Sunday, April 06, 2014

Taper Unemployment Benefits

Despite being technically out of recession for about five years, there's been increasing noise about extending emergency unemployment benefits. If we go down this route, either now, or as the next recession hits, I'd like to propose an experiment cobbled together from several social science observations.

We know that people on unemployment tend to find work soon after their benefits run out. Not always, but a statistically significant amount of the time. During the period of joblessness, the individual's skills atrophy. We also know that people respond to consistently applied negative feedback, even when that feedback is relatively minor.

 So when we eventually vote to extend emergency unemployment benefits, now or in a future cycle, I suggest a tapering of benefits rather than a sudden cessation. Reduce the payments a little bit each time. Make it budget neutral, so that the same amount of funds get paid out over a longer period of time.