THE BLOG
11/02/2012 04:22 pm ET Updated Jan 23, 2014

LAZOF: Government's Good Intentions on Jobs May Harm More Than Help

By Ron Lazof

Lazof is managing director of Prism Advisers, LLC and a Job Creators Alliance member.

Given this morning's jobs numbers, a slight increase from 7.8% to 7.9%, the last report before Tuesday's election, this seems as good a time as any to talk employment numbers. Since the start of the "recovery" in 2009 the official unemployment rate has declined from 9.5% to 7.9% a total of 1.6%. It hasn't been a particularly robust recovery but things are, at the very least, apparently moving in the right direction. In human terms a 9.5% unemployment rate reflects approximately 14 million unemployed people, but if you add in all those who are "underemployed" (those who have part-time jobs but wish they could find full-time work), that number jumps to 23 million people or 14.8%.

While the overall trend may seem to be decent, a closer look at the numbers reveals that the trend does not look nearly as good. How can this be? The workforce participation rate has during this same period fallen from 65.7% to 63.6%, which means that an additional 3.3 million of our fellow Americans have simply given up looking for work. They are not officially considered "unemployed" because they are not (according to the government's current definition) currently seeking a job. Think about what that means: they are so discouraged by what they find in the economy that they have dropped out of the workforce. From a statistical perspective, they are no longer unemployed, but surely they would much rather have the dignity of a job or the financial and non-financial rewards of earning a paycheck!

So where do those members of our broader family go? Of the 23 million who are struggling to find full-time jobs, nearly 5 million are on state and federal rolls for unemployment benefits and almost 9 million are now receiving Social Security Disability payments. The ranks of those receiving Social Security Disability payments have swollen 24% over the past four years; as opposed to the "normal" historical increase of about 4% per year. In other words we are in the middle of an unexplainable epidemic of disabilities, without any historical or statistical precedent. Historically SSI Disability benefits are paid to less than 3% of the working age population but today that number has almost doubled to 6% of the working age population.

Some commentators would have you believe that those who may not be permanently disabled but are still receiving disability benefits, are doing so only in extremis and will soon rejoin the work force when it improves. These same commentators say that those who are on "extended" federal unemployment benefits (about 2.13 million) are indeed actively looking for work even though they have been receiving taxpayer-funded benefits for 99 weeks.

While I am certain that they are right for many, perhaps a majority, of people, ask yourself: what are the chances that an employer would hire a person who has been receiving disability assistance for an extended period of time? Would that person pass a pre-employment physical? Would such a candidate be more or less preferred compared to an applicant who does not have a history of disability?

Would an employer, in a market full of applicants, prefer to hire someone who has been unemployed for nearly two years or someone who has been actively using their skill sets until recently unemployed?

These questions illuminate an important point: Perhaps the well-intended helping hand of government is actually - as Ronald Reagan said - "the problem" that is making it more difficult for our people to get back to work. It may be time to acknowledge that these noble aims are having the unintended consequence of slowing the very thing they are designed to improve?

Ultimately, the vast majority of our fellow Americans who are struggling to find full-time work are not looking for government handouts or assistance; they are looking for a job. A well-paying, sustainable job is the best unemployment program there is. Instead of focusing on distributing tax dollars to the unemployed, we should be focused on how to encourage and empower employers to invest in and hire more people.

The surest way to achieve that, in my opinion, is to get the government, and its good intentions, out of the way and let small businesses and entrepreneurs do what they do best! Only then will monthly job reports become an occasion to celebrate!