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Nowadays, the USA faces a number of topical issues that require immediate solution as they threaten the well-being of the entire nation. Successful implementation of a solution to any problem requires money that comes wither from private investors or from the state funds. However, the flow of money within a country depends largely upon the labor sector that currently suffers from enormous problems. The rate of the US unemployment is 7.9 %, which constitutes 12.3 million of the unemployed. However, this figure causes much skepticism as it does not count many population groups that do not have a job, but are not eligible to fit the criteria of the official unemployed designation. Such a high rate of unemployment is alarming and makes both economists and common citizens worry about the future of the country. Thus, unemployment is a topical issue that faces Americans. The current unemployment welfare system has proved to have insufficient potential in terms of altering the existing situation on the employment market. Moreover, welfare benefits are often blamed for keeping unemployment rates high. Thus, there is an urgent need to revise the welfare system and research the unemployment problem in order to efficiently decrease its rate in the USA. However, a great amount of literature testifies to the fact that unemployment benefits are not solely responsible for the existing problem. Therefore, in order to tackle the unemployment problem, there is a need to analyze and restructure the entire system of economy in the country as unemployment is a sure indicator of the economic crisis.

Relevant Background of the Issue

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Unemployment seems to be the eternal integral part of the labor market in any country. However, the rate of this phenomenon varies across countries and times and serves as a definite indicator of the economic health of the country. The unemployment has become a serious issue in the USA in the recent decade while previously its level was relatively unthreatening for the economy. Thus, the rate was 4.4% in 2007. In 2009, it was already 10%, which was an extremely quick rise raising concern among specialists and citizens. The government was and is still urged to take effective measures to combat the unemployment problem. The statistics of January 2013 is rather promising as the total number has remained almost the same, even a bit smaller than in September 2012. The overall rate of 7.9% corresponds to 12.3 million of the unemployed. However, the number of long-term unemployed has not changed being at a stable percentage of 38.1%. Furthermore, there is a supposition that the statistics is significantly underestimated because the official statistics does not account for some population groups that do not have jobs, but do not correspond to all criteria of the unemployed designation. The promise to reduce the unemployment rate has been pivotal in the election campaign of President Obama. The American Job Act is the President’s plan of decreasing the level of unemployment in the USA through the introduction of measures both for employers and long-term unemployed people. For instance, this Act promises tax credits for employers hiring long-term unemployed and prohibits discrimination because of the status of a long-term unemployed. Nonetheless, these measures seem to be insufficient as an efficient solution of the problem.

Support for the Position

There is a supposition that the amount of long-term unemployed has nearly doubled under President Obama due to the prolongation and increase of the unemployment benefits. However, this point has been proved to be invalid in the circumstances of the modern economy. Despite the traditional view that “if welfare rates are too high, people will simply stop working and go on the dole”, the benefits have been proved to be not responsible for the increase of the unemployment rate. Job is essential not only in terms of the monetary reward, but also in terms of being pivotal for the harmonious development of the human personality and for the improvement of socializing skills. Besides, unemployment benefits are not granted to anyone who does not want to work. “This is because unemployment insurance requires a person to have worked a certain amount of time before they can claim benefits”.

The research conducted by David R. Howell and Bert M. Azizoglu (2011) is aimed at discovering whether unemployment benefits and namely the recent policy concerning their possible extensions to 99 weeks possess a work disincentive character. This practical research reviews past mainstream economic theories of the 1980s that advocated for the detrimental influence of the unemployment insurance. The researchers manage to prove that benefits have no evident work disincentive effect on workers as job has become nowadays a much more complicated concept than being simply a means of earning money. Therefore, if the new welfare policy truly has some effect upon the increase of the long-term unemployment rate, it is connected with the maintenance with the labor market participation, but clearly not with the much blamed work disincentives.

If welfare benefits are not responsible for the high unemployment rate, there is a need to find a real cause of the problem. It may be accomplished if policymakers cease treating unemployment “as a single, isolated problem to be solved on its own”, but start viewing it “as a symptom of something deeper happening in the economy”. The true reason why the US unemployment rate is so high is the unproductiveness of the economy and the “hyper-consumerist” nature of the American society that “simply borrows and spends, but doesn’t produce”. The creation of new job places and adoption of new welfare policies are a temporary remedy that cannot solve the problem in the long run as the economy should start producing goods that would be the solid base of a healthy economic system. Nonetheless, it does not mean that the welfare system concerning unemployment benefits should remain unaltered as it holds the potential to encourage people make sufficient changes in their businesses and workplaces, which would contribute to the process of restructuring the US economy.

