Free Money for the Unemployed

The unemployed need money – unless they saved up during good economic times. And therein lies the first problem with unemployment insurance: it discourages savings, and Americans save pitifully little. But the unemployed do need money, so do we let them suffer?

The second problem with unemployment insurance is even worse: if the government hands out money to the unemployed because they are unemployed, why work? Unemployment insurance discourages work, and we need workers to pay for all that insurance.

Our current solutions to this dilemma are kludges at best. We limit the duration one can receive benefits – unless the unemployed constitute a large voting bloc, in which case benefits keep getting extended. We also enlist a small army of bureaucrats to monitor recipients to make sure that they are making a good faith effort to look for work. Alas, these bureaucrats must either be meddlesome or easily fooled.

A better solution: free money for the unemployed…as well as the employed. Don’t pay people to not have a job. Just give every adult citizen an equal piece of the pie. Make the government cash free for everyone. For the well employed, this is just a partial tax rebate. For those employed with low paying jobs, the free money is a useful supplement. If you are unemployed, it is money to live on while looking for a new job – as long as you are very frugal. If you want to maintain a good standard of living between jobs; however, save some money when times are good.

Free money has several advantages over unemployment insurance:

First, you don’t have to be unemployed to collect. You have an incentive to get a job as soon as possible. This includes temporary jobs while still looking for a “real” job. This can be critical for those in shrinking industries, for whom there will be no “real” jobs in the future.

Second, employers don’t have to bother collecting unemployment insurance, which requires two extra deductions from each paycheck to be paid to two government agencies: one federal and one state. Free money comes from general revenue, which could come from a very simple income tax and/or some excise taxes and tariffs. By making life easier for employers, we create more employment opportunities. Ironically, unemployment insurance ensures unemployment.

Finally, free money allows for a bit of voluntary unemployment, if you are willing to live cheap for a time: time to take some classes, start your own business, or simply take a sabbatical. We live in a prosperous society. Let us enjoy it.