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Do unemployment benefits deter job seeking?

20 July 2010 512 views No Comment

This morning President Obama made a plea to the Senate to extend unemployment benefits to 3 million Americans who will stop receiving them this month. He said it’s the government’s responsibility “to offer emergency assistance to people who desperately need it … to help them make ends meet and support their families even as they’re looking for another job.”

With about five unemployed people per available job and 6.8 million who have been out of work for 27 weeks or more, this seems like a no-brainer at first glance. Proponents say this emergency relief can help the unemployed pay bills and put food on the table and also stimulate consumer spending. Yet many argue that extending unemployment benefits will deter people from looking for jobs and dig deeper into the nation’s deficit.

So which argument is right?

A March 2010 report from JPMorgan Chase argues that emergency unemployment benefits have contributed to longer durations of unemployment and a higher unemployment rate.

But in an April 2010 report from the Federal Reserve Bank of San Francisco, researchers Rob Valleta and Katherine Kuang wrote: “Analysis of unemployment data suggests that extended unemployment insurance benefits have not been important factors in the increase in the duration of unemployment or in the elevated unemployment rate.”

And this July, the U.S. Congress Joint Economic Committee released a report entitled “Does Unemployment Insurance Inhibit Job Search?” The report states “it is unlikely that extended unemployment benefits inhibit individuals’ job search efforts. Simply put, even a low‐paying job is likely to provide more support than that offered by [unemployment insurance].”

Still unsure? Are both sides right? Watch this clip from MSNBC’s Hardball to learn more:

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