Opposing View

The thesis statement of the paper contains the supposition that generous welfare benefits are responsible for the high unemployment rate. Having studied the issue from the perspective of modern economic situation in the USA, it is valid to conclude that the amount of welfare benefits does not lead to the increase of the unemployment rate. However, there is an opposing view of the situation that is widely spread in the media and in scientific circles. Thus, opponents support the idea that unemployment benefits and their increase and extensions are directly responsible for the spike in the unemployment rate, hence implying that unless the unemployed stop receiving state assistance, the total number of the unemployed will remain relatively the same no matter what other measures are introduced.

Interesting results have been obtained by two Swedish researchers who attempted to investigate the connection between unemployment benefits and the level of unemployment on the basis of the Swedish data. Although their empirical research addresses the problem of unemployment in Sweden, their theoretical conclusions are applicable to the situation all over the world including the USA. The researches suppose that “benefit generosity increases unemployment” and deem their evidence “as fairly robust since the estimates are similar across alternative specifications”.

Similar position is expressed in the article Here’s why the US should adopt Singapore’s attitude toward unemployment benefits by Michael Cimaglia. The author advocates for the idea that “Maybe there is a better way to handle this current predicament that’s more efficient than simply handing out checks for 99 weeks”. He views unemployment benefits as “throwing money at a situation” rather than solving it in an effective way. According to this article, the USA should adopt the Singapore’s attitude towards benefits when they are viewed not an ordinary solution to help the unemployed, but as a kind of radical means that is exploited when there is no other way to help the unemployed. In Singapore, it is shameful to rely on the state benefits. Therefore, people try to resort to social assistance in extreme cases. Besides, the criteria for the benefits eligibility are very strict with the current amount of about 3000 Singapore citizens receiving unemployment help. Thus, the author implies that the attitude of the general American population towards the unemployment benefits should be changed and that people should be encouraged to look for other possible solutions of the problem rather than simply applying to the social benefits program.

Jim Powell’s article Why long-term unemployment has doubled under President Obama supports the idea that unemployment benefits are responsible for the high unemployment rate. The author defines the reasons that he considers to be the most influential upon the increase of the rate. Among these reasons, unemployment benefits and other welfare benefits occupy the prominent place as “many academic studies show how unemployment benefits undermine the urgency of finding a job”. The author supposes that unemployed people can afford staying out of job for a long time due to the benefits, thus becoming “picky” when they are offered a job. Such an attitude holds the potential hazard of increasing the possibility that many unemployed are not going to be able to recover from their dependence on the benefits and return to the effecting working mode. It is proved by the fact that “As extended unemployment benefits finally expired, large numbers of out-of-work people have applied for Social Security disability benefits”.

Besides the opposing view of the unemployment issue, there is also an idea that “There is no structural unemployment problem at all”. The supporters of this idea do not deny the fact that unemployment exists in the country, yet they suppose that “today’s economy cannot support unemployment rates below 5% – like the levels that prevailed before the recession and in the late 1990s”. Edward Lazear’s article There is no ‘structural’ unemployment problem claims that the unemployment problem stems not from the mismatch of the labor market or from generous benefits, but is the result of the weak economic growth. In his opinion, “the evidence suggests that to reduce unemployment, all we need to do is grow the economy”.


Peter Fredriksson and Martin Soderstrom in their paper Do unemployment benefits increase unemployment? New evidence on an old question seem to make general theoretical conclusions that are, in their opinion, applicable to all economic systems on the basis of the relatively small scope of practically obtained data. Their research is valuable for Sweden and may serve as a credible source for analyzing the unemployment situation in other countries with similar problems, yet its results have to be critically assessed and modified to fit the unique circumstances of other countries. Besides, authors analyze only data concerning unemployment rates and benefits alterations within corresponding timeframes. Hence, they have not accounted for other variables affecting the overall unemployment level like work incentives, disincentives, and the general state of the economy.

Cimaglia (2012) offers an interesting approach to solving the unemployment problem in the USA on the basis of the Singapore model. Although the concept may be partially eligible for the implementation, there is a significant problem concerning the essential difference in the mentality of the Americans and Singaporeans. Besides, the economies of these two countries are essentially different as well. The problem of the unemployment can be treated as a separate problem without referring to larger problems affecting the entire economic system. Thus, the solution offered by Cimaglia (2012) should be also critically reviewed and adapted to the peculiar situation in the USA in order for it to be successful and truly helping.

