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High Long-Term Unemployment No Surprise

Posted By James Sherk On November 18, 2008 @ 5:41 pm In Economics | Comments Disabled

Sen. Robert Byrd and Majority Leader Harry Reid (Photo by Scott J. Ferrell/Newscom)

Congress is considering increasing the length of time unemployed workers can collect unemployment insurance (UI) benefits. Normally unemployed workers can collect UI benefits for up to 26 weeks. Congress changed the law to allow 39 weeks of benefits. Now many in Congress want to allow 46 weeks of benefits. One of the reasons Senate Majority Leader Harry Reid (D-NV) and Sen. Robert Byrd (D-WV) give for this change is the fact that long-term unemployment has increased.

This is true: The number of workers unemployed for more than 26 weeks has increased. Part of the reason this has happened, however, is precisely because Congress extended UI benefits.

Workers stay unemployed longer when the government pays longer unemployment benefits. The Congressional Budget Office estimates that a 13-week extension of benefits causes the typical workers to stay unemployed two weeks longer. Not coincidentally, the Bureau of Labor Statistics reports that the average duration of unemployment increased by 2.2 weeks since Congress lengthened UI benefits. The unemployment rate has also risen by 1 percentage point.

Not all of this increase can be directly attributed to extended UI benefits, but some of it can. A Heritage study found that a 13-week extension of UI benefits, such as that Congress passed in June, would cause the unemployment rate to increase by approximately 0.2 percentage points [1]. Increased UI benefits explain a fifth of the increase in the unemployment rate since June.

Congress needs to remember that spending money and calling it stimulus does not mean that money is well spent or benefiting the economy. Good policy solves problems, not creates them. There are humanitarian reasons to extend UI benefits, but extended UI benefits also affect the choices unemployed workers make. Congress cannot use the increase in unemployment partly created by extended UI benefits as justification for extending UI benefits further.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2008/11/18/high-long-term-unemployment-no-surprise/

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[1] a 13-week extension of UI benefits, such as that Congress passed in June, would cause the unemployment rate to increase by approximately 0.2 percentage points: http://www.heritage.org/Research/Economy/cda08-13.cfm

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