Unemployed Need Motivation to Find Work

It seems the more the unemployed get paid to do nothing, the more they do nothing. After doing nothing for extended periods of time, the worker believes he or she can't rejoin the work force because of believed motivation incentive to do nothing and get paid for it is too strong to over come.

The only way to stop this is to begin the painful process of cutting off benefits. As there is no more money left to give, it would seem the unemployed will have to decide on their own what is best for themselves when the checks stop coming.

Unemployment Insurance Taxes
Source: Joseph Henchman, "Unemployment Insurance Taxes: Options for Program Design and Insolvent Trust Funds," Tax Foundation, October 17, 2011.

Record high levels of unemployment and record low reserve funds have placed great pressure on the federal-state unemployment insurance (UI) tax and benefit system, says Joseph Henchman, vice president of legal & state projects at the Tax Foundation.

Between 2008 and 2011, $174 billion was paid in unemployment taxes while $450 billion was paid out in benefits, a gap of $276 billion. In 2011 alone, employers and employees are projected to pay $51.8 billion in taxes, while $131.4 billion is projected to be paid out in benefits for workers recently unemployed. Benefits are drawn for an average of 18 weeks, with many claimants receiving the maximum 99 weeks of benefits.

Over the past two years, 34 states and the U.S. Virgin Islands exhausted their unemployment insurance trust funds and have had to borrow from the federal government to pay unemployment benefits; 27 states have outstanding balances. While some states have repaid their balances and others are no longer borrowing additional amounts, the current outstanding balance of loans is $37.3 billion.

Beginning on September 30, 2011, states must pay approximately $1.3 billion in interest on those outstanding balances; in many cases, businesses and employees in those states will also face increases in federal unemployment insurance tax rates as a result of those federal loan balances.

These unemployment insurance fiscal policies may exacerbate negative job growth and tax trends, instead of operating countercyclically as the program was intended. Consequently, this may be an appropriate time for the federal government and the states to contemplate significant changes to the structure of unemployment insurance taxation and benefits. Program design alternatives could offer more innovative and more sustainable methods to find jobs for the short-term and long-term unemployed while preserving benefits to support them in the meantime.

These options include eliminating the firewall between administrative costs and benefits, reducing cross-subsidies through greater use of experience ratings, relying more on face-to-face training and advising, adopting elements of state workers' compensation programs, and experimenting with individual accounts to encourage saving, says Henchman.