Friday, June 4, 2010

Experts Back up the Need for Extending Unemployment Benefits. NOT a Disincentive

Economic Policy Institute: About 7.8 million jobs have been lost since the recession began in December 2007, and over that same time, the country should have been adding about 100,000 jobs per month, or about 2.9 million in total, just to keep up with population growth. As a result, the country is now short 10.7 million jobs and has more than five unemployed workers for every job opening. Even if the labor market were to sustain the strong pace of job growth seen in April, when 290,000 jobs were created, it would still take five years to return to the pre-recession rate of unemployment.

Economists on the panel noted that in this sort of a weak labor market, arguments that unemployment insurance discourages people from looking for work do not apply. "If there really are no jobs, that cost (of providing unemployment insurance) goes away," said Rothstein.

Also on the panel, Till Marco Von Wachter, associate professor of economics at Columbia University, addressed some of the risks associated with not providing unemployment insurance to jobless workers. He said that providing unemployment insurance helps keep jobless workers in the labor market, looking for work, since, in order to qualify for unemployment insurance, a person must be actively seeking work. "A high fraction of the unemployed who lose their benefits will end up out of the labor force," he said.

Economist Josh Bivens, stresses that programs aimed at creating jobs are partially self-financed. As people go back to work, tax collections rise, and the need for safety net spending is reduced. When all these factors are considered, the cost of creating jobs is considerably less than the upfront investment. Bivens argues that this large "bang for the buck" is one more reason to make sure that we direct resources as efficiently as possible in the name of job creation.

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