Unemployment benefits make people lazy? Not so

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.

Their conclusion:

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.

178 comments Add your comment

Thomas

May 24th, 2010
4:46 pm

Like a good pain pill prescription- meant to be a band aid- not a life style. We are on the verge of seeing a massive renewal of the “American” work ethic of those who are tired of waiting on the government and large companies to provide jobs. We took our eye of the ball and watched millions of jobs go offshore.

Ragnar Danneskjöld

May 24th, 2010
4:48 pm

Good afternoon all. Here we find the great divide between leftists and rationalists. Leftists affirm that (a) even if there is a sound economic basis to infer that time-extensions for unemployment benefits is causative of longer average unemployment periods, (b) it is still a good idea to lengthen unemployment benefits.

Certainly the growth of the welfare state finds its genesis in such generosity with other people’s (taxpayer) monies. Taxpayers would likely prefer dissolution of the government welfare entirely, and to return that function to the church rather than creation of the entitlement, much less the continuously lengthening extensions to the benefits-drawing period.

Rather than subsidizing the production of indolent time, a better use of taxpayer funds would be a direct stimulation of private hiring. And even better would be allowing the capital generators to keep their funds in the first place, thus to expand the economy according to traditional conservative techniques. Thank goodness we have leftists who know better what we need than the market itself.

Robbin Hood

May 24th, 2010
4:54 pm

I believe that trust funds make people lazy. Let’s tax all estates over $500,000 at 85% and get those lazy idle rich off their butts and on the job.

Thomas

May 24th, 2010
4:55 pm

Ragnar- more of a macro issue. The US is facing low inflation and possible deflation as the emerging markets continue to face wage inflation. As the rupee and the yuan are forced to appreciate the American worker and therefore the service and manufacturing sectors will become more in play. The gov’t should be the silent hand that keeps the every day Joe and Jane from being a cork floating in the economic ocean.

Ragnar Danneskjöld

May 24th, 2010
4:56 pm

Dear Robbin @ 4:54, agreed, mob theft is the only cure for free-market capitalism and economic growth.

joan

May 24th, 2010
4:57 pm

Ragner is right. You are equating those workers who have no-fault lost their jobs with a group comprised of Newbies and people who were fired. The latter class can’t be equated with the former in any realistic sense. I also got a laugh out of your line “Since I live in the reality-based universe and I depend on facts and evidence, I’d be willing to change my view …”
I am not sure where your reality is, unless it is up Obama’s backside.

Scout

May 24th, 2010
4:58 pm

Cynthia:

Let’s make these payments permanent and then test your theory ! What say ye?

Ragnar Danneskjöld

May 24th, 2010
4:58 pm

Dear Thomas @ 4:55, while we do not disagree that government-manipulation of currencies should never lead to disinflation (nor inflation), we disagree on the cure of the that evil. More government intervention is unlikely to restore growth to the free market, just as it failed to do so from 1930 – 1945, and from 1973 – 1981.

godless heathen

May 24th, 2010
4:58 pm

The SFFR study is flawed because they probably know nothing about the work force. The group that doesn’t receive UI benefits are generally the slackers and the losers. They work a while and then they quit or get fired. They get hungry or the relatives won’t let them mooch any longer so they go find jobs. People who receive UI have stayed on the job long enough to qualify and have lost their job through no fault of their own. A comparison between these two groups doesn’t say a dang thing about whether or not UI is a disincentive to find work. That may or may not be true but it is not supported by this study, as reported.

joan

May 24th, 2010
4:59 pm

Hey Robbin Hood: Somebody worked for that money, paid taxes on it, and did it for their posterity. Why else do people work hard? And why penalize the hard workers so the indolent (lazy) can continue to sit on their hands, or their roofs (in New Orleans) for that matter?

Thomas

May 24th, 2010
5:07 pm

Ragnar- definitely not looking for more- looking for less and more efficient which is most likely not forthcoming

hmm.....

May 24th, 2010
5:09 pm

“Since I live in the reality-based universe and I depend on facts and evidence….”

Tell me you were at least laughing as you typed this…..

I'm here from the government and I'm here to help

May 24th, 2010
5:11 pm

ctucker, see Europe today? That’s America tomorrow!

Living off the government tit

Literally, a low life that is able bodied, yet lives off government assistance. I.E. Welfare, WIC, Food Stamps etc. etc. In the film Forrest Gump, Forrest asks Lt. Dan what he’s doing now when he sees him for the first time after they arrive home. Lt. Dan, who has lost both legs and is confined to a wheelchair, states, “Living off the government tit.” The phrase is a reference to Lt. Dan’s receiving a monthly stipen for the loss of his lower limbs. In recent years, the term has a negative connotation and is often used to describe healthy welfare recipients that are able to work but choose not to because they are satisfied with their welfare checks for doing nothing.

ctucker

May 24th, 2010
5:11 pm

joan, please. the lazy sat on their roofs in New Orleans? Really?

