Saturday, June 25, 2011

A Signing Bonus Instead of Unemployment Checks?

Todd G. Buchholz, a former White House economist, had a huge spread in the Washington Post’s Outlook section recently about his idea of paying people who have been unemployed for 26 weeks to take jobs instead of continuing to draw unemployment benefits. “Will Work for Signing Bonus” contains a number of interesting ideas, and his math appears to compute, but alas, I don’t think Buchholz realizes just how nasty the job market is today. After being unemployed for half a year most people are considered dead meat to potential employers. No offers are being made. Many of the long-term unemployed aren’t even getting interviews, because people who already have jobs are openly preferred. Next come people who have left jobs within the past month or so. People who have been out of work long-term reside at the bottom of the employment heap.

The crux of the problem is most people are not sufficiently humbled immediately after losing their jobs. They don’t grab at the first thing that offers, and in this economy, likely they ought to. If the new job is a poor fit, the person can continue the job hunt from a position of strength—that of being employed. Unfortunately, most people who lose their jobs are in a state of shock when it happens, and they need time to recover. Time is what they don’t have in our fast-changing society. We have so many safety nets, not only unemployment benefits but also credit cards and spouses with jobs, that many recently laid-off workers aren’t quite desperate enough right after the event. They should be. This is a buyer’s market and employers have their pick. A resume is viewed as fresh for a month or so, but after two to three months, the resume is definitely sour. People who lose their jobs should settle for whatever is offered within the first two months, because there may not be any more offers for a long, long time. If ever. I know it sounds awful, but it’s the practical thing to do unless unemployment benefits happen to pay more than the new job would.

Buchholz wants to pay people bonuses to take a job, but impose an enormous penalty if the person quits or changes jobs in under a year. This presumably is to encourage people not to game the system, as has been done with the first-time homebuyers' credit and various other tax advantages. I think it would be more fair to require the worker to pay back the bonus with interest, raising that interest over time if payback is dilatory. Regardless of the details, Buchholz’s idea of giving unemployed people a financial incentive to take jobs instead of extended unemployment benefits is interesting. If it worked, it would save the government money and add to government coffers as the employed person began paying income taxes again.

Should we all rush out and take whatever jobs we are offered? Yes. If the worst your resume shows is a little job-hopping rather than a lengthy period of unemployment, you have a competitive advantage over other job seekers. And meanwhile, you have a job.

With one caveat. This strategy does not apply to low-level retail employment. The field is not stable enough, and your prospects are not good enough, to give up anything to enter it. In many cases, even working full-time at a big box store will not be enough to pay the rent if you previously held a moderately good office job. Also, I've done plenty of tax returns for people who only lasted for half a day at McDonald's or Home Depot. Firing people from these jobs is dead easy and happens all the time. Many out-of-work people are nagged to go work at these places, but accepting such underemployment is a strategy of last resort, to be taken only after all other avenues have been explored, including using up all unemployment benefits, getting a roommate, and selling possessions.

Monday, June 13, 2011

How to Get Out of Debt

1. Stop buying on credit.
2. Contact your creditors and push to get your interest rates lowered.
3. Balance transfer your high-interest debt to lower-interest accounts.
4. Pay off your highest-interest debt first.

This simple advice presumes you have income. Maybe not enough income, but there's a paycheck coming in steadily, and that gives you some choices.

Another set of tips to try:

1. Change up your eating habits. Do not buy food at the same places, or the same food. Instead, try to work from a budgeted food amount outward. If you have $100 for food this week, what can that buy you, and how long can that last, and how often must you shop, and is food preparation involved?

2. Sell any vehicle on which you are making payments, and buy a used vehicle outright. It has to be in good condition. You have to be reasonably certain it won't beggar you with repair costs. But a paid-for car is usually cheaper to own and run than a new car.

3. Hold a yard sale (or post on Craigslist, which is free) and sell anything you no longer need or want. It may surprise you how little people are willing to pay for your used goods. They may not buy them at all. A good reminder not to spend so much money on buying all that new stuff in the first place.

4. Empty your clothes closets into your suitcases. What you own doesn't fit? Reduce it until it does, and never buy a piece of clothing again without getting rid of a piece. Be mindful of this when you shop for clothing, because it is easy to think you need multiples when the truth is you don't. If your suitcases are full, you have enough clothes.

Add your own tips for getting out of debt if you've got 'em.