January 12, 1988
"Bribe Them Out of Joblessness"
San Jose Mercury News
By Timothy Taylor
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LOOKING for a job is hard work. It requires writing letters, standing in line,
traveling to different potential employers. It requires checking with friends,
reading advertisements, looking for notices. Most difficult of all, it requires
the job seeker to take the position of supplicant, waiting for some employed person
to answer a letter or take time to talk.
Job seekers have to be willing to keep trying, even as the process of applying
and hoping and being turned down takes painful little chips off their sense of
It's not surprising that unemployment can break up families and cause stress-related
diseases. But it is surprising that most of the programs to reduce unemployment
don't take advantage of what the jobless people who are looking for work have
Consider the best known ways of fighting unemployment. One way is to strengthen
the overall economy, so that businesses want to hire more people. Another is to
provide job training or education for the unemployed. Recently, the most popular
approach to joblessness seems to be "workfare," passing a law that people
have to look for work or go to school to receive welfare benefits. These programs
all have their place. But none of them provides a direct incentive to the jobless
person to take on the difficult task of seeking out the right job and staying
with it. After all, each person is the best judge of what jobs he or she likes,
what jobs they're willing to do, how far they're willing to commute, what shifts
they're willing to work, what sort of work environment they like and all the other
factors that go into keeping a job and doing good work.
Sometimes the answer to problems like this is just too obvious to be obvious.
Society has to pay unemployment benefits and welfare because, well, just because
it's the right thing for a wealthy and humane society to do. But since society
would prefer that people have jobs, why not offer the unemployed a bonus to find
a job and get off the unemployment rolls? It's so crazy, it just might work.
At least, that's the evidence from an economic study done by Stephen A. Woodbury
of Michigan State University and Robert G. Spiegelman of the W.E. Upjohn Institute
for Employment Research, and published in a recent issue of the American Economic
Review. In the experiment, they offered job seekers applying for unemployment
insurance a $500 bonus if they found a new job in less than 11 weeks. (About one-third
of U.S. unemployed workers in 1986 were without jobs for more than 11 weeks.)
The new job had to be at least 30 hours per week, and the worker had to hold the
job for four months before claiming the bonus.
Now, a $500 bonus may not sound like a lot to everybody. But if you're a low-skilled
worker earning, say, $6 an hour, it's worth more than two weeks wages.
In any event, the amount had an impact. Only about one- eighth of the workers
actually collected the bonus, although others could have collected but didn't
take the trouble to do so. Even among those who didn't get a bonus, the announcement
that 500 smackeroos were ready and waiting still had an effect in pushing them
to get a job more quickly. Overall, those in the group that was offered the bonus
were unemployed a week less, on average, than would otherwise have been expected.
As a result, the state saved 2.3 times as much in unemployment benefits as was
paid out in bonuses.
Both conservatives and liberals should applaud this sort of bonus program.
It reduces unemployment. It saves money. It works with minimal bureaucracy. Frankly,
it sounds almost too good to be true.
So a little caution is in order. The Woodbury and Spiegelman study only offered
bonuses to about 4,200 Illinois residents. Expanding such a program would require
considering whether $500 is the right amount, whether 11 weeks is the right time
frame, how to avoid workers' and employers' taking advantage of the program, whether
the results hold up in larger groups, and so on.
But caution should not imply hesitation. Even with the ongoing good news about
more Americans working and a lower unemployment rate, nearly 8 million American
workers remain unemployed. That figure represents deep personal loss, as well
as a double drain on a society that ends up both paying to support the jobless
person and missing what that person could contribute to the economy. Obviously,
bonuses aren't a complete answer. But on the evidence, they seem to work.
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