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Here's how it works in NY, where I live (it varies state by state, but most states have a similar system):
If you work less than four days in a week and earn $405 or less, you may receive partial benefits. Each day or part of a day of work will result in your weekly benefit rate being reduced by one-quarter. For example, if your weekly benefit rate is $100 and you work three days and earn less than $405, you could potentially receive $25 in benefits. If you work two days, you could potentially receive $50 in benefits. If you work one day, you could potentially receive $75 in benefits.
As I talk to people, I've noticed a pattern. Though almost no one could support themselves on the paltry sum they receive from unemployment insurance, many folks (especially at the lower end of the income spectrum) use unemployment benefits as a cushion that supplement with some other income until they find a full-time job. But in order to preserve their unemployment benefits, they look for off-the-books work. Sometimes they do consulting or freelance work, again only if they can find clients willing to pay them on the sly. By doing this, they might be taking steps towards finding full-time work. But they are probably living in fear of being discovered (and facing severe penalties, including jail time in some states).
Though the stimulus plan did extend unemployment benefits 13-20 weeks in states with exceptionally high unemployment, I wonder if more time is what people really need. What if our system encouraged people to double dip rather than penalizing them for it -- at least for a reasonable period of time, say six months, to give them a chance to get back on their feet?
I talked about this with Zachary Hummel, an employment lawyer. "If I were a government, I'd want to encourage people to take part-time work that resulted in taxes," he said. "We could even incent employers through some kind of stimulus program to employ people collecting unemployment." He added. I tend to agree. Why have a system that penalizes people for doing the very thing that will get them back to full-time employment?
One of every three unemployed people is jobless for over 27 weeks, according to the Department of Labor. That's a long time to be looking for work and relying on benefits that are usually not enough to live on (And even longer for those who don't qualify for unemployment benefits). There's go to be a better way.
What's your take -- Does the unemployment system encourage people to try to beat the system?
Might we be better off with policies that provide incentives to people who find ways to earn income until they are fully employed?
