Unemployment Benefits: How Much Unemployment Do They Cause

Though participants agreed there was considerable slack in resource utilization, their judgments about the degree of slack varied. The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate, relative to levels recorded in past downturns, by encouraging some who have lost their jobs to remain in the labor force. If that effect were large — some estimates suggested it could account for 1 percentage point or more of the increase in the unemployment rate during this recession — then the reported unemployment rate might be overstating the amount of slack in resource utilization relative to past periods of high unemployment.

This is from the minutes of the January 26-27 meeting of the Federal Open Market Committee (p. 14).

Here’s what Obama advisor Larry Summers wrote in The Concise Encyclopedia of Economics:

Unemployment insurance also extends the time a person stays off the job. [Kim] Clark and I estimated that the existence of unemployment insurance almost doubles the number of unemployment spells lasting more than three months. If unemployment insurance were eliminated, the unemployment rate would drop by more than half a percentage point, which means that the number of unemployed people would fall by about 750,000. This is all the more significant in light of the fact that less than half of the unemployed receive insurance benefits, largely because many have not worked enough to qualify.

On December 16, 2009, I wrote:

Recall that Peter Orszag sidestepped the question when asked last month if any of Obama’s economic team were against the most recent extension of unemployment benefits. My candidate for critic is Larry Summers . . .

Interestingly, Paul Krugman today called such reasoning about the effect on unemployment benefits on unemployment “bizarre.” (HT to Michael Williams.)

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RL

Mar 5 2010 at 1:40pm

I suggested to a friend recently that Senator Bunning made a tactical error trying to oppose these extensions. Rather, the Republicans should have called for making unemployment benefits permanent, and watched the Democrats try to explain why the benefits could be repeatedly and indefinitely extended, but not made permanent.

Granted, there is an obvious risk in this tactic…

kebko

Mar 5 2010 at 2:08pm

Krugman says:
“What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment.”

Is this even remotely true? Is there any economics textbook that would say taking money from working people & giving it to non-working people reduces unemployment? This seems like a bold-faced lie designed to make his readers more righteous in their ignorance. I would really like to see an example that even remotely vindicates Mr. Krugman. At best, he might argue that this is deficit spending, but then the supposed benefits would be due to printing money, and even then I can’t believe that anyone could argue that the inflationary effects of this one policy would outweigh the incentive effects on the small number of people who receive it.
Can someone defend this? I’d love to gain an understanding of this if there is any truth to Mr. Krugman’s statement.

Daniel Kuehn

Mar 5 2010 at 2:16pm

Summers simply makes the point that unemployment insurance increases unemployment rates. Is this surprising to anyone? I wouldn’t think it would be. There’s a difference between knowing that it will increase unemployment rates and thinking that it should be elminated, though. One of my all time favorite statements about unemployment insurance is from Martin Baily. He said “there may be more unemployment as a result of unemployment insurance, but it matters less”. The point is, reducing the unemployment rate by half a percentage point as Summers estimates would obviously be fantastic. But that change doesn’t happen in a vaccuum. David, you don’t make a clear case at all why that half a percentage point reduction in the unemployment rate is better than the income maintenance that is provided by the existence of UI. Why do you think the tradeoff is so clear cut? Why do you think Summers’s estimate gives you any insight into HIS thinking on the tradeoff?

And finally – on Krugman. He did NOT say that it was bizarre to think that unemployment insurance increases the unemployment rate. What he said was bizarre was Sen. Kyl’s concern about reducing the incentive of the unemployed to find jobs, as if worker incentive was the obstacle to full employment at the moment. That has nothing to do with Summers’s point. I’m sure Krugman doesn’t find Summers’s conclusions bizarre at all. You may want to reread Krugman’s article.

David

Mar 5 2010 at 2:23pm

I place the news regarding Krugman’s position firmly in the “dog bites man” camp.

david

Mar 5 2010 at 2:44pm

It’s bizarre in a recession, when there is insufficient demand for businesses to profitably employ more people. This is in the same class as cutting government spending in a recession; what sort of effect do you expect it to have?

This is just standard neoclassical-synthesis macro (where short-run Keynesian effects dominate). To pretend that you’ve never heard of the logic is just misleading.

Mar 5 2010 at 2:58pm

I agree, david (2:44pm david, not Henderson). I’ve had enough of this “bold-faced lie” crap over Krugman. If you disagree with him, disagree with him vigorously. But don’t pretend he’s making this stuff up or that he’s being devious. The vitriol that comes up whenever Krugman’s name surfaces is noxious.

