In Michigan, people choose unemployment over work
detnews.com
detnews.com
This reads like something out of the Onion. Are they really so surprised that extended unemployment benefits create moral hazard problems?
And that is tantamount to suggesting that higher education brainwashes people into thinking abuse of the system is nonexistent, and everyone on the system is a legitimate citizen using it responsibly.
I'm not trying to demonize either side of the equation, but abuse does in fact happen, and it's just as disasterous/dangerous to act like it's not happening than acknowledge it with (possibly) inflated arguments that women are getting pregnant just to prolong their access to public resources like unemployment and welfare.
If abusers are 4% of the system, if it costs more than 4% of the cost of all the benefits given, you actually waste money seeking abusers. Additionally, the abuse detection measures also have false positives, or long paperwork times, which filters out some legitimate users of the system.
This is a big issue with Social Security disability in the US, where things have to go through an abuse detection step, however this takes over a year almost in many states (SS Disability is oddly a per state run activity). By that time, the actually disabled have usually had their personal finances destroyed, or have worked in spite of severe danger to their health, both of which only up the end cost to the taxpayers.
An alternative (or even complementary measure) to strict abuse detection is graduated benefit reduction. (EDIT: By graduated benefit reduction, I mean, at the time you get a job, you do not lose all your benefits, you instead lose only a portion of them, say, 50%). That way moral hazard doesn't occur, as they get part of the benefit while working in a crappy job, thereby working is more attractive, but it still decreases the cost to the taxpayer, as highly qualified people may fill McJobs while looking for those in their real professions, and then not drawing the whole benefit.
We have a big issue with non-graduated benefits in the US, where it is the rational thing to do to accept benefits and not work with the incentive structure in some areas. If we change the incentive structure to promote work, overwhelmingly large number of current abusers would stop doing so and would take the work option.
Unemployment insurance in the US works for people who will make several times the unemployment amount when they get a new job. It's only the people who will make close to the dole amount after getting a job have issues with thinking it is a good alternative. As an economic rational actor, the people not taking the job may be making the correct choice with the unsophisticated system we have.
Graduated benefit reduction can work lots of places: Food stamps, section 8 subsidies, unemployment, social security, social security disability, re-education grants, etc.
Graduated benefit reduction might prevent the moral hazard, but it does so at the expense of introducing all sorts of assumptions about the availability of work, and the likelihood of getting an offer and becoming reemployed again quickly.
In fact, it may have a non-linear detrimental effect, because people who end up unemployed long-term will come to depend more on UI as more and more of their savings dry up. It stops being effective just about the time they need it to be effective.
The UI system inherently sucks because of this; either people will game it, or it will be eroded too severely to be of any real use during really tough economic times.
As an aside, to help my own thinking about this, how much does the average employer contribute per employee to UI benefits? This is really open-ended on purpose, I'm just kind of looking for ballpark numbers, from as many contexts as people are willing to offer them. :-)
I think the ultimate claim is that if you create a system that can potentially be gamed, people will find whatever way they can to game it. It is possible also that they will game it incorrectly.
To cement your suggestion: yes, there are poor women that do this. Making the existence of such actions unspeakable trades solving the problem for perpetuating a socially acceptable lie about it. I don't see how this is better.
And the other socially disadvantaged will game systems built for their benefit as well. People don't suddenly grow a heart and a conscience and become flawlessly altruistic because they were a victim of something. It is just a possible they develop the opposite attitude: society screwed then, and now they're going to return the favor. Will they necessarily? No.
But I'm not going to give the benefit of the doubt just because they'd claim to be a victim of something. I don't know if they've actually been a victim; they may have foist this upon themselves, in which case I am contributing to massive amounts of moral hazard. They may be down on their luck, but think that the current system we have for dealing with that sucks, because it incentivizes the wrong things and treats them as more of a victim than they think it should. For what it is worth, I am in that latter bucket right now. The entire UI system and such is just so condescendingly paternalistic; I feel like I've suddenly become a grade school student again.
They may have been a victim, but we also don't presume that someone was a victim of assault just because they are bruised. We don't hand them whatever entitlement they think we, in due guilt-worthy acquiescent behavior, owe them as penance. And we certainly don't make speaking about the self-inflicted ways one might become bruised taboo.
It's just not that simple. You can't assume that everyone who is disadvantaged is a hapless and wholly undeserving victim of horrible circumstances; there's just too much in that assumption that can be wrong, and being wrong means you make the real problems worse.
My brother in MI is doing $10/hr landscape work because it's the only work to be had right now (for someone w/o an in-demand skill) and he had to call in a favor to get it.
Additionally, the fact that payroll taxes are charged against people making so little likely hurts the issue even more. A moralistic system of everyone paying their due is ironically making some people not work, where if the first 25k everyone made was tax free from payroll taxes, then lots of work would be a lot more appealing for those on the lower end of the scale.
I dislike linking to the Daily Mail, with its salacious "little Englander" tone, but this story is played out all over our country: http://www.dailymail.co.uk/news/article-1272512/20-000-benef... - Allowing basic "personality disorders" and similar as grounds for people to claim welfare for decades is the way to ruin. It not only costs us money as a country, but people who don't work for long periods become demotivated and are unlikely to be productive again - that must suck for them as much as for us.