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At around midnight last night, the House of Representatives passed a bill that keeps the “Bush Tax Cuts” for two years and then extends unemployment benefits for those who have already had 99 weeks of benefits.  The extension will allow for another 13 months of benefits.  Two million Americans fall into this category.
I’ve heard comments from some friends who are concerned to the unintended consequences.
1.  Does it help a person in the long run to be unemployed for 3 years?
and
2. Does giving people money (about $300/wk) provide incentive to avoid working?
With regard to the true benefits in the long-run for a few million people who have not had a job in 3 years… I see that point.  The second question about incentive I also see as a concern.  Some people believe those out of work are lazy.  That would be a very ignorant minority.
Assuming that no one is being called lazy, let’s talk about the unintended consequence.  If you get a tax-free $300 check per week as a consequence of being unemployed, how much would you have to make in order to justify taking a new job?
To answer this question you have to factor in the cost of working vs. staying home.  For most people the two basic costs are transportation to work and lunch while at work as opposed to lunch at home.  Then we all need to be honest about opportunity cost (is the benefit difference worth working?)
Lets say a person would make $8 and hour at their job.  That’s rougly $320 pre-tax earnings which make the $300/wk look good.  At $9/hr it’s $360.  At $10/hr its $400/wk.  So even at a job making $10 and hour, the $300 a person gets from unemployment looks good as compared for waking up early, putting in 40 hours a week and doing it again every day for the entire week.
This has become blog post… but if free market principles win out… what happens to America’s hurting and homeless?
I believe faith-based groups would be forced to re-define their mission.  If all of a sudden unemployment shoots up and the government can’t pay for it, you’d see thousands of churches rally to care for the downtrodden.  Our religious institutions would be forced to re-evaluate everything.

I have mixed feelings.  On one hand the entire economy is hurting so there are very real effects out there- especially for those at the bottom of the proverbial ladder.  Those jobs with low barriers to entry are the ones that are hit the hardest as the higher paying jobs shrink and force people to take lesser jobs.  So skill sets pushing downward force people with high level skills into lesser jobs just to pay the bills, it causes a domino effect.
Eventually someone gets pushed out of the workforce.
So I know its real and I have no desire for anyone to be hurting.
The concern comes when you’re making $300/wk for not working… it creates a new barrier to re-entry into the workforce.  Any logical person is going to ask “How much do I have to make for it to be worth the stress of working 40 hours a week and spending extra money on gas, bus fare, lunch, etc?
At some point the government’s $300/wk becomes more appealing than going to work making $10/hr.  At $10/hr you’d make $400/wk but get taxed and have to pay gas/lunch, etc.
So you’d pretty much say “I’m not getting out of bed for less than $11 an hour.”  Then we have to ask “How many $11+/hr jobs are out there right now?
At the end of the day I am torn because while I don’t want anyone to be homeless or hurting… dependancy makes one a servant to the government.  Unfortunately in some minds it becomes a choice between freedom in the cold or servitude in a warm house.
This has become blog post… but if free market principles win out… what happens to America’s hurting and homeless?
I believe faith-based groups would be forced to re-define their mission.  If all of a sudden unemployment shoots up and the government can’t pay for it, you’d see thousands of churches rally to care for the downtrodden.  Our religious institutions would be forced to re-evaluate everything.