The Effect of Unemployment Insurance on Unemployment
By David Henderson
An increase in U.S. aggregate labor demand reflected in rising job vacancies has not been accompanied by a similar decline in the unemployment rate. Some analysts maintain that unemployed workers lack the skills to fill available jobs, a mismatch that contributes to an elevated level of structural unemployment. However, analysis of data on employment growth and jobless rates across industries, occupations, and states suggests only a limited increase in structural unemployment, indicating that cyclical factors account for most of the rise in the unemployment rate.
This is from Rob Valletta and Katherine Kuang, “Is Structural Unemployment on the Rise?”, FRBSF Economic Letter, November 8, 2010. The article also addresses the effect of unemployment insurance on the unemployment rate, which I’ve discussed here and here. They write:
In addition, the availability of extended unemployment insurance benefits, which reached a maximum of 99 weeks in most states in 2009, could explain a portion of the shift depicted in Figure 1. By easing the financial burden of long-term unemployment, extended benefits reduce the incentives of eligible workers to search for jobs and fill vacancies. Research by Valletta and Kuang (2010) suggests that the impact of extended insurance benefits on the unemployment rate in late 2009 was only about 0.4 percentage point. Updated estimates for all of 2009 and the first half of 2010 suggest a larger impact of about 0.8 percentage point.
HT to ARJTurgot2.