Don’t Blame Extension of Jobless Benefits for unemployment levels

According to a paper by the Federal Reserve Bank of San Francisco, the high duration of unemployment has a “quite small” relationship with the maximum amount of time one can draw unemployment benefits. From the Wall Street Journal:

“Extended [unemployment insurance] benefits have had a relatively modest effect” on the jobless rate. “We calculate that, in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.”

The paper notes the economic crisis of the last few years has generated an “unprecedented” level of unemployment duration. Those unemployed for more than six months hit 4.3% in March, “well above” the previous high of 2.6% in 1983. The economists note that the current situation is all the more striking because the unemployment rate peak was quite a bit higher in that downturn, relative to what’s been seen in this episode.

With all the rhetoric out there that unemployment insurance is actually raising unemployment, it is refreshing to see some statistics that show that extended unemployment benefits do not encourage job seekers to quit.

Read the full article: http://blogs.wsj.com/economics/2010/04/19/dont-blame-unemployment-extension-for-high-jobless-rate/