Among one of the more misguided notions in the debate over unemployment insurance is that any job is a good job and unemployed workers should take what they can get. Not surprisingly, this isn’t only bad for workers but the economy as well particularly when there aren’t enough jobs to go around.
As part of the unemployment insurance changes that went into effect in July 2013, a new definition of “suitable work” was established. By this definition, after 10 weeks of receiving unemployment insurance, someone would have to take any job that they are offered that pays 120 percent of their weekly unemployment insurance payment. If they didn’t they would lose unemployment insurance.
Of course, in a labor market where there are 3 unemployed workers for every job opening, the chances of getting a job offer are slim. And the reality is that many of the jobs that are being created pay less than the jobs that were lost.
So what does this “suitable work” provision mean to workers? A jobless worker who is receiving the average weekly benefit amount of $245 would have to take any job that pays $15,288 a year. That is well below the poverty threshold for a family of four and a quarter of what it actually takes to make ends meet in our state. A jobless worker at the maximum benefit amount of $350 would make $21,840, still below the poverty threshold for a family of four.
For jobless workers, taking a job for which they are overqualified or which doesn’t meet their prior earnings level squeezes out time to search for a better job and could have an additional negative impact on their skill development. Both limit their ability to find higher-paying jobs and prospects for finding a better match to their skills.
Why would policymakers be pushing people into poverty-level jobs? Surely, they know that not everyone receiving unemployment insurance was already poor and many were in fact earning middle- and high-wages given the disproportionate impact of the Great Recession on the manufacturing and finance industries. Surely, they know that pushing people into low-wage work will only require greater expenditure in other areas as families struggle to make ends meet on earnings that fall far short of a monthly budget and turn to other public programs to fill the gap.
The result of establishing a low bar for suitable work is the underutilization of human capital, with a host of potential negative effects on economic growth and innovation. Indeed, researchers have pointed to the important role that unemployment insurance plays in ensuring an optimal allocation of resources in the labor market. That is, unemployment insurance helps jobless workers pursuing higher wage and more productive jobs resulting in a positive impact on the productivity of the economy.
So if you want to push more people into poverty, then dramatically reduce the wage replacement function of unemployment insurance and require people to take poverty-wage jobs regardless of their prior earnings or skills. If you actually want a genuine economic recovery, provide temporary support to jobless workers and training opportunities so that they can best use their skills and capacity to fit the needs of employers and find work that can support their families and be fulfilling too.