At a time when long-term unemployment is a serious national problem, some states are cutting jobless benefits. Recently Michigan cut the time its citizens could collect unemployment checks from 26 weeks to 20. Now, Florida is looking to do the same, with an even more aggressive twist. Its House of Representatives wants to tie jobless benefits to the unemployment rate. The proposed law would cut the benefit period to 12 weeks if unemployment dips below 5%. Are state lawmakers going too far?
Let's Be Practical: This Is a Real Problem
For starters, it's pretty clear that cutting benefits for the long-term unemployed ignores the reality of Florida's situation. Although the government does not release state-by-state data for unemployment duration or job openings, we can use the national data as a proxy, and assume it's more severe in Florida. The state's unemployment situation is far more dire than what the U.S. is experiencing nationally. The U.S. unemployment rate was 8.9% in February, while it was 11.5% in Florida -- third worst in the nation.
Despite the relatively lower national unemployment rate, long-term joblessness isn't improving much. From its 2010 peak, the number of Americans unemployed 27 weeks or more has only declined by about 9%. In fact, the situation is likely even worse than the 6.1 million Americans jobless for at least 27 weeks suggests, as some long-term unemployed workers are no longer classified as technically unemployed, because they're either discouraged or not counted in the workforce for some other reason.
Moreover, there just aren't enough job openings to accommodate the massive number of jobless Americans. In January, there were 2.7 million job openings. Meanwhile, there were 20.3 million Americans who did not have a job and wanted one. That means that there was roughly one job for every 10 people who wanted one.
This isn't merely a problem of people sitting around, collecting unemployment insurance instead of taking a job, and snickering about the gullibility of Uncle Sam. There is a huge number of long-term jobless Americans and not enough available jobs to go around. The problem in Florida is likely even worse than we're seeing in the broader U.S.
Tying Benefits to the Unemployment Rate Won't Matter
So what about the idea of tying jobless benefits to the unemployment rate. In a sense, this provision might not matter. The unemployment rate probably won't dip below 5% in Florida again for several years. By that time, relatively few workers will be newly laid off. So most people still unemployed once the rate declines below 5% will likely have been jobless for a few years. That will render the 12-week threshold pretty meaningless to most of the jobless population. They won't qualify for unemployment benefits by then anyway.
Who exactly is this 12-week rule supposed to catch? In a recession the unemployment rate rises pretty rapidly. So as layoffs begin again, the rate will likely rise above 5% within 12 weeks having elapsed, or shortly thereafter. That means those workers will still qualify for the usual 20 weeks of benefits. Instead, the measure would only really be in felt by those who lose their jobs during times of economic expansion. In theory, those people should be able to find jobs relatively quickly anyway.
The Effect on Florida
But for now, if the state government gets its way, it will follow Michigan in cutting its jobless benefits to 20 weeks. Already, many Florida residents are likely beyond that threshold. In fact, many are likely past or nearing the 99-week limit for extended benefits set by the federal government. What happens if Florida's benefits run out more quickly? People living there will have to go to other states to find jobs.
Is that what Florida wants? Most of its problems stem from the housing market collapse. Now the state is way overbuilt, which means it needs more people to inhabit the homes that remain empty -- not fewer. If its population declines with its residents looking for jobs in other states, then this will exacerbate its real estate woes.
Of course, if more of its current residents find homes in other states, this will also make it tougher to collect taxes on all that vacant real estate. Florida does not have a state income tax, so it relies heavily on real estate taxes. This point begs the question: will cutting unemployment benefits save the state money in spending, or will the move cost it money in lost tax revenue as unemployed Floridians move away to find work elsewhere?
Finally, some jobless Florida residents might be trying to stay in the state, despite the lack of jobs, because they have a house that they are scraping by to pay the mortgage on. Perhaps a husband is barely making enough to pay the bills along with his wife's unemployment benefits, or vice versa. Without those benefits, the couple might have to walk away form their home and push foreclosures in the state even higher. Again, this would make Florida's problems even worse.
So ultimately, it's hard to see much sense in Florida's new law. While its lawmakers may want to save the state government some money, cutting unemployment benefits could backfire. Instead, it may drive residents away and make its future economic growth -- and tax base -- even smaller.