Baylor

May 24th, 2010
5:12 pm

well since Obama hates jobs and lied to us about the hasty stimulus package (if we don’t spend now unemployment will get above 8%. It’s now at 10%) what does it matter?

Sad that CT has to shift through the internet obscurity to find a pointless story like this, instead of tackling the real problem….WHERE ARE THE JOBS?!?!?!?!?!

ctucker

May 24th, 2010
5:12 pm

Joan, I think you can be a bit more civil. Or, at least, I hope you can.

ctucker

May 24th, 2010
5:14 pm

Ragnar, Longer, on average, by a week and a half. You really want to stop unemployment benefits over a week and a half?

serge

May 24th, 2010
5:15 pm

Obama’s unemployment figures are so bad, that even shamefully changing how to measure unemployment last year still can’t put a positive light on it.

pigs are flying

May 24th, 2010
5:17 pm

Guys, remember, Cynthia is coming from the same spin doctors in the MSM that have been trying to convince us that unemployment is a GOOD thing. Anything to deflect the worst Presidency in our nation’s history.

I'm here from the government and I'm here to help

May 24th, 2010
5:18 pm

According to recent reports, the construction industry cut 62,000 jobs in October. Combined with 61,000 jobs lost in manufacturing and over 40,000 job cuts in the retail industry–the sharp rise of nearly a half percent in the nation’s unemployed from September to October has many Wall Street forecasters scratching their heads–and many more Americans wondering what to do next.

So, what happens to all of these Americans who get forced out of their jobs? They turn to the only place they can for assistance: the government. There are numerous government programs designed to help those in unfortunate situations make it through their darkest days. While the government’s not a golden goose–in addition to unemployment compensation–there are other ways you can live off Uncle Sam for a little while–until something better comes along.

Scout

May 24th, 2010
5:19 pm

Cynthia:

You didn’t answer my 4:58 !

danny

May 24th, 2010
5:20 pm

so….giving unemployed people money isn’t a deterrent? Just like giving an alcoholic a bottle of Jack Daniel’s isn’t an enabler either?

I'm here from the government and I'm here to help

May 24th, 2010
5:21 pm

Now for the instructions….

I'm here from the government and I'm here to help

May 24th, 2010
5:23 pm

Step 1 – Apply for food stamps so the burden of providing food for your family can be relieved. The amount you get depends on a number of factors, and while you may have to learn how to shop more wisely, the food stamps you get will help your family fend off hunger–and as a side bonus, you may learn new shopping techniques that will last long after you’re off of government assistance.

Step 2 – Apply for TANF (Temporary Assistance for Needy Families). TANF is a block grant provided to each state to disperse as needed. Once approved, your family will receive government funds to help you get through a temporary setback. This program is designed to promote job preparation and education in an effort to prevent families from becoming permanently dependent on government assistance programs like welfare.

Step 3 – Besides financial help and food-based support, the other primary concern for families in economic trouble is healthcare. Although a national healthcare reform plan was recently approved, it may take years before it gets successfully underway, so in the meantime, families can still apply for Medicaid. If you are a low-income family, but not an unemployed one, you can still get healthcare for your children through the government’s Children’s Health Insurance Program (CHIP).

Step 4 – Apply for financial help for your utilities. For families in a low-income or unemployed situation, having their utilities turned off can be a final blow to their resolve and morale, especially in the cold winter months. Every state offers the Low-Income Home Energy Assistance Program (LIHEAP), and some even offer low-income telephone assistance.

Plus, for many states, individuals on utility assistance programs don’t have to worry about being disconnected throughout the winter months, which run from November 15 through March 15.

Step 5 – If you have a child or children in school, you may be eligible for the National School Lunch Program, which provides your child a healthy lunch at a minimal cost. There are certain requirements, so check the link in Resources below for the program’s guidelines.

Bandaid

May 24th, 2010
5:23 pm

Unemployment is a temporary solution. Even at maximum benefits of $330/week, I was motivated to get off my proverbial “rich butt” and find new employment. Collecting $2500/week at a job than $330/week on my couch seems like pretty basic math…..

ctucker

May 24th, 2010
5:23 pm

pigs are flying, I haven’t heard anyone arguing that unemployment is a good thing. Can you name a person who said that?

