Extended unemployment benefits not turning jobless into slackers: study

Teni Sow | September 17, 2011 | 0 Comments

Extended unemployment benefits for the long-term jobless are not a major cause of the high U.S. unemployment rate, according to a new study that comes as lawmakers debate whether to keep extended benefits beyond their slated January expiration.

Many conservatives have argued that extended unemployment benefits encourage the jobless to sit on the couch instead of looking for work. Reauthorizing the benefits through next year would cost roughly $50 billion.

“This economy will not recover if we’re going to continue to borrow money, put the debt on the heads of our grandchildren, and think that spending money solves anything,” Rep. Steve King (R-Iowa) said during a Thursday speech on the House floor. “We’ve got to get this country back to work and get those people out of the slacker rolls and onto the employed rolls.”

Conservative economists have said extended benefits could have increased the unemployment rate by as much as 2.7 percentage points, but Jesse Rothstein of the University of California, Berkeley found otherwise. According to his analysis , extended benefits “raised the unemployment rate by only about 0.2–0.6 percentage points, much less than is implied by previous analyses.”

And Rothstein says more than half of that increase could be caused by benefits recipients searching for jobs — thereby remaining part of the labor force — instead of just giving up on their search. (Benefits recipients must look for work to qualify.)

“The evidence here thus supports the view that optimal [unemployment insurance] program design would provide for generous extensions of benefit durations in deep recessions that last until the labor market is strong enough to give displaced workers a realistic chance of finding new employment before their benefits expire,” Rothstein concluded in the report.

In an interview, Rothstein said his work ought to change the course of the debate in Washington. “I wrote this paper because there are all these people arguing this was a big effect, and we just didn’t know,” Rothstein said. “What the results say is, [these people] don’t have much of a point.”

In normal times people who lose their jobs through no fault of their own are eligible for six months of state-funded benefits, and in recessions since the 1950s, the federal government has always provided extra weeks of assistance. During the Great Recession, Congress gave the jobless as many as 73 weeks of aid, for a total of 99 weeks in some states — more than during any previous downturn.

The federal benefits are set to expire in January. President Obama and congressional Democrats want to reauthorize the aid, but Republican leaders have been cool to the idea. The White House has added a sweetener, however, by proposing that states adopt “Bridge to Work” training programs that have been popular with Republicans.

According to the Labor Department, more than 3.5 million long-term unemployed currently receive benefits. State and federal benefits combined kept 3.2 million people out of poverty in 2010, theCensus Bureau reported on Tuesday.

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