Andrew_M_Garland

Mar 5 2010 at 3:04pm

I will channel the spirit of our government:

(1) In a recession, the return on spending $100 is $150 in new wealth. Private spending only returns $100, because the private sector saves some of it.

(2) People who are out of work are the best spenders in the society. They spend almost all of the money they receive.

(3) So, there is a 50% return on unemployment benefits, above the social good that is done by being kind.

So, unemployment payments are not only proper social justice, but this spending returns more than almost any business investment. We should have more unemployment!

Really. If our government faux economists were correct about the effects of government spending, then we should immediately license counterfeiting. Their policies may be a joke, but this conclusion follows directly from those policies.

Let’s Counterfeit Our Way to Wealth

Mar 5 2010 at 3:12pm

You sure beat the stuffing outta that strawman, Andrew Garland!

Patrick R. Sullivan

Mar 5 2010 at 3:37pm

This is in the same class as cutting government spending in a recession; what sort of effect do you expect it to have?

As another David (Friedman) puts it:

From 1920 to 1921, the unemployment rate increased by 6.5 percentage points and prices fell by more than 10%. Seen without the benefit of hindsight, it was obviously the beginning of a depression. Comparing the increase in unemployment and decrease in prices from 1920 to 1921 to the almost identical figures for 1930 to 1931, it was going to be a Great Depression.

President Harding acted as President Hoover is supposed to have acted. By 1923, federal expenditure had been reduced to about half its 1920 level. The table shows the result. The unemployment rate that peaked at 11.7% in 1921 had fallen, by 1923, to 2.4%. One year of high unemployment instead of 11 years under Hoover and then Roosevelt.

It was the Great Depression that didn’t happen.

Redland Jack

Mar 5 2010 at 4:02pm

@ david and Daniel Kuehn

I think it’s important for sites to have guys like you who, in general, disagree with the ideological viewpoint of the blog. Especially, since you both (as far as I can recall) make reasonable arguments and avoid ‘throwing bombs’.

That being said, I just don’t see how anyone could reasonably think that:

“What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment.”

This would mean that, literally, paying a person not to work causes employment to increase. I can’t conceive that Y=C+I+G+NX could outweigh the incentive effect of the policy.

Even if we were to grant that premise (and grant that Keynesian economics is correct), obviously you could reduce unemployment even more through some stimulus that didn’t give people an incentive not to work.

When Krugman shifts gears to talk about the morality element, that’s fine, since that’s a matter of opinion, which he can opine on as he wishes, but his economic arguments strike me as ludicrous.

Tom West

Mar 5 2010 at 4:10pm

Well, I imagine that a lot of currently unemployed people would find jobs if each month we shot 1 in 100 people who are unemployed.

It is obvious that the unemployment rate will drop if you make unemployment unpleasant enough. The reason that we have unemployment benefits is not to lower the unemployment rate, but to ameliorate a difficult situation for our fellow citizens.

Will some take advantage of our generosity by staying on UI when they could find a decent job? Of course. But that doesn’t override the fact that cutting short the UI benefits for the rest who are trying and still can’t find a job would cause large scale distress and force people into underemployment situations.

So the real question is whether the benefits of the many are not worth allowing the few to exploit the system.

Mar 5 2010 at 4:13pm

Daniel says:
“Summers simply makes the point that unemployment insurance increases unemployment rates. Is this surprising to anyone?”

Apparently, it’s surprising to Mr. Krugman! According to him, you need to go read some textooks, Mr. Kuehn!

Kalle Kock

Mar 5 2010 at 4:19pm

As Cochrane of UChicago said of Krugman (in their spat over macro last fall), “Krugman is the Rush Limbaugh of the economics profession.”

But even a bomb thrower should mind his economics. If there’s empirical evidence that shows that UI lengthens spells, the implication is that UI prevents reservation wages from falling to market clearing levels. That’s pure Keynesianism — sticky wages.

If Democrats believe that the empirical evidence of basic Keynesianism isn’t relevant in a recession, why do they keep pushing Keynesian remedies? We’ll still have sticky wages and prices and providing assistance to unprofitable firms and unemployed workers just makes them more sticky. Can’t figure that out, myself. I think Baily had it right. Politically, it’s popular to provide assistance to the unemployed — even if it prolongs unemployment spells.

