April 2010

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UNEMPLOYMENT BENEFITS:
INSURANCE,WELFARE OR ENTERPRISE?
 
By Peter Bearse
 
Unemployment benefits have become a first-page, news headliner issue
since Sen. Bunning put a hold on benefits payments. He insisted that
the Senate find $10 billion in cuts elsewhere in the budget to pay for
a new round of benefits -- so that the Senate wouldn’t violate
Congress’ renewal of “Pay as you Go” legislation.
 
The more basic problem, however, is that repeated extensions of
benefits turn the unemployment “safety net” from an insurance to a
welfare program. The unemployment insurance funds have already been
exhausted in many states We know the dangers of welfare -- creating a
dependency culture rather than encouraging self-reliance and
enterprise.
 
Many years ago, some successful experiments were mounted in some
American states (e.g., Massachusetts) and some foreign countries
(e.g., France). These showed that unemployment funds could be used to
seed new businesses. Many unemployed people were helped to “be your
own boss” and create their own job(s). The potential of this is great
now, as the “Great Recession” continues and long-term unemployment
grows. The Director of the New Hampshire’s SBA program reports that
his office has been swamped with requests for assistance from
unemployed people who can’t find jobs, so they are turning to
self-employment as an option. They need help to establish new
enterprises.
 
Thus, Congress should build on past experiments to revise the
unemployment benefits program so that it can help enable enterprise
rather than encourage dependency. Receipt of benefits to be paid out
to someone unemployed over a year should be contingent on a choice of
either self-employment or public employment. The latter implies that
Congress should also be prepared to authorize temporary public
employment on an emergency basis -- to enable some useful work to be
provided to people unemployed more than a year. The guiding rule is
just what guided welfare reform: Beyond a certain point, no welfare
without work.
 
Studies show that nearly two-thirds of net new jobs are generated by
new or young (up to 5 years old) enterprises. To the maximum extent
possible, let’s see that unemployment funds are used to help build
job-creating businesses.
 
        PETER BEARSE, Ph.D., International Consulting Economist and Candidate
for Congress, NH CD 1.