With the recent passage by the United States Congress to extend the availability of 99 weeks of unemployment insurance for an additional 18 months a unique question arises, "Does longer term unemployment benefits affect migration flows?"
From a humanitarian aspect I am a supporter of unemployment insurance. For intervals of somewhere between ninety days and six months, unemployment insurance is an important facet of civilized society. Unemployment insurance reduces the inflammation of societal unrest and generally provides a much needed safety net for not only the unemployed individual and his or her direct creditors, but his or her community as well. That said, is long term unemployment insurance creating distortions in the labor market?
Here is the rub: Joe loses his job in California where he lives with his family. His children are in school, his mother works in town and all his brothers and sisters are nearby. It is a perfect situation, well at least until the factory closed last week. Now, Joe really needs, and in fact wants, to get back to work. The problem is that the town has been hard hit and jobs like his just aren't available. What does Joe do?
Well, assuming unemployment benefits are a "necessary" safety net, meaning Joe doesn't have adequate savings to wait for employment, Joe would certainly be forced to move if no benefits were available. As a national average, despite recent trends indicating the savings rate of Americans is on the rise (over 7% at last reporting), Americans are ninety days from being broke. This means that if our Joe is in fact an "average Joe," he has ninety days to replace his paycheck or face a dire circumstance.
With the extension of unemployment benefits, workers are given a longer period to replace employment. With ninety-nine weeks of benefits and ninety days of savings, the unemployed are given the option to "wait and see." The drastic, life altering, option of uprooting oneself and leaving family behind, becomes a more distant last resort. While quite understandable, is this behavior causing market distortions in the National labor market?
Currently the Midwest, meaning Nebraska, Iowa, South Dakota, North Dakota, Kansas, Oklahoma all have unemployment ranges far below the National Average. That said, California, Nevada, Arizona, Florida are well above the National Average. Also, these relative levels have remained since the first of signs of the Great Recession in 2008 three years prior. With the current era's speed of travel and the ability of job seekers to connect with prospective employers in an instant through the Internet, why is it taking so long for people to move to more favorable job markets?
Desirability ? Inability to sell one's house? Familial roots? Perceived standard of living? Regardless of the validity of one or all of these reasons- all of them are luxuries. Starvation, homelessness and inability to provide the basic necessities certainly would trump them. During the Reconstruction Era Depression or the Dust Bowl Americans migrated far and wide to search out opportunities for work. Even in more recent recessions such as the energy crisis of the 1970's, I had the personal experience of watching my father move away to find work leaving my working mother behind to care for me while he settled into a more prosperous region. Labor moved to meet capital. The rebuilding process inert in capitalism's cycle of life thus began again.
While I am not selling one that capitalism is the paramount economic system, nor am I suggesting that providing those without isn't noble- I am merely asking whether in a capitalistic system prolonged benefits are distorting the natural reallocation of labor and capital? If the answer is yes, the more important question is: Whether the prolonged benefits will in fact work in putting Americans to work in their hometowns or whether in the end the invisible hand will force these individuals to move regardless?
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