Long-Term Unemployment Benefits Do Not Increase Unemployment
Although the official unemployment rate remains stuck at around 9 percent—significantly lower than the “U6” rate of 16 percent, which includes discouraged workers and those forced to work part-time for economic reasons—conservative lawmakers are eager to reduce the number of weeks unemployed workers can receive benefits. One potential bill would also require recipients without a high school diploma to enroll in a GED program or lose their benefits, and allow states to screen applicants with a drug test. That position isn’t particularly surprising, considering the typical conservative refrain that unemployment benefits reduce the incentive to look for work. By their account, if we would only take away unemployment insurance (UI), millions of lazy Americans would get to their feet and find jobs.
It’s a deeply flawed presumption, and one that has real world consequences for the 6.7 million families that rely on an average weekly benefit of $300 to afford food, heat, and shelter while they look for work. It also endangers the more than 2 million long‐term unemployed workers, who will lose their UI benefits entirely by the end of February if Congress fails to reauthorize those benefits before they expire.
Luckily, a new report from the U.S. Joint Economic Committee proves just how wrong the conservative position is. According to the report’s authors, there is no evidence that emergency UI benefits inflated the unemployment rate; the intensity with which the long-term unemployed searched for work actually tripled during the Great Recession. That analysis complements a similar study from Brookings earlier this year that found only 0.3 percent of the 4 percent increase in unemployment could be attributed to long-term benefits.
Unemployment benefits also function as extremely effective, targeted economic stimulus. Benefits are spent quickly on basic necessicities, creating a ripple effect throughout the economy that sustains consumer demand and supports employment. The authors of the JEC report argue that reauthorizing emergency UI benefits provide “the greatest ‘bang-for-the-buck’ among a range of fiscal policies,” boosting GDP with a multiplier effect that the CBO estimates to be as high as $1.90 for each dollar spent: far more than the negative multiplier of tax cuts.
As the report points out, Congress has continued to extend UI benefits until the unemployment rate fell substantially below peak in every major recession since the 1950s. And at 3.7 percent, the current long term unemployment rate is nearly three times higher than it has ever been when UI benefits were allowed to expire. It is estimated that, in 2010, over 3 million Americans were kept out of poverty by UI benefits. To allow the extension of those benefits to expire now would risk impoverishing millions of families at a time when consumer demand is already at historic lows.
