Since June 1, when federal unemployment benefits began to expire, an estimated 325,000 jobless workers have been cut off. That number will swell to 1.25 million by the end of the month unless Congress extends the benefits. The Senate, so far, has failed to act. . .2) New York Times columnist Paul Krugman, March 5, 2010:
The right thing to do is obvious. The House and Senate should immediately extend unemployment benefits.
So the Bunning blockade is over. For days, Senator Jim Bunning of Kentucky exploited Senate rules to block a one-month extension of unemployment benefits. In the end, he gave in, although not soon enough to prevent an interruption of payments to around 100,000 workers. . .3) New York Times Economix blog, August 16, 2010:
But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief "doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work."
In Mr. Kyl’s view, then, what we really need to worry about right now -- with more than five unemployed workers for every job opening, and long-term unemployment at its highest level since the Great Depression -- is whether we’re reducing the incentive of the unemployed to find jobs. To me, that’s a bizarre point of view -- but then, I don’t live in Mr. Kyl’s universe.
Danish studies show that the longer a person goes without a job, the harder it is to find work. Many people get a job within the first three months of entering the system, but many more wait until just before benefits expire to take anything available.Conclusion: As Steve Adcock at SmallGovTimes says:
"So you need to have a period of unemployment that is as short as possible," Claus Hjort Frederiksen, the finance minister, told me recently in Copenhagen.
Consider this 2009 chart from Denmark’s Labor Market Commission:
source: New York Times Economix blog
It shows that between 2005-7, the number of people who got jobs during their four years of benefits -- the green line -- rose at the beginning before dropping sharply, then spiked as benefits were about to run out, only to plummet after. The red line shows similar behavior in 1998, when Denmark’s benefit period was five years.
Denmark is not alone. Many European nations are struggling with similar budgetary concerns as governments continue to pay their citizens during times of unemployment. The United States’ recent extension of unemployment benefits is the latest example of, as the NYT apparently just learned, social entitlement programs being used to exacerbate these very problems.Agreed--because incentives matter. But see MaxedOutMama.
(via John Stossel, EconLog)