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Continued: Economists: Budget deal cutting unemployment insurance may not help recovery

  • Article by: JIM SPENCER and DEE DEPASS , Star Tribune staff writers
  • Last update: December 13, 2013 - 10:06 PM

Those who have lost jobs may push harder to find work as unemployment benefits expire, explained Randy Johnson, director of Workforce Development Inc. in Rochester. “But what you find are people who have lost confidence. They are trying but striking out.”

Jim Seas, now communications director for the employment program HIRED in Minneapolis, was jobless for 17 months after being laid off. At one point he sold his class ring, clothes and other items to put food on the table.

“This can affect anyone, anywhere, at any time,” Seas said.

To be sure, there are unemployed people who choose government benefits over jobs they don’t want. Nicole Snell has seen that as manager of Express Employment offices in Edina, Eagan and Chanhassen. She places workers in jobs paying $10 to $13 an hour.

“There are definitely people out there who legitimately need the benefit,” Snell said. But “you would be surprised at the number of people we call who don’t have jobs, and they say, ‘I make more money on unemployment, so I am not interested,’ or ‘I would rather just wait until my unemployment runs out.’ ”

Government savings from ending extended unemployment benefits will be about $26 billion in the next two years, according to the Congressional Budget Office. However, that savings will be offset partly by likely reductions in consumer spending that CBO believes will decrease gross domestic product and actually could cost the economy 200,000 jobs by the fourth quarter of 2014.

“Last month, we added 230,000 jobs. We could literally be wiping a month of job growth by doing this,” said Rep. Keith Ellison, a Democrat from Minneapolis who voted against the budget deal.

The dynamics of unemployment sometimes defy easy conservative-liberal distinctions. Strain is a conservative free market advocate. Nevertheless, like his ideological foil Ellison, he believes history and current conditions make the case for continuing to extend unemployment insurance.

His reasoning is simple: The long-term unemployment rate is still roughly twice what it was when extensions were ended in previous recessions.

But, Strain acknowledged, “Every policy decision is partly based on economics, partly based on politics and partly based on philosophy.”

Harry Holzer of Georgetown University’s school of public policy says appearances held sway in the budget deal. The usually antagonistic House and Senate wanted to be seen as working together. The problem, explained Holzer, is that the rare show of cooperation will do very little to get more Americans back to work.

“This is not good government,” Holzer said. “But by now we’re so far from good government that people are actually cheering this agreement.”

Lisa Dvorak of Champlin is not among them.

Dvorak was making $23 an hour as a team leader in a UCare patient call center when she was laid off in March 2013. Now when she applies for jobs, recruiters either think she is overqualified because of her past pay scale, or underqualified because she doesn’t have a college degree. With her $350 a week unemployment checks set to disappear, Dvorak rides “a roller coaster of emotions.”

“I don’t sleep much at night,” she said. “I wake up thinking, ‘What is going to happen to us?’ ”

Dee DePass • 612-673-7725

Jim Spencer • 202-383-6123

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