NCPA - National Center for Policy Analysis

Extended Unemployment Insurance Benefits

January 24, 2012

Congress has maintained extended unemployment insurance (UI) benefits temporarily and periodically with votes to reauthorize them at their extended level (currently up to 99 weeks for workers in states with high unemployment).  In a new report James Sherk, a senior policy analyst in labor economics at the Heritage Foundation, explores the policy concerns and economic effects of extending unemployment insurance.

Policy Concerns.

  • Higher unemployment: Studies show that extending UI benefits to 99 weeks has increased the national unemployment rate by roughly 0.5 percentage points.
  • Longer unemployment: Economic research shows that each 13-week extension of UI benefits increases the average length of time workers receiving benefits stay unemployed by approximately one week.
  • Reduces other income: Wives' earnings fall by between 36 and 73 cents for each dollar of UI benefits married men receive.
  • Ineffective monitoring and job search assistance: The law requires UI recipients to actively search for work, but the government does little to enforce this requirement or assist unemployed workers in finding new jobs.

Economic Effects.

  • Ineffective stimulus: The studies that conclude that UI benefits boost the economy ignore their effect in raising unemployment and incorrectly assume that unemployed households spend every dollar of UI benefits they receive. Empirical studies contradict both of these assumptions.
  • Negligible wage effects: Extended benefits neither increase nor decrease unemployed workers' wages when they find new jobs.

Source: James Sherk, "Extended Unemployment Insurance Benefits," Heritage Foundation, January 12, 2012.

For text:

http://www.heritage.org/research/reports/2012/01/extended-unemployment-insurance-benefits

 

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