Unemployment: How the Lazy Are Hurting the Needy

There's growing evidence that some unemployed people want jobless benefits instead of work.

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Get ready for an attack on the unemployed.

With the economy improving and more companies hiring, people who are desperate to find a job finally have some opportunities. Yet there's still a generous government safety net in place for the unemployed, including federal programs that extend jobless benefits for up to 99 weeks. And now, there's growing anecdotal evidence that people who might be able to get jobs are choosing to live on the dole rather than work.

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Surveys by the National Federation of Independent Business, for instance, show that small businesses are finally becoming more optimistic and hiring more workers. But of those that are hiring, 76 percent said recently that they can't find qualified applicants for the openings they have. Part of the reason, not surprisingly, is that people lack the right skills or work history. But business owners also report that 16 percent of the applicants they reject have poor social skills, 20 percent have unrealistic expectations about pay, and 14 percent have a poor appearance. "This is a surprise," NFIB chief economist Bill Dunkelberg wrote in a recent Philadelphia Inquirer commentary, "since the applicant can largely control those factors."

Business owners also say that some job applicants want to get paid under the table, so they can continue to collect jobless benefits. A recent story by CNN Money highlighted a manufacturing firm in Wisconsin that has started to lock out job applicants it suspects of showing up just so they can say they looked for work—a requirement for anybody receiving jobless benefits. Another business owner, in Illinois, said in the same story that her company needs to hire 45 to 50 new salespeople, but struggles with workers who quit after getting free training, or who try to get fired after a few months of work so they can re-qualify for unemployment insurance. The company has now hired a specialist to help weed out phonies and identify worthwhile applicants.

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Most people who receive jobless aid don't abuse the system, and economists generally support the idea of unemployment insurance when it functions as a short-term way of helping workers stay in their homes and keep food on the table during the down time between jobs. Federal jobless benefits have been in place for nearly four years, with Washington committing more than $200 billion to jobless aid, on top of more than $250 billion spent by states, which typically fund such programs. More than 20 million Americans have gotten government checks in lieu of a paycheck over that time. Congress recently voted to rein in the duration of federal benefits, which will begin later this year.

Government checks have been a lifeline for many people who would happily work if they could find a job. But the current system also creates perverse incentives and makes it hard to cut off the lazy while helping those in genuine need. Anybody who has collected unemployment insurance knows that some paying jobs provide less money than is available by collecting a government check. There's also the risk that a new job won't work out, leaving you worse off than if you had never taken the job in the first place. So while it might be unethical to feign a job hunt while living on the dole, it's often rational to do just that.

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Economists who have studied the problem believe that generous jobless benefits probably keep unemployment higher than it would otherwise be. Some studies, for example, show that employment levels tend to rise around the same time benefits end, which suggests that people max out their benefits before looking for work in earnest. But it's not clear what percentage of the unemployed may behave this way, or whether it even harms the overall economy.

Americans tend to support benefits for the unemployed, but that's likely to weaken as the economy improves and more stories circulate about people gaming the system. The heated rhetoric of this year's elections could also generate fresh scrutiny of one more government program that spends billions, with an uncertain benefit to taxpayers. There will also be intense pressure at the end of the year to further cut government spending and start tackling the national debt.

The problem is, there will still be millions of Americans who can't find meaningful work, no matter how hard they try. The unemployment rate at the end of 2012 will probably still be around 8 percent, and it could be five years or more before all the slack in the labor market has tightened. Yet Congress could cut back on jobless aid even more near the end of the year, when it's likely to revisit the issue. Maybe by then, everybody filling out job a application will actually want a job.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May. Follow him on Twitter: @rickjnewman.

Corrected on : This story was corrected on April 3, 2012, to account for recent changes in jobless benefits passed by Congress that were not mentioned in an earlier version of this story.