There’s a ton of us out there without work; we all know someone who’s looking for a job, a shot. And as long as they’re out there, shouldn’t we do what we can and give ’em the support they’ve worked for all these years? Isn’t that the right thing to do?
And I’ll tell ya why.
Unemployment benefits carry a cost that must assumed by someone. There is nothing that government can do that will create the resources required to pay for these benefits. All of them, every cent of them, will be a cost to someone, somewhere.
And these costs can come in several forms:
- Raise the cost of employment
- Raise the tax burden of all of us
- Create an incentive not to work
First the first:
From the perspective of an employer, it is irrelevant how the costs of labor are broken down. For example, a grocer doesn’t care if it costs him $9.00 an hour to hire an employee and all $9 go to the employee of if he hires that same worker and pays $7.75 in wages and $1.25 in taxes. 9 bucks is 9 bucks. Bottom line.
The same is true when the cost of an employee goes up due to the need for extended unemployment benefits. As those benefits continue to increase, either due to higher unemployment rates or due to extended eligibility, the cost of those benefits will be passed on to the employer. The rest is Econ 101. The more expensive a thing is, the less of that thing people will buy.
In other words, when you make the cost of hiring someone go UP, fewer people will be hired.
Next the Second:
The second point is perhaps the hardest of the three to internalize. Currently, the extended unemployment benefits are fully funded by the Federal Government. In other words, it isn’t “costing” North Carolina a thing by allowing these benefits to be extended. We’re neither contributing or PROMISING to contribute any money.
But that doesn’t mean that money is free.
These benefits are coming from the Federal Government. And the only way that the Federal Government can obtain that money is to levy taxes. Taxes on things, like cars and sugar, or on labor, like income taxes. So, as the Federal Government continues to hand out money in the form of unemployment benefits, that same Federal Government is going to have to raise taxes on ALL of us.
What this means is best described in two parts:
- Federal taxes ARE a tax on North Carolinians.
- In the same way that I don’t want California dictating how MY money is spent, I don’t want someone in Wyoming having to wonder how North Carolina is spending THEIR money.
Finally the Last:
The continued practice of extending unemployment benefits has a negative affect on the folks trying to find jobs. I’m speaking in the aggregate here, not the specific. In general, when large numbers of people are incented to act in a certain manner, some significant number of those folks will react in such a manner that we may not want.
For example, consider the duration of unemployment in Denmark:
As you can see from the chart, it doesn’t matter if benefits are extended for 4 or for 5 years. Folks find work as those benefits begin to end. The result is especially clear on the green line where benefits end after 4 years. From year 1 to year 3.7 there is virtually no change. But the transition spikes just at the time those benefits end.
And insofar as we want folks in North Carolina to work and to drive down our unemployment rates, we should create those proper incentives.