That said, Krugman’s attack on Bunning is just one of his usual below-the-belt stabs. Bunning was not against extension of UI, he was trying to insist that the Senate obey it’s own recently passed pay-go rules. I guess that was just too much subtlety for Prof K to grasp. Why should the Senate obey its own rules? Reconciliation, anyone?

Mar 5 2010 at 4:26pm

Tom, Daniel & David,

I don’t see any statements in this post suggesting that we should eliminate unemployment insurance. He seems to be making the point that it is responsible for some of the poor recovery of employment in recent recessions. This seems like a very interesting point to me, especially since most of the media coverage of unemployment tends to blame some inequitable quality of our economy that keeps down the working man. If I asked the typical non-economist about post-recession unemployment, they would generally have some “trickle-down” notion of how poor people just keep getting left out of the economy more & more.

But, regardless of all of that, you all disagree with Mr. Krugman, who has implied that you have a very elementary understanding of economics & need to go read some textbooks, which would explain to you how unemployment insurance reduces unemployment.

Carl The EconGuy

Mar 5 2010 at 4:46pm

Here’s a quote that I just found from Taranto at WSJ:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

The quotation is from Krugman’s own textbook on Macroeconomics. Precious, ain’t it?

Nathan Smith

Mar 5 2010 at 4:53pm

Unemployment insurance increases unemployment. What you subsidize, you get more of. People respond to incentives. Duh. This is as simple and clear as economics gets.

Nothing novel in this post, nothing brilliant, just good honest boilerplate, provided to educate the public about basic economic principles.

What is ominous is that it seems it’s not just the public that needs educating. Some of the economics profession needs it too.

Daniil Gorbatenko

Mar 5 2010 at 4:54pm

I see a big problem with the Keynesian liquidity trap scenario. They imply that once a recession happens something happens that alters the laws of economics.

But it never gets explained how it really works. Instead, Krugman looks at the Fed funds rate, sees that it is close to zero, and says that, gosh, we are in a liquidity trap. Never mind that interest rates are not determined by liqudity preferences but by intertemporal preferences and that the Fed Funds rate is not representative of interest rates in the economy.

Krugman then proceeds to say that in a recession aggregate demand is vertical. Never mind that there is no such thing as aggregate demand because demand is relative.

In fact, what falls, however, is the demand for other goods relative to money. But it can’t fall forever. Because the demand for money is determined by how much people hope their investment in money will allow them to gain in the future, there is a natural limit to the liquidity preference. It should be explained by the circumstances of each individual. One may have substantial debts. Another may lose his job.

Krugman’s logic, however, implies that money becomes a kind of good in itself when the recession starts. Or maybe Krugman believes that in a deflation people hope to buy goods cheaper in the future and hoard money for that matter. But this self-fulfilling deflation should be limited by people’s fear to have less goods left instead of lower prices because of their choice to hoard.

Thus, infinite liquidity preference and the Keynesian AD deflation scenario is impossible.

Randy

Mar 5 2010 at 5:14pm

Has anyone factored in that Unemployment Insurance doesn’t really help anyone, but simply displaces the “saving for a rainy day” that would otherwise happen? Can we say “unintended consequences” boys and girls?

wlu2009

Mar 5 2010 at 5:35pm

@Randy,

And the same applies to social security, and probably medicare.

jc

Mar 5 2010 at 5:38pm

@Patrick R. Sullivan: Thanks for the link. Comment #7 was especially funny.

(I’m assuming it was serious and jpdwn honestly thinks Friedman is unfamiliar with that other guy named Friedman, aka “dad”. It could be a friend playing a joke, I guess. Reminds me of a friend we’ll call Professor Right who got a review saying, “You clearly don’t understand Professor Right”.)

Pete

So, from the quotation it sounds like the choices for an unemployed person are collect UI and stay in the labor force and continue looking for a job, or drop out of the labor force and stop looking for a job. So the effect of UI is to keep them looking for a job as opposed to give up. That seems like a good thing, not a bad thing.

David C

Mar 5 2010 at 5:42pm

I’m surprised at how many people commenting don’t understand the concept of stimulus. Disagreement is one thing, but most of you don’t even know what it is in the first place.

If there is a surplus of labor, and a shortage of demand for labor, then reducing that surplus will have no effect on unemployment. It is only when those who can obtain a job choose to not do so that unemployment benefits create a problem. In a large enough recession, unemployment benefits will have no effect on unemployment.

