Friday, October 19, 2007
Friction
I never really took the time to understand unemployment benefits until recently, when an acquaintance was fired, applied for benefits, had the application contested, and was eventually awarded the benefits. These events were my inspiration to educate myself about the process.
I’ve long felt that there is an inherent asymmetry in the employer/employee relationship, not necessarily from a legal perspective, but from a social one. Employees want stability, so they create in their minds a presumed commitment from their employer, where none really exists. I’m too young to be familiar with the days when one expected to have one employer for one’s entire working lifetime. People my age expect to hop jobs periodically. However, among older generations and even among a significant portion of mine, many people really just want a secure future.
From what I can tell, employers prey on this expectation. They know it exists, and they do their best to preserve the illusion of stability, since that illusion boosts morale. Similarly, employees are expected to give two weeks notice when leaving a company, but no such burden falls on the employer. Clearly the two week notice standard is not legally required, but from what I can tell, it is a social nicety whose violation will follow an employee via references. What I am seeing, though, is an increase in legal protections for employers, in the form of documents required to be signed annually by employees stating that the employee is aware that at-will employment means they can be fired at any time for any reason.
All of this leaves a bad taste in my mouth, in that employers tend to hold employees to a different standard than that to which they hold themselves.
What I have found interesting in my research on unemployment insurance is exactly how not free the market is. We all know at least anecdotally about employment law in European countries, where it is virtually impossible to fire someone, so they don’t really bother hiring anyone either, resulting in unemployment rates that are typically at least double what is common in America. It isn’t difficult to fire someone in America, but there certainly are significant disincentives.
In my acquaintance’s case, she had a medical condition that required frequent doctor visits and occasional days off to rest. She used all of her vacation time, all of her allotted doctor’s visit time, all of her sick time, all of her FMLA time, and then continued to take time off as she felt it necessary. The company was not pleased, and eventually found reason to dismiss her. This was entirely justified, given that they were getting very little work out of her while keeping space and equipment idle awaiting her return.
Unemployment law states that in order to collect benefits, one’s dismissal must be at no fault to one’s self. The wording makes it clear that it was aimed at layoffs at a factory, for example, where workers are idled because of over-production. In this case, even with a very generous reading of the law, I could see no way my acquaintance would be eligible for unemployment benefits.
However, she applied for them anyway. Her application was challenged, she appealed, and she won. I was not privy to any of the legal proceedings, so I do not know exactly what transpired.
The fact that she ended up getting benefits tells me a couple things. It is entirely possible that the company made a purely financial decision that it is cheaper to pay the unemployment benefits than to fight them in court. That raises a whole different issue of legal costs that are spiraling out of control, making it cheaper to feed the welfare state than to fight the welfare state in court. The other possibility is that the company fought and lost, meaning the court proceedings were entirely biased against the employer.
In either case, it struck me that even in America, there is significant disincentive to remove people from jobs. Possible reasons for such removal include lack of need for that particular job, an individual being inappropriate for a position, or an individual being incompatible with a company’s philosophy or management style. In my state, an employer could easily end up paying nearly $10 an hour, full-time for the better part of a year, to an employee that no longer provides any service whatsoever to the company. If an employee is hired that misrepresented themselves to the company, unless such misrepresentation was grossly negligent, the company is stuck with that person unless they are willing to in effect, buy out their contract.
Success in business requires efficiency. A company must be good at something, better in fact than its competitors. I suppose if a drag on that efficiency is applied equally across a broad spectrum of the economy there is no unfairness (in the competitive sense), but still, I wonder at the real cost of the friction applied to the economy in this way. It seems to be a boon to the few at the expense of the many, as are most welfare state programs.
As with most distortions to the free-market, the first place I look for analysis is how such distortions change my own behavior. I see myself being much more unwilling to give someone a chance, as someone who is marginally qualified but promising has a greater chance of failure than someone whose resume indicates a better fit. There are a variety of reasons why I might be willing to take on someone less qualified, but they all pale in comparison to the fact that if it doesn’t work out, I’m stuck with the person.
