Did Expiring Benefits Drive Down the Jobless Rate?

By Allen, Cynthia M | Pittsburgh Post-Gazette (Pittsburgh, PA), August 14, 2014 | Go to article overview

Did Expiring Benefits Drive Down the Jobless Rate?


Allen, Cynthia M, Pittsburgh Post-Gazette (Pittsburgh, PA)


In January I wrote a column questioning the morality of continuing to extend jobless payments to Americans looking for work.

It didn't come from a coldhearted supposition that unemployed people don't deserve benefits.

I was contemplating the results of a recent study by four distinguished economists, released through the National Bureau of Economic Research.

The study concluded that "unemployment benefit extensions can account for most of the persistently high unemployment after the Great Recession."

That may seem counterintuitive to people who argue that unemployment benefits create jobs by giving the unemployed money to spend. The bureau's study found that in fact, these benefits are more likely to be a job killer.

Using a novel method of empirical modeling, the authors found that extensions of long-term unemployment benefits may have perpetuated unemployment in recent years and made the prospects of finding jobs even worse.

The economists argued that continuing to extend benefits forces businesses to raise wages to incentivize workers to take vacant jobs.

And with decreased profit margins, businesses create fewer positions.

It's a logical conclusion and hardly one motivated by disdain for Americans searching for work.

The study was released at the peak of a heated congressional debate about extending long-term unemployment insurance yet again. Those on the left who supported the extensions accused Republicans, who did not, of being heartless.

But maybe Republicans were just being smart.

As Congress could not come to a resolution on benefits extensions, they expired at the end of 2013.

Since then, we have more economic data, much of it reinforcing the plainly logical conclusion of the bureau's study: People are more likely to seek and secure jobs after the benefits run out.

In July, the Federal Reserve Bank of St. Louis looked at how the expiration of long-term unemployment benefits affected the unemployment rate in early 2014. …

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