Meanwhile, people without a job still continue to pay for essential items (mortgages, electricity, gas, food). They are more likely to be unable to afford these things than the employed, and therefore more likely to spend if they receive cash. The employed will reduce their consumption to the minimum out of fear of losing their job, and save any money they are handed. Because the unemployed spend more, this boosts aggregate demand. Boosting aggregate demand increases the demand for labor, helping the economy to grow.

There’s also inflation, but that’s another story.

It’s fine to disagree, but at least understand it first.

Mar 5 2010 at 5:43pm

“In a large enough recession, unemployment benefits will have no effect on unemployment.”

Oops. I should have written no direct effect on unemployment. They will have indirect effects.

Brittany

Mar 5 2010 at 5:48pm

In today’s economy unemployment rates are extremely high compared to what they have been in recent years. One reason could be because of the unemployment insurance as Summers stated. If some of the benefits were taken away there wouldn’t be as many people unemployed but from another viewpoint it also stimulates the economy because their money isn’t as hard earned therefore they spend more of it. Summers also stated that if unemployment insurance was dropped the unemployment rate would drop as well. The benefits received from unemployment are well deserved for those who have always worked hard at their job but for those who just aren’t trying, I think the benefits should be cut back.

Mar 5 2010 at 5:51pm

@Patri Friedman

Perhaps. But I think you will concede that yours is a fringe view, even among economists on the right, and it is at best misleading to present it as otherwise. Or to assert that basic synthesis macro (which can indeed be found in any first-year textbook, by Mankiw and such) is “bizarre”.

@Redland Jack

The job market in recession is primarily constrained by the number of jobs available, not the incentives of now-unemployed jobseekers. This is the whole point of saying that wages are sticky: people, even unemployed people without welfare, will attempt to find jobs at their previous high real wages, funded by dramatically cutting their consumption.

While benefits do distort incentives, the point is the elasticities are such that their effect is outweighed by the boost to aggregate demand. Y=C+I+G+NX dooes indeed outweigh incentive effects.

To be sure, the best policy way out here would be to temporarily slash payroll taxes, which directly reduces real labor costs. But it is still true that unemployment payouts will reduce unemployment in a recession; it’s just not optimal (Krugman – being Krugman – will only support payroll tax cuts where most of his readers won’t see it and will reserve the populist flagwaving for the headlines).

David R. Henderson

Mar 5 2010 at 5:59pm

Guys,
It would really help if people read what I wrote. I never used the word “bizarre” to describe standard Keynesian macro. Nor would I. It was Krugman who used the word “bizarre.”
Also, I know Patri Friedman and I’m basically positive that unless he’s using a pseudonym, he didn’t even comment on this.
Finally, it was the FOMC, in the graf I quoted, that said that the unemployment rate overstates the slack: In other words, the economy is supply constrained. Now, they may be wrong, but then you’re taking issue with them, not just with me.

Mar 5 2010 at 6:17pm

Dave,
The quote says, “The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate…by encouraging some who have lost their jobs to remain in the LABOR FORCE.”
I think this implies that without UI the people who choose to remain in the labor force would instead exit the labor force. If the economy is supply constrained, then doesn’t the fact that UI keeps people in the labor force and hence looking for a job, increase the supply of labor and alleviate the supply constraint, not worsen it. At least, I think that’s what the quotation is saying. Am I confused?

Mar 5 2010 at 6:36pm

@David R. Henderson

Whoops, I’m lacking sleep and mixed up the Friedmans I keep seeing on EconLog (along with Patrick R. Sullivan quoting (David) Friedman). I’d like to edit my comment to point the @s the right way, but there’s no comment editing…

Blackadder

Mar 5 2010 at 8:15pm

Has anyone factored in that Unemployment Insurance doesn’t really help anyone, but simply displaces the “saving for a rainy day” that would otherwise happen?

The amount people would “save for a rainy day” ini the absence of unemployment insurance is far lower than what they receive in benefits.

Mar 5 2010 at 8:18pm

If there is a surplus of labor, and a shortage of demand for labor, then reducing that surplus will have no effect on unemployment.

Unemployment just is a surplus of labor. Saying that reducing the surplus of labor won’t reduce unemployment is tantamount to saying that reducing the surplus won’t reduce the surplus.

Isn’t “supply constrained” just a roundabout way of saying “sticky prices and wages”?

Let’s not confuse this with aggregate demand failures. Whatever aggregate demand is, sticky prices is the problem to be solved, in the Keynesian version of the story.

