rssAre Unemployment Benefits Actually Increasing the Unemployment Rate?
Wednesday, July 07, 2010 at 11:57 am
- 123 Comments
I wanted to pull out part of my article from this morning, as it makes a somewhat confusing but nevertheless important point. Most policy experts and economists think that unemployment insurance discourages people from looking for work or accepting jobs offered to them, keeping them unemployed for longer — a serious point of contention right now, given the fight for extended benefits in Congress. But most think that, given how bad the labor market is, the impact is very, very small. New York Times columnist and Princeton economist Paul Krugman explains:
Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.
But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.
But in an interview for the article, economist Heidi Shierholz of the Economic Policy Institute made an interesting further argument: The United States’ unemployment benefits are inadvertently lowering the unemployment rate. “When you’re in a downturn like this, the logic gets flipped on its head,” she explains. “To receive unemployment benefits, you need to be looking for work. You are actually required to be looking for a job, whereas if you aren’t getting unemployment insurance, and there aren’t any jobs, you might lose your incentive to look for work.”
To unpack that a bit: In the United States, you need to be actively seeking work — sending out resumes, etc. — to receive your UI checks. (The government does not tap your phone to make sure, of course, but it does check in.) Once your UI ends, so does the requirement to keep looking for a job. You’re on your own. An enormous body of people — at least one million of them — have graduated from their unemployment benefits into further joblessness, rather than work. Many of those people, rather than continuing to look for a job, have given up because the labor market is so bad. Those people are lowering the unemployment rate, because they are not in the labor force anymore. And were they still seeking jobs — which many would be, if their unemployment insurance lasted for longer — the unemployment rate would be in the double digits.
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123 Comments
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Comment posted July 7, 2010 @ 5:59 pm
I am not sure where you people some times get your information. It is crazy to think that most people don't want to go back to work. And that unemployment benefits encourage people to be unemployed and not go back to work.
I will make this real simple for you, just take your local phone book and start dialing companies and ask them if they are hiring. You -those of you who have doubt about this unemployment- no jobs situation start submitting resumes to companies who SAY they are hiring and just keep waiting for the response that never comes. Then go and wait in the long lines at the job fairs. Things are getting so bad, that companies are not being honest in their hiring process.
I went to a job fair at the local food stamp office in Denver. It was from 9 in the morning until 5 in the evening. it turns out that they only had a couple of positions open. yet there were hundreds of people in and out all day. the funny thing is that parking cost $8.00 –so do the math –$ 8.00 times at least 300 people= $ 2400.00 at the LEAST –people spent money that they didn't have to spend this way. Now really, is the HR dept that stupid that they have to see 100's of people to make a decision for a couple of slots.
the other problem that is coming out of all of this, is websites like craigslist are not real jobs you are applying to. They won't tell you the company name and location, yet expect us to give them all of our information. Some of the Auto dealerships are using the help wanted section as advertisement for their cars under the pretense of positions open, now hiring. Every time I sign up on a site that is supposedly a job site, I get tons of emails from them about other crap.
this is just a small list. Now how do I know all of this? BECAUSE I have frantically been looking for a job. YES –looking for work with an unfair advantage. So, until you actually do your homework on this, don't be so quick to judge.
Comment posted July 7, 2010 @ 7:11 pm
This is just my two cents, but……. I was laid-off in Janurary 2009 due to economical cut backs. I was making $65,000 a year as a electrical designer for commercial construction and let me say that what I have been receiving in unemployment insurance does not come close to meeting my needs! I want to get back to work and start making real money again!!!
Comment posted July 7, 2010 @ 7:12 pm
Republicans in the House and Senate, don't care if millions of people end up homeless and starving. They think, it's worth it because some people might be abusing the unemployment benefit. The real question is, why would anyone who isn't extremely rich, vote for these type of people?
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Comment posted July 8, 2010 @ 4:18 pm
People who WANT TO BE RICH vote for these sorry excuses for human beings. They have the gall to blame us for this economic catastrophe, as if we are in control of everything and that we laid ourselves off. We are the victims not the perpetrators. If capitalists can't provide stability, good jobs, and a healthy environnment then its time for a real change. I'm tired of being bossed around by jerks who care only about themselves and their families but not the rest of us. Its what is wrong with the competitive economic system model. It pits people against each other and its ripping this country and the world apart.
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At Kerrisdale Capital we took a different look at the unemployment numbers. Our analysis can be found here: http://kerrisdalecap.com/commentary/?page_id=10…
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