After much maneuvering, the Senate is set to vote on an extension of the unemployment benefits - with the House to rapidly follow. (HR 4213 that also includes a number of tax break extenders -- see stories in the Washington Post, New York Times and Wall Street Journal.) I support this extension -- but see the debate as a wasted opportunity. Much of the debate has been a re-hash of the stale old arguments as to whether unemployment compensation causes people to stay unemployed longer (because they are more likely to turn down a potential less-than-perfect job waiting for something better).
For the record, I think this argument is wrong. It also illustrates the problem with the debate. It assumes that that a downward movement in workers' skills is acceptable -- i.e. you should be willing to take a job at lower pay just to get a job. This is the commodity theory of employment -- all workers are fungible commodities and the labor market adjusts to overall supply and demand.
In truth, many jobs carry a specialized skill set and knowledge base. This is part of the power of the I-Cubed Economy -- the value of the intangible asset embodied in worker skills. The individual tragedy of long term unemployment and downward mobility is that the worker's skill set and knowledge base diminish. The economic tragedy is that these lost skill sets and diminished knowledge bases are a wasted asset.
Our unemployment insurance system doesn't understand that. A job is a job is a job. The system needs an overhaul.
Yes, over the years the system has been jury-rigged to try to fit in with a re-training system. But our re-training system is inadequate and our training system (for incumbent workers) is almost not existent. And the UI system doesn't even begin to touch the problem of the involuntary underemployed (see my postings on the employment data).
There are a number of ideas out there worth looking at -- every thing from using UI funds to help people start a business (entrepreneurship) to job sharing (see earlier posting). Few of these ideas came up during the debate.
As Phil Izzo points out in a posting in the Wall Street Journal blog, we are likely to see a push for another extension later this year. However, I doubt that we will be able to do anything about transforming the program at that time either -- just before an election.
We keep mouthing the words -- "our people are our most important asset." But we don't put our money where our mouth is. We lost the opportunity to do something meaningful during this most recent debate. We will likely waste the opportunity as well the next time around. And nation, our economy and our people will continue to be ill-served.
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FYI Update: There is a program in the Labor Department that allows the use of UI funds to help start a business -- the Self-Employment Assistance program. However, UI is administered by the states and right now this is a voluntary program operating only in Delaware, Maine, Maryland, New Jersey, New York, Oregon and Pennsylvania. In other states, if you are actively seeking clients for a new business, you don't qualify for unemployment benefits (see this story about North Carolina).
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