So, however you twist and turn, you can’t get around this: more UI, slower reductions of reservations wages, and longer unemployment spells, as well as discouraged worker/lower labor force participation rates.

Which part of sticky wages don’t you understand?

The_Orlonater

Mar 5 2010 at 8:34pm

“David, you don’t make a clear case at all why that half a percentage point reduction in the unemployment rate is better than the income maintenance that is provided by the existence of UI.”

Daniel, you do not make a clear case at all for maintenance of the of a higher income level provided by unemployment insurance. It’s as if you think the economy will magically rebound and we’ll have “full employment.” When will the dead-line be for unemployment insurance? Will you have enough money to supplement it? Secondly, once the economy has reached the bust point that means their needs to be a restructuring of the economy and the need to allocate resources to where their future uses are most profitable. Just maintaining a higher consumption and income level does not at all mean the economy is going to recover suddenly.

Mar 5 2010 at 9:04pm

To David,

Thanks for the compliment, that I beat the stuffing out of “that strawman”.

What, exactly, is the strawman that you think I created, merely to argue against?

Travis

Mar 5 2010 at 10:09pm

@David C:

If the unemployed are given enough in benefits to make these basic payments (rent, electricity, gas, food) – then your Keynesian example does not work, correct?

I’ve always thought that unemployment benefits could potentially offset the multiplier effect of fiscal stimulus.

Les Cargill

Mar 5 2010 at 11:06pm

I see the beginnings of the idea here, but I don’t see it said. It’s that ole debbil deflation that the Keynesians are afraid of ( and possibly for good reason ).

Unemployment benefits clearly improve the velocity of money. The result has high marginal efficiency – the marginal utility of unemployment benefits have to be pretty clear by now.

I have looked pretty hard – I don’t think Hayek has anything like a story on deflation. I have to ask – are we working from the frame of reference of the utility to the consumer or not? Unemployment benefits are not crowding out production.

If there is an Economics 2.0, then it’s something like “people become obsolete.” Do we have a story for them beyond “it sucks to be you”? $DEITY knows I have escaped the surly bonds of obsolescence ( by pursuing value ahead of trend ) more times than you can imagine.

Unemployment is a hedge on uncertainty. Without it, you won’t see consumption do anything but what it did during the reign of reification of a greenback dollar well above its rightful place.

It would stop.

Perhaps I am amiss, but I don’t think Hayek has a story on deflation. Well, *people* do. I can adapt, but that’s me. I know what my grandparents generation were like, and it’s going to be wrenching to go there. Seems kinda Calvinist.

“We’re in a tight spot” – Everett, “Oh Brother Where Art Thou?”

Earl O'Mar

Mar 5 2010 at 11:35pm

Maybe I’m missing something here, but the reports referred to in this post do not say that people get back to work sooner when unemployment benefits are not extended. It says:

“…encouraging some who have lost their jobs to remain in the labor force.”

The definition of “labor force” being “…all persons classified as employed or unemployed…” — all this means is that people who would not normally be counted continue to be counted as benefits are extended. If benefits were not extended, these folks would not be counted as unemployed members of the labor force — but instead, among the uncounted, discouraged or marginally employed persons not considered as part of the labor force.

When you increase the size of a bucket while maintaining a heavier flow in than the hole in the bottom allows to flow out — you’re going to have more water on hand when the overflow is discarded. It’s plain common sense.

The bottom line is that extending unemployment benefits, which are meager to begin with (a fraction of one’s normal wages), does not make workers less motivated to find work. All it does is ensure that a larger portion of those unable to find work continue to be counted. At least until they’re discarded with the rest of the overflowing water.

John Thacker

Mar 6 2010 at 12:13am

To pretend that you’ve never heard of the logic is just misleading.

Right, which is why you agree that Krugman is being misleading? David Henderson didn’t say that the argument that it has little effect in a recession is “bizarre” or that he had never heard of it. Krugman is the one claiming that the group taking one reasonable side of an argument is bizarre.

If you disagree with him, disagree with him vigorously. But don’t pretend he’s making this stuff up or that he’s being devious. The vitriol that comes up whenever Krugman’s name surfaces is noxious.

Again, I find that Krugman is the one who is claiming that his opponents are being devious and engaging in noxious vitriol, like he does so often recently. Not David Henderson.

Steve

Mar 6 2010 at 1:03am

Dave,

This is the second time I’ve caught you completely distorting what Krugman wrote. (The first one was citing an artcile about the negative consequences of inequaltiy as evidence he admitted inequality didn’t matter.)

