Thursday, December 5, 2013

Study: Jobless Benefits are NOT a Disincentive to Work

Life on Easy Street

How often have we heard the Republicans say that unemployment benefits causes people to stay home rather than look for a job? Even though the "official" unemployment rate has 11.3 million Americans unemployed, when there is only one job opening for every 3 people out of work.

But by using the broader measure of unemployment (the U-6 or U-7 rate) there are actually closer to 20 million Americans out of work, making only one job opening for every 6 people unemployed.

But even by using the lower U-3 rate, only one third of those people receive unemployment benefits. And Fox News bears this out in an Associated Press article. So how are those people keeping the other two thirds from also finding jobs?

* As an aside: In one correction to that AP article, it also says, "Applications for the disability insurance program have jumped about 50 percent since 2007." Note that they reported APPLICATIONS, not AWARDS. The Congressional Budget Office says disability "claims" always increase in the aftermath of a recession; but as of last year disability "awards" have actually declined --- as have the number of disability "terminations" increased. (See all the data here)

The fact remains, unemployment benefits do NOT keep people from looking for work, or finding a job. A new study shows that even more generous unemployment benefits, more so than those available in the U.S., have zero impact on a person's drive to go out and find a job.

The multi-national study, conducted by Jan Eichhorn, a sociologist at the University of Edinburgh (and published in the October issue of Social Indicators Research) discredits what many see as "conventional wisdom" in Washington D.C.

During a floor debate over extending benefits for the long-term unemployed, Republican Senator Jon Kyl of Arizona had once falsely claimed: "Continuing to pay people unemployment compensation is a disincentive for them to seek new work."

Not so, Eichhorn reports. Although he found that the well-being of the unemployed varied dramatically from country to country (according to various economic and demographic variables), the key finding was that the generosity of unemployment benefits had no effect at all on people's drive to go out and try to find a job. (Most of the countries Eichhorn studied offered their citizens much more substantial benefits than Americans do when they lose a job.)

"This means that claims about unemployment benefits resulting in complacent unemployed people who chose the situation, and would be satisfied with it, cannot be retained uncritically," he wrote.

The study is consistent with other previous research. A 2011 study by the Congress Joint Economic Committee found that among the long-term unemployed, those eligible for benefits spent significantly more time looking for jobs than those who didn’t qualify:

"In fact, since Congress enacted federal unemployment benefits, time spent looking for a job has tripled among the long-term unemployed who are out of work as a result of job loss."

I have also cited several other studies debunking the false cause and correlation claims about unemployment benefits being a cause of higher unemployment; or that extending federal jobless benefits also extends the durations of joblessness (see here and here.)

Unemployment benefits also provide some of the best bang-for-the-buck in terms of stimulus. The Congressional Budget Office estimates that a Democratic proposal to extend unemployment benefits for the long-term unemployed past 2013 would increase growth and add 200,000 jobs to the economy in 2014. But rather than creating jobs, cutting benefits could actually cost as many as 310,000 jobs, according the Economic Policy Institute.

But House Republicans are set to block the measure to extend jobless benefits --- and 1.3 million Americans will lose their benefits just a few days after Christmas --- and close to two million more will follow in the first half of next year.

That's all the GOP can do --- cut, cut, cut --- no matter who they hurt (and then lie about why they're cutting, like saying things such as:

"Those lazy freeloading drug addicts refuse to find jobs, and they are living it up on steak and lobster on Easy Street, and drinking frozen strawberry Margaritas by the pool --- and all on your hard-earned tax dollars!"

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