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Why NOT to extend unemployment benefits

John Heckers //August 12, 2010//

Why NOT to extend unemployment benefits

John Heckers //August 12, 2010//

(Editor’s note: The opinions expressed are solely those of John Heckers.)

Congress has voted, once again, to extend unemployment benefits. Currently, one can receive unemployment benefits for up to 99 weeks, which is close to two years. Realistically, voting to not extend unemployment benefits is probably political suicide for a Congressperson or Senator. But refusing to extend this government benefit is also the right thing to do.

The continual extension of unemployment benefits may seem, on first blush, to be a compassionate outreach of our government to those who have been hit hardest by the dishonesty, corruption and outright theft that have characterized both Wall Street and D.C. for so many years. In fact, it is harming both the unemployed and the economy.

Unemployment insurance was designed for short-term job loss that was no fault of the employee, such as lay-off. It is paid for by employers, like me. When we let someone go, it can be “for cause” or “not for cause.” If “not for cause,” unemployment begins to pay out. If the person was fired for, say, insubordination, unemployment insurance was originally designed to pay less or nothing, as the job loss was seen as the employee’s fault. If I let someone go without cause, the rate of my “insurance premium” (tax) can go up, especially if I let several people go.

Need I tell you that the system doesn’t exactly work this way anymore. Employers who contest the unemployment claims of even the worst employee fired for cause are seen as cruel and heartless. They, or their representatives, can spend expensive hours and days preparing for and defending the contesting of the unemployment claim. They face a system biased against employers, however, so many employers don’t even bother to contest the claim. They pay up with a grimace.

Now, there is really no such thing as a tax on a business. A business is not an individual. So taxes on businesses really wind up as taxes on their customers. If I, as a business, get “soaked,” those costs either have to be passed on to consumers or, sooner or later, I go out of business. Econ 101, right? Well, unfortunately, it seems that those who inhabit the fairy land called “Washington D.C.” never took Econ 101.

The more taxes I have to pay per employee, the fewer employees I’m going to hire. Extending unemployment insurance will, sooner or later, result in higher and higher rates. Someone has to pay for these extensions, and the current climate is not business friendly. So, I will hesitate to hire more people because I have no idea how far my employer taxes are going to be raised per employee. Many other business owners feel the same. Thus, the unemployment tax extensions place a chill on hiring.

The extensions are bad for workers, too…especially the lower level workers. Many of the things they are unemployed from are things that are vanishing. For example, if you’re an assembly line worker, it is much more likely that your job will be done by a robot rather than coming back. Robots don’t get sick, don’t need benefits, and don’t join that major American job killer – unions. So, what these folks need to do is to use their brains and find something else to do. Many have. Others check their mailboxes for the unemployment checks.

By extending unemployment benefits, we are preventing the unemployed from finding various ways to earn an income. Some, even many, of these ways would pay more than unemployment benefits. Many of us do this every day.

Extending unemployment benefits simply creates a class of people who are buying the minimum, further impairing the economy. Those on unemployment don’t usually buy cars, microwaves, TV sets or computers. But those who have found a way to make money for themselves often do.

Extending unemployment benefits is delaying the necessary change from a 1950’s America where everyone is employed by large corporations, to the America of the 21st Century, where small businesses, independent workers and project-oriented jobs are the norm. Reform of health insurance and other benefit programs to expedite this, if done with any intelligence (dare we expect any from either dishonest and corrupt side of the aisle?), are excellent ways of assisting this necessary transition.

Increased unionization, waiting for jobs that will never return, and counting on the government are simply foolish and short-sighted notions that must end. The old way of doing business is making a valiant last gasp. President Obama and Congress should go ahead and pull the plug and bring America into the 21st Century.
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