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What the Devil won't tell you

Kudos to Ducey for taking Trump's COVID unemployment offer. Now change the UI system entirely

Gov. Doug Ducey said “Yes! I will accept Donald Trump’s presidentially provided unemployment boost!” and it’s good that he did.

People are suffering right now because of economic and public health crises beyond their control. Meanwhile, rent is due and bill collectors have their palms out and penalties are accruing. There’s a federal plan to help; the states just have to step up. Or at least hold out their hands for a check — and it's states with Republican governors who'll be the likely recipients of Trump's largesse with FEMA funds.

Funny. I remember something similar in 2011 going exactly the other way. Congress approved an unemployment extension as The Great Recession lingered after the 2008 crash. Arizona's Legislature refused to take the money. Lawmakers only had to change a date in state law to get the money. But they took an "F-em" approach when there was a black Democrat in the White House. The broader the suffering, the more likely voters were to blame that president and vote him out the next year.

Ducey wants Trump to win re-election and carry Arizona, so of course he’s going to take the money. He’s not stupid. That's money going into the Arizona economy that wouldn't otherwise exist.

Now that he's bolstering the system, he's conceding Arizona's unemployment insurance program isn't designed to cope with modern recessions. He should acknowledge that, and make our system of support for the jobless ready for the 21st century. Right now, those benefits constrain Arizona's unemployed, put them at a disadvantage against workers in other states and fail to recognize the year is no longer 1973.

I'm not talking generosity. I'm talking about pragmatism. I survived on unemployment while the mortgage crisis destroyed the economy and the news industry collapsed during the last recession.

On this, I know of what I speak. I've also covered government programs enough to know that austerity can be the mother of invention. It can force government to streamline. It can also render programs meaningless if too much is cut.

The unemployment rate in Arizona more than doubled, shooting from 4.5 percent in February to 10 percent in June. In Tucson, 26,000 of our neighbors have been tossed out of a job since the COVID-19 pandemic took hold.

I think everyone agrees the top goal of unemployment is to get people back to work. The state has long taken a "make-em-suffer" approach by providing the second-smallest benefit check in the country. Forget about it being "mean." It's counter-productive to pay just $5 more weekly than Mississippi.

Let's also define our terms here. Unemployment insurance isn't welfare. It's an insurance policy that workers and employers take out to provide a cushion in the event of unemployment without cause.

Insufficient funds

Arizona’s maximum benefit of $240 a week is so small it hurts. I'm not just talking belt-tightening. It can hurt employment prospects.

A worker making $50,000 per year would see their income cut to an annualized (sorry about the "ized" but it's required) rate of $13,000. Perhaps someone has a spouse making some money but if not, that’s a catastrophic cut. If Joe and Juanita Arizona got laid off in Kentucky they could still survive on $28,740. The figure in Utah is $29,120; it's $31,616 in Montana and $31,126 in North Dakota.

These states are a bit on the high end states in terms of benefits, but just 15 states pay out less than $400 per week. Only six states top their benefits off below $300. Only frickin' Mississippi pays out less.

Here's the problem: Prospective employers now routinely conduct credit checks.  Protecting that score is vital. Given the job search is competitive in nature, how can an unemployed Arizonan compete against an unemployed North Dakotan when the North Dakotan isn’t trying to pay rent, utilities, food, bills and credit cards on $960 a month? Let alone someone who is still working?

Just to keep up with Visa, a person out of work in Arizona may have to break a lease. Worse, they may get evicted because that's a days-long process in Arizona, versus foreclosure, which can take months.

Ducey is admitting Arizona's benefit is too low by taking the federal money to supplement the maximum amount.

A common refrain punctuates this round of economic relief: These workers did nothing wrong. They are unemployed through no fault of their own.

Right, but people who are out of work through fault of their own are not eligible for the benefit. A period of high unemployment is systemic. It's not about individual action. How many auto workers who got laid off because of the Tech Bubble launched a dotcom? How many renters or homeowners with a 30-year fixed rate got hosed during the mortgage bubble?

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We can also test the theory that having it too good rewards sloth the unemployed will indulge in. The states with the three most generous benefit amounts are Massachusetts, Washington and Minnesota. Their jobs picture improved faster than Arizona, Mississippi and Louisiana during our last go at an economic downturn.

I'm not going to argue it's causative without more information. But sustaining people's lives closer to their employed former selves certainly didn't cause deeper unemployment.

Get a job (or not)

Well, they can take extra work, right? Just swallow some pride and get a job flipping hamberders in the short term and put some money in your pocket. Don't go running to the government. Right?

Sorry. No. It's not legal under the current system. To earn more money, an unemployment recipient would have to report the income or file a fraudulent weekly claim. Then the state would deduct — dollar for dollar — from the weekly deposit any money earned after $30.

