Extended jobless benefits and unemployment

Date posted: November 4, 2013

A debate about unemployment benefits’ impact on the unemployment level has raged for a long time. Some worry that providing longer periods of benefits discourages recipients from looking for jobs and causes the unemployment rate to be higher. N.C. State University economist MIke Walden explains what some newly published research has to say on the topic.

“This research is from the prestigious National Bureau of Economic Research. That is actually a private research group, not a national group. And what it found was that, yes, the longer that someone can get unemployment benefits, it seems as if that is positively related to the unemployment rate. That is to say, the unemployment rate is going to be a little bit higher.

“And, for example, looking recently at the extension of unemployment benefits, which we saw during the recession, this paper estimated that it did have an increased effect on the unemployment rate by a little under half a percentage point. But, that is … in line with other studies.

“Here’s the new finding from this research: (The researchers) found that the increase in the unemployment rate when unemployment benefits are extended was not due to recipients taking longer, a longer period of time, to find a job.  Instead, what it did was it kept those recipients classified as unemployed for a longer period of time than it is when they’re getting those extended unemployment benefits. They’re having to look for work, and therefore if they don’t have a job, they’re classified as unemployed. Once however, those unemployment benefits ceased, these folks did not find a job. What they did was simply dropped out of the labor force, which means that they’re not classified as employed or unemployed.

“So that is the new finding. So it does not appear that these extended unemployment benefits actually slow down a person’s ability to get a job. It simply means it keeps them in the labor force longer, then they simply drop out.”

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