Moderate Line

May 24th, 2010
5:24 pm

From the National Bureau of Economic Research”

The results indicate that a one week increase in potential benefit duration increases the average duration of the unemployment spells of UI recipients by 0,16 to 0.20 weeks.

http://www.nber.org/papers/w2741

Reality Check

May 24th, 2010
5:25 pm

Once again CT you dont state all the facts to try and make Republicans look like they think everyone who lost their job is lazy. That is not the case. No one that you mentioned is for disbanding unemployment benefits. They just think you shouldnt get them for 90 weeks after they lose their job because at some point the people who are lazy take advantage of the government by just receiving the benefits with no real incentive to go out anf find a job. This article is just par for the course for you.

I'm here from the government and I'm here to help

May 24th, 2010
5:25 pm

Then have the next generations follow the same steps and presto! You have whole families living off the Government tit for life. What a Great Country America is!!!

Thomas

May 24th, 2010
5:26 pm

Ragnar- one also needs to be careful in looking at history as “your” periods are pre internet- pre global economy. Look at how quickly Enron was able to disrupt the energy complex- the same can be said about what an India or China can do to sectors of the economy. Exchange rates reflect anticipated inflation. The cycle is now heading back “US”-

georgiadawg70

May 24th, 2010
5:26 pm

Hey Robin Hood. Why don’t you earn your own money instead of wanting someone else’s. What a looser.

Ragnar Danneskjöld

May 24th, 2010
5:26 pm

Dear Ms. Tucker @ 5:14, yes, of course. If government diverts taxpayer funds into 12 weeks of unemployment benefits, the unemployed stay unemployed 10.5 weeks,. If government diverts taxpayer funds into 30 weeks of unemployment benefits, the unemployed stay unemployed 18.5 weeks. If government diverts taxpayer funds into 96 weeks of unemployment benefits, the unemployed stay unemployed 94.5 weeks.

Ms. Tucker, do you really want unlimited benefits? Why do you think government use of taxpayer funds is more rational than similar provisions by voluntary private support systems, such as churches?

D-Boe

May 24th, 2010
5:27 pm

Republicans did a lot towards limiting the size of government while they were in power. We should only focus on democrats since ‘pubs did such a great job.

Oh, and if you didn’t know, you pay your own unemployment benefits when you’re employed, and receive those benefits when you’re out of work.

leftwing

May 24th, 2010
5:28 pm

Ragnar my old friend, of course as usual you’re just plain (or is that Palin) wrong.

It is easy to sit comfortably and tell people that they should pull themselves up by their own bootstraps, but let me ask the question; have you ever been unemployed for an extended time? Have you ever needed a little help to get by?

Personally, I have. I didn’t want to stay on it any longer than I needed to; and it certainly didn’t pay all my bills. However, having a little cash flowing into my account made it easier to stretch my money until I could find something else.

Let me ask the question; why would people stay on unemployment (as their benefits start to expire) when they could find employment, which would give them longer term income? If I can answer my own question; most wouldn’t. It is in people’s own self interest to acquire long term stable income, and certainly not in their interest to exist for a few weeks on the “welfare state”.

Ragnar Danneskjöld

May 24th, 2010
5:29 pm

Dear Thomas @ 5:26, I respectfully ask if you recall why Enron was able to disrupt the energy complex. Surely you will recall the misbegotten effort of the loopy California legislature to legislate rates, thus giving Enron a potentiality for cornering the market? Overlord management of otherwise free people always produces the unexpected consequences, a la FNMA and FHLMC.

ken R

May 24th, 2010
5:30 pm

C.t.

If the unemployed find work after 17/18 weeks then why do we have almost 10% unemployment? It seems to me that if these people can find work that fast then why can’t the rest of them?

Exactly how many people have collected benefits for over 1 year? This article is a little cloudy.

JKL2

May 24th, 2010
5:30 pm

CT- the lazy sat on their roofs in New Orleans? Really?

Yes. They were too lazy to leave when the government told them too. Now they are too lazy to work, because all you hear is that the poor people in NO need another bailout ($300M in healthcare known as the infamous Louisiana purchase for example).

Ragnar Danneskjöld

May 24th, 2010
5:31 pm

Dear leftwing @ 5:28, you err. I am objectionable in my harsh opinion, but I am correct in my notes on the macro-effects on incentive

Poor Boy from Alabama

May 24th, 2010
5:32 pm

Ms. Tucker,

Did you read the SF Fed paper? It’s five pages long. At the beginning of the conclusion section they acknowledge that extended unemployment benefits increase unemployment duration. They say it added about 0.4% fo the increase in unemployment we’ve experienced in recent years. This equates to about 600,000 unemployed workers.

