A major reason the U.S. labor market is widely considered more efficient and flexible than those in Europe, Japan or even Canada is Americans' willingness to uproot themselves and move from regions where jobs are scarce to regions where they are plentiful. This national labor market, however, is undercut by a balkanized unemployment insurance system in which benefits vary widely from state to state.
The issue will present itself this week as Congress reconvenes. It is expected to consider whether -- and how -- to extend jobless benefits for 780,000 workers who recently lost their coverage. Under most proposals, longer extensions would be granted in states with higher jobless rates -- a seemingly logical distinction that really makes sense only if state borders defined a single labor market (they don't) and demand for workers within the state were the same no matter what their skills (it isn't).
Furthermore, these distinctions based on unemployment rates would come on top of already wide variations from state to state in the level of basic benefits.
In effect, the current system provides employers with all the benefits of high labor mobility while arbitrarily placing much of the burden on workers unlucky enough to have lost their jobs in penny-pinching states or states with relatively low rates of overall unemployment.
In a truly national labor market, it would be up to Congress to determine the optimal level of benefits and how long they last, striking the balance between providing income security while giving workers sufficient incentive to find a new job. If fairness or economic efficiency are the criteria, it would seem that where you live or how many others are unemployed should have nothing to do with it.