Some mistakes have to be repeated before the lesson is learned. When the government shut down the American economy in March 2020, Congress voted to send cash payments to many Americans and the U.S. government paid millions of people not to work. The results were severe economic and social costs, because unemployment has lifetime consequences for individuals, families, and communities. There are many non-monetary benefits to work and there are social costs to unemployment. Livelihoods are lives.
Some of the extra personal and societal costs of being paid to sit on the sofa include increased drug and alcohol use, breakup of marriages, disruption of career path and lower lifetime earnings, poorer academics for children, and increased crime. All of us pay when some are paid not to work.
Instead of recognizing the error of cash payments, many big-city mayors, including Houston, Nashville, and Louisville, have started to pay people in their cities not to work. So the employed taxpayer pays for someone to be unemployed. Talk about being unfair to the working taxpayer!
The COVID shutdown was an experiment in what happens when the government pays people a substantial amount for not working. Congress authorized $600 per week in unemployment bonuses early in the pandemic. The consequences were substantial, including prolonging unemployment and economic underperformance. With easy money in the bank, then there is no hunger to seek employment. The previous largest federal unemployment bonus, which was enacted by President Obama, was a mere $25 per week.
These checks meant that being unemployed was more profitable than work. The result was elevated unemployment rates, which — surprise, surprise! — dropped when the $600 bonus ended. But when Congress authorized another $300 per week bonus, then the unemployment rate stalled. Economics is all about incentives and in 2020, people had a large incentive not to work.
Some red states — like Florida and Texas — ended the state’s bonus unemployment benefits far earlier than blue states — like New York and California. The states that cut off these extra benefits earlier had a much faster return-to-work effect. As a result, their economies recovered much faster than those states that offered prolonged benefits. Some states with high unemployment benefits did not fully recover all their lost employment for three years.
Payments for not working end up hurting the very people they are designed to benefit. According to the Urban Institute: “The long-term unemployed tend to earn less once they find new jobs. They tend to be in poorer health and have children with worse academic performance than similar workers who avoided unemployment. Communities with a higher share of long-term unemployed workers also tend to have higher rates of crime and violence.” The devil does make work for idle hands.
The U.S. government should not lavishly subsidize unemployment and make non-work pay better than work. It does not matter if the extra money is spent on necessities, the heart of the problem is that money with no strings attached is a disincentive to work. According to the Wall Street Journal (“More Places Try Cash Aid to Needy, Stirring Some GOP Opposition” 3/20/24), there is “a growing sentiment among economists, tech industry leaders and Democrats that distributing money without strings is one of the most effective and least bureaucratic ways to help struggling people.” The idea is called “Universal Basic Income”, but the reality of UBI is “U B Indolent”.
The best way to help struggling people is to give them a purpose, not a purse. A job provides a purpose, discipline, satisfaction, community, and responsibility — none of which ever come from a free handout. Politicians like to hand out money in order to get votes. Perhaps the tech industry leaders prefer to have more customers devoting their day to social media apps instead of concentrating on a job to accomplish.
The Universal Basic Income is socialism. When people are dependent on government for income, they are not free people. When people are beholden to government, they lose all individual rights.