NCPA - National Center for Policy Analysis

Emergency Unemployment Benefits: Too Much of a Good Thing?

October 5, 2010

The Senate spent the better part of its summer fighting over extending a program that provides up to 99 weeks of unemployment insurance benefits to millions of out-of-work Americans.  Democrats finally succeeded in passing the $34 billion measure seven weeks after the previous extension had expired, says Jeffrey Jones, an assistant director and a research fellow at the Hoover Institution.

  • The additional funding for Emergency Unemployment Compensation runs out at the end of November.
  • But with the economic recovery stalling and unemployment sticking at 9.6 percent, the White House has already signaled that it intends to push for a ninth extension.

But is emergency unemployment insurance effectively doing what it was created to do -- namely, providing additional weeks of assistance during periods of high unemployment so that workers can find a job?  No, says Jones. 

Jones cites Nobel Prize-winning economist Gary Becker, who says, "[T]he long-term unemployed tend to lose confidence in their abilities, their resources to pay for their consumption run out and their skills begin to depreciate."

  • Making matters worse, many of the jobs and industries workers were laid off from -- construction, real estate, financial services and manufacturing -- will be slow to recover, if at all.
  • This results in a mismatch between the supply and demand of skilled labor in a recovering economy.

We stand at a crossroads over what direction to pursue in tackling the issue of unemployment.  It's time to change the focus of employment policy in Washington from one of subsistence to one of real solutions that benefit both the individual and society, says Jones.

Source: Jeffery Jones, "Emergency Unemployment Benefits: Too Much of a Good Thing," Spotlight on Poverty and Opportunity, September 29, 2010.

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