Income Redistribution: Persistent Unemployment
Do unemployment benefits actually benefit the unemployed?
Last Friday, we noted a new study showing how food stamps fail to alleviate poverty and hunger. That isn’t surprising, and neither is another study on the effects of another Beltway sacred cow – unemployment benefits. According to the National Bureau of Economic Research, “[M]ost of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility.”
As bad as the recession was, the “recovery” has been hardly better. And during this time, most states increased unemployment benefits from 26 weeks to 99 weeks – i.e., six months to nearly two years. A frequent criticism is that, rather than finding work, recipients opt to continue getting checks for nothing. This is, of course, a broad generalization as many unemployment recipients are hard workers who have simply fallen on hard times not of their own making.
The bigger problem, according to researchers, is that long-term unemployment benefits deter job creation. As The Wall Street Journal put it, “What brings unemployment down is not mainly the effort made by people to find jobs; instead, it’s the incentive employers have to create jobs. Long-term unemployment benefits deter that job creation.” Unemployment benefits force wages higher – working for a paycheck must be more attractive than free checks – and so make jobs more expensive for employers to create. So even if we concede that leftists have good intentions (a big “if”), their efforts only exacerbate the problem.