The benefit recipient showing initiative would only walk away from a week of 20 hours on the clock at minimum wage with $270 in their pocket before taxes. Total. That's a lot of work for an extra $30.

So to make an extra $250 a week, a recipient would have to earn an extra $460 a week. Oh, and this isn’t saving anyone any money. That $210 the state pockets just gets tacked on to the end of the benefit period.

But what’s the point of working if you can make the same money without working? Worse, if the recipient quits that job, then they are unemployed voluntarily and lose their entire benefit.

Working is also a big help in landing the next job.

The statistical website FiveThirtyEight did a study back in 2014 of the long-term unemployed and found the biggest predictor of extended joblessness was the unemployment rate at the time the person lost their job.

Think about it. If someone loses their job when the unemployment rate is 10 percent, it’s a safe bet that they face a lousy job market. The odds of getting a job don’t improve until the employment picture brightens. The longer they wait for that, the longer they are unemployed and the less desirable applicant they become.

What's more, there's a nasty little trend called "The Unemployed Need Not Apply." It's flat-out discrimination and it's largely legal. Having even a crap job will at least keep someone in the daily grind, which employers want to see.

Finding work – even part-time or freelance or gigging – is a way to keep the resume topped up.

Grinding gratis

What is encouraged is working for free. Believe me. Anyone can get a job if the client doesn’t have to fork over money. Oh, they’ll hire you all day long and straight through the longest night if you work gratis.

What does that do to gig workers? In his 2017 State of the State address, Ducey said he wanted Arizona to be the Silicon Valley of gig workers. The one competitive edge anyone on Arizona unemployment has over a gig worker is their willingness to charge zero. I mean, if it’s going to come out of their end anyway, why bother? More importantly, why lose the gig?

Gig workers get unemployment now, too. So they too can choose to offer their service for no charge.

That’s not economic activity. That’s just doing favors. It’s a step down from bartering.

A whole new world

I could go on.

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Starting a business is verboten. Enrolling in college full-time is not allowed. So entrepreneurship and retraining are discouraged even if they are exactly what our post-industrial economy requires.

This state's unemployment system is simply a relic of another time.

The rules may have made sense when laid-off workers would simply wait for demand to return. The company fired you. A company will save you if you ask nicely.

Legislatures and bureaucrats years ago knew what was best for job seekers in the 2020s. The thinking is the sick cousin of socialism. It suggests microeconomic outcomes can be dictated a priori by strictly governed poverty informed more by grandpa's horse sense than economic reality.

Today, though, more onus is put on the individual worker to fight their way back into the labor force with flashing sword and lifted shield and it's not always a straight line. It's a much more individualized process.

The fix is in

Let's be clear that the best thing to fix the economy now is to fix the COVID crisis. Our daily rate is down to 1,000 cases a day but our per capita rate is still really high. It's taking a reduction in economic activity that sustains 10 percent unemployment to shrink the number.

In the meantime, how might we change the safety net program workers take out on themselves?

One way to fund an increased maximum payment would be to charge the worker for it ahead of time. Make it work just like any other insurance policy. In this case, it's not such a bad idea to get higher income workers a better benefit because they have higher expenses. They also kick more in. This is how Social Security works.

Take the leash off workers and let them go make some extra cash. Maybe that burger flipping job turns into something else. Maybe corporate finds out they have a coder working the grill, or an architect or a lawyer or a graphic artist and they'll move them up.

Maybe it just keeps them grinding and help them protect their credit.

Here's another goofy idea as claims start to get extended: Pay people to leave for a better job market. Take that $6,000, six-month claim and offer $5,000 to relocate to a state with better hiring prospects. It beats them being on state-funded health care and food stamps.

Perhaps we keep the weekly benefit where it is but include two lump sum payments of $2,500 at the beginning and in the middle of the benefit period to cover cover emergencies, pay down some debt and perhaps take a few courses at a community college.

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The question is this: Are we just in the program to make sure no one gets a single dollar that's unnecessary or is it to get people back on the payroll, boosting the economy and broadening the tax base?

The state has for too long been myopic about grubbing every dime. The system needs to be modernized for the here and now.

This isn't to say the state can't help. Think internship incentives, access to quick professional development, microloans and tax incentives to hire back the unemployed. Think "new." Think "now." Think "flexibility. "

The goal should be to turn unemployment recipients into employed taxpayers.

Yet the state system designed to help them get there hasn't changed from the late industrial age.

Blake Morlock is a journalist who spent 20 years covering government in Arizona and also worked in Democratic political communications. Now he’s telling you things that the Devil won’t.

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1 comment on this story

Aug 20, 2020, 7:23 am
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How many unemployed are protesting the Govt shutting down their jobs?

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Arizona's unemployed will get some emergency relief. What they need is a new system.


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