NCPA - National Center for Policy Analysis

Study: Extending Unemployment Benefits Hurt Job Creation

September 3, 2014

Another study has been released indicating unemployment benefits ultimately hurt the unemployed. As Senior Fellow Pam Villarreal writes at the NCPA Retirement and Taxes Blog, research over the last few decades indicates that extending unemployment benefits hurts those who are out of work. The most recent of these is a report from the House Committee on Ways and Means, which found the Emergency Unemployment Compensation program was a significant factor in the United States' poor jobs recovery.

The Emergency Unemployment Compensation (EUC) program began issuing checks in July 2008 to the long-term unemployed (those who had already been receiving 26 weeks' worth of state unemployment compensation). While similar programs had been created during previous downturns, the EUC (which ran from 2008 to 2013) was much bigger:

  • While the emergency unemployment program after the 2001 recession paid out 89 million checks from 2002 to 2004, the EUC paid 800 million checks.
  • The EUC spent $260 billion. Previous temporary programs had paid much less: $28 billion from 2002 to 2004, $46 billion from 1991 to 1994 and $22 billion from 1982 to 1985.
  • Under the EUC, the unemployed received 33 weeks of benefits, on average. During the 1991-1994 unemployment program, recipients received 17 weeks of benefits.

Did the extra funds help people get back on their feet?

  • According to the congressional study, the long-term unemployment rate under the EUC was twice the rate it was during the 1970s recession.
  • Villarreal notes the rate only began to fall in 2012 -- right at the time that Congress reduced the maximum amount of unemployment benefits people could receive.
  • She notes that the short-term unemployment rate only reached the 2001-2007 average at the end of 2013, when the EUC program finally ended.

The report notes that under the Obama administration, 3.1 million adults ages 16 to 54 have dropped out of the labor force, while employment has grown by 900,000. But since the EUC expired in December 2013, the number of 16 to 15-year olds in the labor force has increased by 400,000.

Source: Pam Villarreal, "More Evidence: Unemployment Benefits Hurt the Unemployed," NCPA Retirement and Taxes Blog, August 29, 2014.

 

Browse more articles on Economic Issues