The Columbus Dispatch claimed that unemployment insurance [UI] benefits create a disincentive to work to attack President Obama's recent call to extend them into 2014. However, multiple economists have found that unemployment benefits are not disincentives to work during economic downturns, and that not extending them will hurt the economy and result in job loss.
Long-Term Unemployment Insurance Benefits Are Set To End Jan. 1
NYT: Unless Congress Acts, UI Benefits Will Expire During The First Quarter Of 2014. According to an article in The New York Times, unless Congress acts, “one of the largest stimulus measures passed during the recession” -- emergency unemployment insurance benefits -- will expire leading 1.3 million people to immediately lose benefits at the start of 2014 with another 850,000 denied benefits through the first quarter of 2014. [The New York Times, 11/17/13]
Columbus Dispatch Claims Unemployment Benefits Are “Disincentive To Work.”
Columbus Dispatch: “Generous Unemployment Benefits Create A Disincentive To Work.” A November 26 editorial in The Columbus Dispatch discussed Obama's call to continue unemployment benefits into 2014 and claimed that the need for an extension was due to the poor economic conditions of the Obama presidency, but that extending benefits creates a “disincentive to work.” The editorial continued:
No one is getting rich collecting unemployment; the average weekly benefit in Ohio is $300. But research and anecdotal evidence suggest that some who have the option will not take lower-paying jobs they consider not good enough and instead will wait until their benefits run out before they are motivated to take a job. [The Columbus Dispatch, 11/26/13]
Experts: Unemployment Benefits Do Not Discourage Employment
CBPP: “Arguments That Emergency UI Benefits Are An Important Contributor To Today's High Unemployment Have Cause And Effect Backwards.” The Center on Budget and Policy Priorities wrote that UI benefits are not a disincentive to work but rather create additional demand and contribute to job creation:
Opponents of continuing emergency UI benefits often assert that UI discourages people from looking for work and that ending these benefits would speed a return to full employment. Though research from earlier periods showed that additional weeks of unemployment insurance have an impact in lengthening unemployment spells, most careful recent research indicates that these concerns are seriously overblown, especially in the current jobs slump.
In summary, arguments that emergency UI benefits are an important contributor to today's high unemployment have cause and effect backwards. We have a temporary federal program because unemployment is so high and jobs are so hard to find. When there are three unemployed workers for every job opening, it is hard to see how sharply curtailing the duration of UI benefits would promote job creation. Rather, EUC benefits help create that additional demand and contribute to job creation. [Center on Budget and Policy Priorities, 11/20/13, emphasis original]
EPI: Unemployment Benefits Do Not Provide A Disincentive To Work. A report by the Economic Policy Institute on the economic effects of letting unemployment insurance benefits expire found that, “In the two most careful studies available on the effects of UI extensions on job search in the Great Recession ... both find a very small increase in the duration of unemployment arising from the extensions, but they find that this is primarily because workers who receive UI benefits are less likely to simply give up looking for work.” [Economic Policy Institute, 11/7/13, emphasis original]
CBPP's Stone: Unemployment Is Still So High Because “Businesses Still Don't Have Enough Sales To Justify Hiring” More Workers. An op-ed in U.S. News & World Report by Chad Stone, chief economist at the Center on Budget and Policy Priorities, stated that while some studies have found unemployment benefits create a small disincentive for searching for a new job, “the more plausible mainstream explanation for why unemployment is so high is that businesses still don't have enough sales to justify hiring enough workers to restore normal levels of employment.” [U.S. News & World Report, 11/14/13]
Not Extending Unemployment Benefits Will Have Devastating Economic Effect
CAP: Not Extending UI Benefits “Would Constitute Yet Another Self-Inflicted Wound To The U.S. Economy.” According to a report by the Center for American Progress, because federal cuts have already dramatically reduced the amount of unemployment benefits, failure to extend UI benefits would mean 3.1 million Americans would lose out on necessary income, leaving only one in four jobless workers to continue to receive benefits:
Since 2008, federal lawmakers have provided extra weeks of unemployment benefits for Americans who want a job but cannot find one--a group that totals 11.3 million people today. Recognizing that unemployment rates have remained high since the start of the Great Recession of 2007 to 2009, Congress has repeatedly enacted legislation to extend these benefits. Under the most recent extension, the American Taxpayer Relief Act of 2012, emergency unemployment benefits will expire at the end of 2013. But extending emergency unemployment benefits will prevent 3.1 million Americans from being cut off from benefits in the coming months and will lead to the creation of 310,000 additional jobs next year. Maintaining these benefits is the right thing to do for the U.S. economy and for the families who rely on unemployment insurance to pay their bills.
If Congress does not extend emergency unemployment compensation before the end of the year, 1.3 million Americans will lose their benefits just after Christmas, and another 1.9 million will lose their benefits in the first six months of 2014. Allowing emergency unemployment benefits to expire would constitute yet another self-inflicted wound to the U.S. economy. It would reduce economic growth by 0.4 percentage points in the first quarter of 2014 and cost our economy 310,000 jobs next year.
Federal cuts have already dramatically reduced the amount of unemployment benefits available to workers. In early 2012, Congress cut the number of weeks of federal unemployment benefits available to all states and raised the unemployment-rate threshold at which states can receive maximum benefits. Now, federal unemployment benefits in every state are significantly less generous than in the recent past. Unemployment benefits have dropped by more than 50 percent in some states, including Florida, Georgia, Kansas, Michigan, Minnesota, and North Carolina. Only one in three long-term unemployed workers already receives federal benefits; if Congress allows emergency unemployment compensation to expire, only one in four jobless workers would receive benefits. Moreover, sequestration has resulted in a decrease in the weekly benefit amount. The average worker now collects just $269 per week, compared to $296 one year ago. [Center for American Progress, 11/20/13]
EPI: Economy Will Lose 310,000 Jobs If Unemployment Benefits Aren't Extended In 2014. The Economic Policy Institute found that if unemployment benefits aren't extended through 2014 the economy will lose 310,000 jobs that would have otherwise been generated through spending. [Economic Policy Institute, 11/7/13]
Economist Michael Feroli: Failure To Extend UI Benfits “Could Shave 0.4 Percentage Point Off Growth In The First Quarter Next Year.” According to an email provided by JPMorgan Chase chief United States economist Michael Feroli to The New York Times, failure to extend UI benefits “could shave 0.4 percentage point off growth in the first quarter next year.” [The New York Times, 10/31/13]