I am aware of the problems with a pure free market system, but that is where my bias always lies, as the benefits clearly outweigh the costs in free (or mostly free) market economies. Unemployment insurance is one of those places where I think there are unintended negative consequences that far outweigh any positive, except to the person that is now entitled to live off a company without working for weeks on end. Such things are often the result of living in a democracy.
Comments
-
Confusing.
The issue, I think, is the word “firing.”
If you are fired, that generally implies “cause.” You can’t collect unemployment if you were terminated for cause, ie, doing a lousy job.
We all pay into the unemployment insurance pot and people getting fired for cause shouldn’t be able to tap into the pot for being idiots. It’s a safety net for layoffs.
What compounds the problem is that we all know that a company’s first round of layoffs gets rid of their problem employees so we recognize some inherent abuse of the system.
This is a complicated case though. She should have applied for disability benefits… a different pot of insurance monies. It sounds like the company made a case that her work was bad or she was abusing their sick leave policy… which, in a sense, she was. That’s what disability is for. If someone cannot work and cannot properly reconcile their problems with the company’s needs, then they have (in a sense) quit. Forcing the company to fire you, so you can tap into the unemployment pot is immoral. Excuses such as needing the money, although we can commiserate, don’t suddenly make it moral. Can you do the job you were hired to do… Yes/No? If no, quit and get another job you can do (employers are not charity). If Yes, then getting fired won’t be an issue.
Generally in these types of situations there are two primary influences:
1. The person was a problem employee and this situation only accelerated their dismissal.
2. The company is an ass so why would you want to continue working for them?You can’t “quit” and collect unemployment. Far too many people force their firing so they can collect. They wouldn’t get away with this if unemployment insurance cases were held to the strict standard. But there are a bunch of bleeding hearts who hear these matters, so people get away with it.
As for notice… that is a courtesy, unless a requirement by employment contract. I’m required, for example, to give 4 weeks notice and it cuts both ways.
People need to negotiate better employment contracts and understand the ones they’ve agreed to… and they shouldn’t use the “Well, let’s just form a union” excuse. They are free agents and are responsible for the contracts they agree to.
As for people believing they should be loyal to their employers and treat it like marriage? That’s just dumb. You do a good job (more than what is expected of you) and you get a pay check for it. End of agreement.
Mrs. du Toit | 10/19/2007 12:23 PM CDT -
She is applying for disability benefits TOO. She’s also suing the company for wrongful termination and disability discrimination. The whole situation is a fiasco, and I think she is largely in the wrong.
Her case is proof that the system as it stands is too easily abused.
American Farmer | 10/19/2007 12:35 PM CDT -
Hmm… WAY late to this one, but I think I’ll say something anyway.
A couple of points:
1) Minorities (because of being minorities), and people with illnesses which make it difficult, but not impossible, to do the work, are difficult to terminate without getting into legal trouble. Probably what happened with this case is that they contested the unemployment just to put some obstacle in her way to see if she would put up with the annoyance of appealing, then didn’t bother to show up at the hearing.
2) This kind of thing is why many companies have switched to using temporary services for their personnel needs. Not only does it provide for a flexible-sized workforce, they get to “test drive” employees before hiring them.
3) Contesting unemployment actually causes considerable issues for the applicant. I was fired from a restaurant because my employer said I was stealiing (I forgot to charge one of the waitresses for her half-price meal after the cash registers were back online from being down during lunch. I told him I forgot, and offered to pay for it; he said he and his partner had made jokes about paying for lunches and that should have made me remember, so my argument didn’t wash). He contested, and I had to appeal. It took me 6 weeks, during which I had to sponge off my parents to keep my utilities on and keep from being evicted, to get my benefits. And no, I’m not one to slack off, sit back collect - that is the longest period I have ever been out of work, and I wound up getting a job about 2 weeks after my appeal went through.
4) However, the system DOES get gamed, but from what I hear, the most frequent abuses come from people in the construction industry (at least around here), where guys will work long enough during the Spring and Summer to earn money that will keep them going, then when whatever current job they are on ends, apply for unemployment for the late fall and winter.
WayneB | 11/8/2007 08:30 AM CDT