Krugman said that today the marginal return to time spent job-seeking is depressed because of the recession AND spending on unemployment benefits increases AD which decreases unemployment. That is textbook economics which says unemployment spending may reduce unemployment–or at least standard estimates of the increase induce are overestimates.

Elliot

Mar 6 2010 at 1:06am

Krugman’s wrong about unemployment benefits not reducing the incentive of people to look for a job.

From a paper by Alan Krueger and Andreas Mueller.

“This paper provides new evidence on job search intensity of the unemployed in the U.S., modeling job search intensity as time allocated to job search activities. The major findings are: 1) the average U.S. unemployed worker devotes about 41 minutes to job search on weekdays, which is substantially more than their European counterparts; 2) workers who expect to be recalled by their previous employer search substantially less than the average unemployed worker; 3) across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits, with an elasticity between -1.6 and -2.2; 4) job search intensity for those eligible for Unemployment Insurance (UI) increases prior to benefit exhaustion; 5) time devoted to job search is fairly constant regardless of unemployment duration for those who are ineligible for UI.”

HT Perfect Substitute

http://perfectsubstitute.blogspot.com/2009/12/job-search-and-unemployment-insurance.html#links

Mar 6 2010 at 9:07am

@Blackadder

“The amount people would “save for a rainy day” in the absence of unemployment insurance is far lower than what they receive in benefits.”

I think you’re missing much of the cost. By way of example, I have two full months worth of savings at my current pay rate, and the mortgage paid two months in advance. That’s enough to either find another job at my current rate, or find a job at a lesser rate and make adjustments, or find no job and make arrangements to move in with family.

When I use the term “save for a rainy day”, I’m not just talking about a bit of cash in the bank, but rather, a plan for hard times in which I remain personally responsible. If we’re going to consider the costs of unemployment insurance, then we have to include all the costs associated with removing the requirement of personal responsibility. Without personal responsibility, I can assume the right to a new job at the same rate as the old job, that I should never have to adjust my standard of living to changing circumstances, that my house is mine no matter what and that its value should never decline, and that I have no need to maintain family relations. That’s a lot of responsibility, and cost, to be loading onto government… and somebody has to pay for it.

simone

Mar 6 2010 at 10:08am

[Comment removed for supplying false email address and for policy violations. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog.–Econlib Ed.]

floccina

Mar 6 2010 at 6:53pm

People often collect and work.

Seth C

Mar 8 2010 at 11:15pm

Paul Krugman attempts to use morals more than actual evidence in his argument. This is a poor tactic since he makes little effort to refute the possibility that increased unemployment benefits may have adverse effects on the unemployment rate; instead, he tries to make the argument about the level of morality rather than the empirical data. His article would be more effective if he stuck purely to his early arguments (e.g. the CBO’s stance that unemployment benefits help create jobs) rather than starting on the slippery-slope of economic morality.

Unemployment is a bad thing, yes, but it’s ridiculous to throw money at the problem and declare yourself a success regardless of the results simply because you had good intentions. Bunning didn’t temporarily block the extension of emergency unemployment benefits because he’s immoral or hates unemployed people: rather, he recognized that there are questions as to how effective/worthwhile increased benefits are when compared with the monetary and unemployment impacts.

Furthermore, the increased money for unemployment does not magically appear out of thin air—a trade-off must be made and the money is taken from somewhere else. By offering increased unemployment benefits, we’re sacrificing money from another area. In essence, we’re trading benefits to society in some other sector for increased unemployment benefits; when viewed in this light, the argument of moral supremacy looks even weaker than before.

This is not to say that morality should never be considered, it merely should not be used in the place of actual data.

Brandon H.

Mar 9 2010 at 11:43am

I believe that in a recession such as this, when unemployment is rampant, unemployment benefits should be extended. Government serves one major function and that is to work for and to take care of its citizens. When economic turmoil arises I think benefits should be extended so as to keep hard-working Americans’ income at least somewhat stable.
If unemployed peoples were able to receive some type of income despite not having a job then two important things are being done; one, a family’s way of life is sustained; and two, people who would be otherwise incapable of contributing to markets, the economy, and such would still have capital to spend, keeping a small pulse of economic functions going.
I don’t think that extended unemployment benefits would contribute too greatly to higher unemployment rates. People who have been employed desire to work for their wages instead of taking a handout, it’s a pride thing. Anyway, I think the government should extend benefits a little for the unemployed in this hard time just so people will be able to stay afloat.

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