The Controversy Over Extending Jobless Benefits

Each week, thousands of Americans are losing their jobs, adding to the 15 million Americans already registered as unemployed. Despite these high numbers, the Senate has been unable to extend jobless benefits. Robert Siegel talks to Ken Rogoff, a professor of economics at Harvard University, about the controversy over extending unemployment benefits and the arguments for providing more support for the unemployed.

Copyright © 2010 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

: Does collecting an unemployment check sap people of the will to work? Republican Jon Kyl of Arizona said this in the Senate recently.

: That doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work. I'm sure most of them would like work and probably have tried to seek it, but you can't argue that it's a job enhancer. If anything, as I said, it's a disincentive.

: Senator Kyl was making the moral hazard argument against unemployment benefits: Pay people for not working, and they won't. We wondered how attractive that argument is to conservatives. So we've called up Ken Rogoff, professor of economics at Harvard, co-author most recently of "This Time is Different: Eight Centuries of Financial Folly," and a fiscal conservative who advised the McCain campaign. Welcome to the program once again.

P: Thank you, Robert.

: And what do you make of the argument that an unemployment check is a disincentive to job-hunting?

M: Well, there's certainly a truth to it, and many people believe that's why Europe, with much more generous benefits, has higher unemployment. But today, we're in a once-every-50-years, once-every-75- years recession. There just aren't a lot of jobs.

And it's hard to believe that that's really what's holding people back from getting them, that they can collect a modest unemployment check.

: That the number of jobs available is simply outnumbered by the number of people who are unemployed.

M: Yeah, absolutely. I mean, look at young people today. They're not looking to be unemployed. There's a massive unemployment rate among people in their early 20s. This isn't your normal recession, and we can't treat it this way.

And absolutely, I worry about the incentives people have to work, and absolutely, we don't want to be like Europe, Spain with 20 percent unemployment. But on the other hand, this just isn't a normal circumstance.

: But as you say, benefits are much higher in other countries. I assume that employers, if not employees, are taxed rather heavily to support those benefits in those countries.

M: Well, that's right. I mean, something's got to pay for it. So it's not a free lunch, to extend unemployment benefits. It's going to cost tens of billions of dollars.

But I would just say that of the various stimulus programs that we're doing, I think the unemployment benefits is an important one, especially from our sense of fairness - that, you know, we have a society, we have an economy, which is pretty rough-and-tumble, capitalist economy. There should be some social safety net. It's important to strengthen that and enhance it temporarily.

I wouldn't recommend keeping it on for 25 years. I think the high unemployment is going to last for at least a couple more years.

: There is another argument made on behalf of unemployment benefits. It runs roughly this way: Give an unemployed worker a check, and it goes straightaway to buying food and children's shoes and gasoline. Give an employed person the same amount in, say, a tax break, and it could just sit in the bank and wouldn't stimulate the economy. Is that true?

M: Well, I think that is true. I mean, I think that's not the main argument because frankly, there's a lot of other things that does discourage employers from hiring workers, because they know that they might have higher taxes.

I mean, I think the stimulus argument is not really what this is about - to me, anyway. It's a fairness argument.

: When you hear Senator Kyl making the argument - and I think Senator Cornyn of Texas has made the same point - what do you make of that? Is - are they being truer conservatives in the clutch? What do you say?

M: Well, I mean, they're making a correct point, but they're stretching it. The empirical work suggests that maybe if you get an extra week of unemployment benefits, your unemployment lasts a day longer, and that's in normal times.

I think it's important to have some checks and balances, not to get carried away. But they're really taking a small point and stretching it out into something bigger than it is.

: Ken Rogoff, thanks a lot for talking with us.

M: My pleasure.

: Economics professor Kenneth Rogoff of Harvard University, co- author with Carmen Reinhart of the book "This Time is Different: Eight Centuries of Financial Folly."

Copyright © 2010 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.