeman still can’t find two qualified truck drivers willing to load and unload building supplies, despite Colorado’s 8.4 percent unemployment rate.

And it’s not that all of the jobseekers have been unqualified.

Sleeman says about 40 of the applicants have admitted they’re unemployed, and are hoping to double dip.

“They’ll come in and say, ‘Well, I’d look at the job but if you could pay me cash I’d take the job so I could keep my unemployment,'” Sleeman said.

* * *

At $10 and $15 an hour, more with experience, the jobs come with benefits, but Sleeman says, apparently that’s not enough for some people without jobs.

“People don’t want to seem to want to work if they’re already getting paid,” Sleeman said.

Paying people when they are not working causes some of them not to want to work quite so much. 

I still support the tax compromise, although it further extends unemployment benefits, for reasons already discussed.  But it is important to remember the costs imposed by, and the fraud inherent in, a generous welfare state.

Published in: on December 9, 2010 at 1:43 pm  Leave a Comment  

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