Ending Neverending Benefits

According to Scott Rasmussen’s Number of the Day for Tuesday, 8 June 2021, 71% of voters favor ending supplemental insurance benefits.  Indeed, according to last Friday’s Number of the Day, twenty-five States have already ended or plan to end pandemic-related unemployment benefits.  South Carolina is among those twenty-five States, all of which have Republican governors (Vermont and Massachusetts are the the only two States with Republican governors who have not ended the benefits), thus demonstrating once again that the Republican Party, for all of its faults, is still the party of commonsense.

As I’ve written recently, excessive unemployment benefits account for the current labor shortage, which in turn has fueled inflation.  It seemed to hit the fast food industry first, as workers could make more money staying at home than returning to their reopening restaurants.  As I detailed in “Fast Food Premium,” restaurants began offering higher pay, signing bonuses, and even cash for submitting an application.  All of those costs get factored into the price of the final product, causing prices to increase.

Many restaurants had already taken advantage of higher meat prices from the early days of The Age of The Virus to tack on another dollar or two to popular menu items, and I fully expect those prices will remain elevated, even as unemployment benefits end and meatpackers return to work along with reluctant waiters, cooks, and hostesses.  In the hospitality industry, it’s easy to see how companies played The Virus to their advantage:  hotels still don’t clean rooms and replace towels the way they used to do (that is, on a daily basis), instead requiring guests to leave bags of trash and soiled towels in the hallway, and to come to the front desk for replacements.  This past weekend we stayed at the Loews Portofino Bay Hotel at Universal Studios—to be clear, I was not the one paying for the room!—and even at a hotel that runs $300 a night on the cheapest rooms, there was no turndown service.

That’s a minor issue compared to skyrocketing food and lumber prices, but it’s suggestive of the many, tiny ways companies leveraged the pandemic to their advantage, using The Virus as a pretext to phase out popular but costly services, while still keeping the price tag the same.  With so many workers sitting at home on unemployment, prices of goods will continue to climb, simply because those goods aren’t being made.

In the case of lumber, demand surely increased during lengthy lockdowns, as many homeowners took the forced downtime as an opportunity to engage in overdue home improvement projects.  But with generous federal unemployment benefits, many workers engaged in the production of lumber for retail sale have stayed home, meaning less trees are chopped down, less boards are cut, etc., etc.  Higher demand plus decreased supply, as any Economics 101 student will tell you, yields a higher equilibrium price, as the demand and supply curves shift accordingly.

I contended in “Fast Food Premium” that the Biden’s administration response to The Age of The Virus was a trial run for Universal Basic Income (UBI).  The concept of UBI is seductive, but it seems that voters—even 59% of Democrats, per Rasmussen—are realizing the very real costs that come with paying people merely to exist.  Those costs go far beyond the value of the direct payment to unemployment recipients; the costs are the results of the ripple effects of workers staying home.

Short-term unemployment insurance is a decent and compassionate way to help folks make ends meet for a month or two as they look for work.  But it’s clear that people will stay unemployed as long as the benefits exist.  Denmark, I have heard, once offered a whopping five years of unemployment benefits—and found that recipients magically found jobs exactly after five years were up.  The country then gradually reduced the length of those benefits to something far more realistic.

Offering over a year’s worth of unemployment is ludicrous, detrimental, and inflationary.  It’s time for the other twenty-five States to follow suit and begin phasing out federal unemployment benefits.


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