Powell (2012) seems to blame the rise in the unemployment rate solely on the policies forwarded and adopted by the Obama’s administration. He does not consider the fact that the economic situation all over the world has been unstable and critical in the recent years. The USA is not the only country that has suffered from economic problems. Although the governmental measures are far from perfect, they have aided the country in leaving the stage of acute economic recession. At the time of the implementation of the policies, they seemed valid and efficient and had many supporters in the country. However, the problem is that these measures have been successful as a temporary solution and have little potential to be efficient in the long run. The problem is not that people do not want to work as Powell (2012) seems to suggest, but that they cannot work because of the shortcomings of the entire American economy. Besides, unemployment benefits have been proved to have no obvious relation to the work disincentives. David R. Howell and Bert M. Azizoglu research the issue of unemployment benefits as “contributing significantly to the persistence of levels of long-term unemployment unprecedented since the Great Depression”. Having analyzed the large scope of empirical data with reference to previous theoretical researches, they find little evidence that “much of current U.S. long-term unemployment can be explained by UI-related low job finding efforts and high job offer rejection rates”. Their idea of the reasons underlying the high unemployment level is consistent with the Lazear’s (2012) opinion concerning the problems of the entire economic system: “massive job destruction followed by an extended period in which the hiring rate has been much too low to reduce long-term unemployment”.

Visual Analysis

The above picture represents the idea that unemployment compensation as well as other unemployment and welfare benefits is viewed as a means of survival for many Americans who would figuratively ‘drown’ without this money. The rate of unemployment is very high with about 13 million people deemed as the unemployed. This figure does not include many groups of the population that do not fit the criteria of the unemployed, yet who do not work and rely on social assistance as a means of feeding their families and barely making ends meet. However, the picture also implies that unemployment compensation is only a temporary solution that does not have the potential to alter the situation in the long run. The lifebuoy can support a person afloat just for a limited period of time. Afterwards, the person will be either saved or will go down. This metaphor also applies to the unemployment issue as the unemployment benefits are paid for several months. If the person does not find a job within this timeframe, he/she will be literally doomed while being not eligible for the benefit extension. There is a possibility to apply to other welfare programs, but the chances of being approved for further social assistance are low. Therefore, the unemployed should treat unemployment benefits as a lifebuoy: exploiting it to the maximum benefit, i.e. to look for a job that would bring them sufficient income and work satisfaction. This way, they will be ‘saved’ with the help of unemployment compensation and benefits as a temporary ‘lifebuoy’ aid.


In order to take the unemployment problem under control, policymakers “need to set aside the flashy slogans, vague platitudes, empty promises, and partisan talking points in favor of a rigorous inquire into the economic causes” of the problem and devise solutions that would be effective in the long run as well as at the time of their implementation. The radical solution that seems to be hardly able to be implemented right now is to restructure the economic system of the USA by making it more productive and taking measures aimed at increasing the pace of its growth. New workplaces cannot be artificially created at the expense of some additional funds or tax credits as they have to be supported by the real value of the produced goods. Therefore, there is a need to adopt policies that would spur the growth and innovative improvement of various industries, which would automatically lead to the creation of new workplaces.

A huge percentage of the unemployed is represented by young people who cannot find a job after graduating from the university because there is no demand for their profession in the labor market. It would be beneficial if colleges and universities encouraged the youth to pursue occupations that are in demand on the market. This way, the percentage of the young people unable to find a decent job corresponding to the obtained degree would decrease, hence lowering the overall unemployment rate.

The welfare system concerning unemployment benefits should be critically evaluated and changed in order to decrease the unemployment rate. Benefits should be viewed as a last resort that people turn to unless they have no other option. Instead of relying on the state for support, people could save money while they are employed “because savings create the investment capital that drives economic productivity and sustainable job creation”. Besides, benefits extensions should be granted only if a person provides officials with a convincing and credible reason why he/she has been unable to get employed. Although many Americans view unemployment benefits as their only way of getting money necessary for normal living, the government should make the eligibility process harsher in order to allocate state funds for truly needy people. The social assistance may be provided in the form of special training and retraining programs paid by the state with a guarantee of getting a job after the successful completion of the course. This way, both the market demand for certain specialists and the unemployed Americans’ need to be a part of a workforce would be reached.


Unemployment is a serious threat to the well-being of the American nation that has devastating effect on the entire economic system as well as on citizens’ daily lives. The government acknowledges the existence of the problem, yet its measures and policies seem to be insufficient in terms of solving the problem or, at least, of taking it under control. Unemployment benefits are often blamed for being a major work disincentive factor and a significant contributor to the rise of the unemployment rate. However, numerous theoretical and empirical studies have proved that this theory is no longer valid in the modern world. Unemployment is an alarming symptom of a bigger economic problem that is a shortcoming in its nature. If the government wants to solve the unemployment problem, it should not be treated as an isolated problem. New policies aimed at creating a healthy and productive economic system are essential for the solution of the unemployment problem.

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