A favorite conservative talking point is the notion that giving people who lose their jobs unemployment benefits makes them lazy and unlikely to look for work. Republican Senator Judd Gregg repeated that assertion on CNBC this morning. Happily, the well-respected economist Mark Zandi was on the air with him and tactfully disagreed.
But Republicans have done such a good job of spreading that nonsense that even Democrats have begun to buy into it. US Rep Kathy Dahlkemper (D-Pa.) gave credence to that half-baked idea in an interview with the Washington Post:
Many Democrats also are scrutinizing emergency spending on the economy. Dahlkemper, facing a well-funded Republican car dealer in the blue-collar district she seized from the GOP in 2008, said businesses back home complain that they want to start hiring but are getting few applicants because Congress has repeatedly extended unemployment benefits.
“Now, whether that’s true or not, I’m still trying to decipher,” she said. “But I think it’s something we really need to look at.”
(When I asked Dahlkemper’s office about it, her press secretary, Marie Francis, declined to give me any additional details. She wouldn’t tell me what kind of businesses, for example, saying that the congresswoman had been engaged in private conversations. Well, for heaven’s sake, if these business have open positions they are going begging, don’t they want workers to know?)
Since I live in the reality-based universe and I depend on facts and evidence, I’d be willing to change my view on unemployment benefits if the evidence supported the charge that they make workers less likely to seek jobs. But the evidence doesn’t show that. Happily, my colleague Jay Bookman found some relevant research:
Economists at the San Francisco Federal Reserve decided to tackle the issue, and seem to have hit upon a pretty good way to approach it. As they point out, roughly two-thirds of the unemployed are eligible for unemployment benefits, because they held full-time jobs that they lost through no fault of their own.
However, that leaves a significant number of unemployed who cannot collect benefits. The ineligible may have left their jobs voluntarily, they may have been self-employed or independent contractors, they may have been fired for cause or they may be new entrants into the job market. For whatever reason, they are jobless, they want jobs, but they collect no unemployment benefits.
With two groups of unemployed — one that is collecting benefits, one that is not collecting benefits — you can begin to get at an answer. How long on average does each group remain unemployed? Put more bluntly, how big is this supposed “laziness subsidy?”
Here’s what they found:
“As of the fourth quarter of 2009, the expected duration of unemployment had risen about 18.7 weeks for job losers and about 17.1 weeks for leavers and entrants, using the years 2006-2007 as a baseline. The differential increase of 1.6 weeks for job losers is the presumed impact of extended UI benefits on unemployment duration.”
In other words, it exists, but it’s not much.
They also note that extended unemployment benefits (now as long as 99 weeks in some states, including Georgia) keep people in the official job market who might otherwise become discouraged and quit looking (proof of active job-seeking is a requirement of collecting benefits.) Without benefits, those people would cease going through even the motions of job search and drop out of the workforce altogether, dropping the official unemployment rate from 10 percent to 9.6 percent.
Although economists have shown that extended availability of UI benefits will increase unemployment duration, the effect in the latest downturn appears quite small compared with other determinants of the unemployment rate. Our analyses suggest that extended UI benefits account for about 0.4 percentage point of the nearly 6 percentage point increase in the national unemployment rate over the past few years. It is not surprising that the disincentive effects of UI would loom small in the midst of the most severe labor market downturn since the Great Depression.
I don’t think we should ditch unemployment benefits because people tend to stay unemployed a week and a half longer.