Want the unemployment rate to stay stagnant, rise, or not decrease as quickly as possible? Then support an extension of unemployment benefits.
Sure, liberals are touting the three-month extension (which isn’t offset by spending cuts elsewhere, despite its hefty $6.5 billion price tag) as an act of compassion for struggling unemployed Americans. But the data shows a different picture: Give people unemployment benefits, and it’s likely they will take longer to find employment.
“Extended unemployment benefits are not an economic free lunch,” explains James Sherk, a senior policy analyst in labor economics at The Heritage Foundation. “Economists have consistently found that they prolong workers’ job searches, raising the unemployment rate.”
“Many liberals argue this is a plus—it helps the unemployed hold out for higher wages,” Sherk continues. “But higher wages discourage businesses from hiring, which means fewer new jobs.”
Specifically, Sherk has noted studies that “show that extending UI [unemployment insurance] benefits to 99 weeks has increased the national unemployment rate by roughly 0.5 percentage points.”
The Senate takes up another extension today. And while Congress no longer permits benefits to last as long as 99 weeks, the current extension, if passed, could allow people in some states to receive unemployment benefits as long as a whopping 73 weeks. That’s close to a year and a half of benefits.
Three and a half years after President Obama’s laughably dubbed “recovery summer,” the unemployment rate remains 7 percent – and the labor participation rate has nose-dived from 66.2 percent of Americans at the beginning of 2008 to 63 percent in November 2013.
Thankfully, the unemployment rate has improved in recent years. But if we want to speed up that process, extending unemployment benefits yet again is the wrong way to go.