I can only imagine the liberal crowing we would have to endure if unemployment had fallen 0.4% or 600,000 Americans had gone back to work since the stimulus package was passed.

leftwing

May 24th, 2010
5:33 pm

Ragnar @ 5:26, where did you come up with these statistics? Because I think you know they’re factually not true. I believe there are 2 statistics; one for college educated and one for non-college educated. I believe the college educated receive unemployment for about 4 weeks (pre 2007), and the non-college educated receive unemployment (pre 2007) for about 13 weeks. I believe that these figures post 2007 are 5 weeks for college educated and the last I saw were 28 weeks for non-college educated.

blutto

May 24th, 2010
5:34 pm

Having been an employer in a manufacturing industry it was my experience that in times of high unemployment some who inquired as to job availability just wanted to have a signature attesting to the fact that they were “actively seeking work,” a requirement while collecting unemployment. Sometimes when told that a job might be available the prospective employee decided it best to seek an employer who was not hiring.

JKL2

May 24th, 2010
5:35 pm

I always liked Ben Franklin’s “if you want to end poverty, make it as uncomfortable as posiible.” Subsidizing satellite TV and cell phones is not uncomfortable.

Abrazos

May 24th, 2010
5:36 pm

As g heathen said, people fired for cause or quit are not eligible for benefits, so let’s dispense with that now and forever more. Also, the MAXIMUM amount for HIGH earners in Georgia is $330 a week, BEFORE taxes. The MINIMUM amount for LOW wage earners (those lazy ne’er-do-wells that I assume most posters’ rage is aimed at) is $44 a week, BEFORE taxes. Check out the link below if you don’t believe the figures. How can anyone actually believe that the “riches” from unemployment are somehow preferable to working?

http://www.dol.state.ga.us/js/unemployment_benefits_individuals.htm

Joel

May 24th, 2010
5:37 pm

CT, they were too lazy to leave town when an evac was ordered…

ctucker

May 24th, 2010
5:38 pm

Poor Boy from Alabama, yes, I know that they conclude that unemployment benefits may increase unemployment by something like a week and a half. Did you read all of my post?

Ragnar Danneskjöld

May 24th, 2010
5:38 pm

Dear Leftwing @ 5:28, I do not mean to be unduly harsh, but the ever-expanding unemployment benefits are a symptom of the mindset that leads to the destruction of economies in the first place – that leftwing arrogance that says an overlord can manage the market better than free people making free decisions.

But for
(a) Nancy Pelosi’s declaration that the government intended to abolish the “Bush tax cuts” (and thus suck more capital out of the private economy), and
(b) Harry Reid’s declaration of intent to impose new higher carbon taxes on all of industry (effectively nothing but new taxes to create new slush funds, and
(c) President Obama’s determination to impose $1 trillion of new costs on companies while simultaneously abolishing free right of contract in the healthcare industry, and
(d) Chris Dodd’s determination that more regulations is just what financial institutions need to stimulate funding of private capital needs,
would every employer in the country simultaneously lay off as much of the workforce as could be spared? Make no mistake about the “cause” of the need for ever-lengthening unemployment benefits. The Ragnar cure, however, is to undo that which caused the problem in the first place.

Moderate Line

May 24th, 2010
5:38 pm

I don’t believe the argument is people are “lazy.” The argument is unemployment insurance provides an incentive not to look for a job as hard. Am I lazy because I don’t apply for job which requires more work for slightly more pay. No.

In some cases that is true and in some cases it is not. Let me say if someone is single living at home with very few debts. (I have personally witness this.) There is no reason to look hard for a job it is almost like a paid vacation. I have also known at least two cases where a person was getting close to retirement and started collecting unemployment without looking very hard for a job.

None of these is good reason to get rid of unemployment insurance because if people pay into a fund and collect it for a defined amount of time then it truly works as an insurance program.

Also, when the unemployment jumps to 10% it is not because people have suddenly gotten lazier.

leftwing

May 24th, 2010
5:40 pm

Ragnar @ 5:31, I still hear the same old ideas from you; let the rich keep their money and it will “trickle down”. Except that it doesn’t.

And right now; we’re not talking about job creation; we’re talking about allowing people to survive until they can find a job. Big difference.

Ragnar Danneskjöld

May 24th, 2010
5:40 pm

Dear leftwing @ 5:33, you are correct in so far as you recognize that I do not tolerate selective collectivization of the population to manufacture a justification to erode freedom for any.

Ragnar Danneskjöld

May 24th, 2010
5:41 pm

Dear leftwing @ 5:40, “I still hear the same old ideas from you; let the rich keep their money and it will “trickle down”. Except that it doesn’t.” You err – it always does. Whereas government dictation certainly does not.