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Extend Their Benefits and They Still Take Jobs

Posted on May 9, 2013
Bytemarks (CC BY 2.0)

New research from the Federal Reserve Bank of San Francisco shows that long-term jobless people whose unemployment benefits were extended at the start of the recession did not become unwilling to work.

“Overall, our estimates suggest that extending unemployment insurance benefits in weak labor markets has virtually no effect on the rate of job finding,” said the study conducted by Princeton University economics professor Henry Farber and San Francisco Fed economist Rob Valletta. Furthermore, the authors say the benefits probably helped the economy, as those who received money promptly spent it on necessary goods and services.

In a healthy economy, people who lose their jobs through no fault of their own are usually able to get six months of state-funded unemployment insurance. In recessions, Congress regularly adds weeks of federally funded benefits. In 2010 and 2011, jobless people in certain states were eligible for an unprecedented 99 weeks of benefits from state and federal governments.

—Posted by Alexander Reed Kelly.

Arthur Delaney at The Huffington Post:

Research from previous decades has suggested long-term unemployment insurance discourages people from taking available jobs, but Farber and Valletta suggest recent past experience isn’t the best guide for evaluating the worst economy since the Great Depression of the 1930s.

“Because extended UI benefits were much more widely available during the Great Recession than during earlier periods,” they wrote, “and because of the severity of the recent labor market downturn, earlier empirical results cannot be reliably extrapolated to assess UI disincentive effects in the recent episode.”

Fewer than half of the 11.7 million unemployed in April received state or federal benefits, according to the Labor Department. The percentage of jobless receiving aid has dwindled since 2011 as Congress has scaled back available weeks and state unemployment rates have declined.

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