High Unemployment Benefit Encourages High Unemployment Rate
A few weeks back Fox News did a story on the labor crisis looming in Eastern Washington. Despite an unemployment rate of 9.6% in Franklin County, farmers there can’t find enough workers to harvest their asparagus crops. Without the labor to cut the asparagus, farmers are forced to let 10% of their crops go unharvested. Fox News was interested in Washington Policy Center’s perspective on the phenomenon—a county with double-digit unemployment that has plenty of jobs but not enough people to do them.
In my interview with Fox News, I suggested an important factor could be our state’s generous unemployment benefits. The jobless in Washington can collect up to $604 per week for 73 weeks. So someone collecting the maximum weekly unemployment benefit has the equivalent hourly wage of $15.10 per hour and an annual salary of over $31,400. Most farm workers don’t earn nearly that much; the average wage for asparagus pickers, a very labor-intensive job, is around $10 per hour. Obviously the incentive to go to work picking asparagus instead of collecting unemployment is nonexistent. As I told Fox News, “The state has created this disincentive to work, with our generous benefits.”
This trend of more jobs with no takers isn’t unique to Washington State.
Economists have been pondering the country’s unusually slow recovery from the Great Recession. Typically the steeper the recession, the stronger the recovery should be. That hasn’t been the case since the economic spiral that began in 2008.
We are recovering, but at a sluggish pace—more jobs are available but unemployment remains stubbornly high. Federal Reserve Vice Chairman Janet Yellen says one of the reasons for our nation’s lingering high unemployment rate is likely the result of “extensions of unemployment benefits, which might encourage job seekers to be more choosey.”
Translation—the higher the unemployment benefits, the less important finding a paying job becomes to the unemployed collecting those generous benefits.
Washington Policy Center has long contended that high unemployment benefits increase unemployment. Now the second highest official in the Federal Reserve is saying it too.