I recently posed this question to my newsletter readers after seeing Sam’s tweet about it last Friday:

“Almost 3,000 millionaires claimed jobless benefits in 2008 according to the IRS and nobody should complain. They suffered an insured loss.”

Most people have one of two reactions to this kind of news:

• Good for them!
• What the heck?

It’s a polarizing topic, just like politics or health care. I think there are two basic principles at work here which people are reacting to. Let’s take a closer look:

Right: “…a just claim or title”

The basis of Sam’s earlier tweet is the belief that everyone who is rightfully entitled to receive unemployment benefits should be able to do so.

Unemployment insurance, at the very core, is an insurance product managed by the state. Companies pay into the fund on your behalf, and in exchange, you get to collect money if you happen to lose your job unexpectedly.

While the fund is sensitive to income for payout amounts (with a maximum cap on benefits), there is no maximum cap on income that I know of. So millionaires can, in theory, claim unemployment just like anyone else.

Their employers, just like millions of other companies, paid into the same fund to insure against the loss of a job. Claiming unemployment is simply cashing in that insurance policy…right?

Need: “…a situation or time of difficulty”

A need analysis would evaluate someone’s measurable need for unemployment compensation, whether that’s based on percentage of income replaced, amount of savings available to cover expenses, amount of required monthly expenses, or some other measure.

Unemployment insurance as it works now doesn’t discriminate based on these factors, but many critics of the system do. They argue that unemployment helps too many people who don’t really need the money, and not enough people who truly do.

A need-based system would evaluate a person’s ability to sustain their families on unemployment income while they search for another job.

Looking at unemployment through the eyes of need paints an entirely different picture–millionaires probably don’t need the help, and even if they did–unemployment only replaces a small fraction of their previous income. What good could it possibly do?

Where Do I Stand?

A lot of people have asked for my opinion on unemployment because so many of my friends have been laid off. (I would not be surprised if the unemployment rate in the architecture industry currently tops 50%.)

When it comes to principles vs. emotion/compassion, I usually tend to side with principles. Some people call it being smug, or even “riding a high horse,” but to me, fairness and equality rule the day every time.

A lot of people criticize the current system for not helping those who really need it. They say that there’s a lot of ongoing fraud and abuse in the system.

I agree. But a need-based system, if that’s even an alternative, would open us up to infinitely more fraud.

On the subject of millionaires, I think they’re within their right to claim because that’s the system they’ve paid into. They’ve done so with the understanding that they would be able to benefit in case of a loss. If we don’t think it’s right, we need to address the system, not crucify the users.

So, what do you think—should millionaires claim unemployment? What is the future of the system and what would be the best/most fair setup?

Photo by ItzaFineDay