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Unemployment Benefits Boost Workers and the Economy

Kelly Edwards, 54, who was laid off 4 years ago, holds a sign at a street corner in Pasadena, California, April 25, 2012.

Over one million workers may lose their unemployment insurance (UI) benefit on December 28 unless Congress acts. But extending UI benefits is not in the recent budget deal agreed to by congressional negotiators. Brookings experts have examined the program—explaining what it is and how it works—and explored some of the main questions about it.

In an interview on "Airtalk" with Southern California Public Radio, Senior Fellow Gary Burtless engaged in a conversation about the importance of long-term unemployment support in an era of recession:

The long-term unemployment rate in the United States ... is about 2.6 percent, which is very, very high by historical standards. A lot of those people do not have good prospects of finding a job anytime soon and taking away their weekly unemployment benefit is going to reduce the amount that they can spend on groceries, and rent and all other necessities of life. So, they face a very, very tough time if we don't give them the kind of insurance that we've given to the long-term unemployed in previous recessions.

At a time when voters and Congress have not supported government-led direct-employment initiatives to address the unemployment problem, Burtless said that "helping people pay their bills a little bit longer into an unemployment spell seems like the next best alternative we have."

Last year, Michael Greenstone and Adam Looney, then director and policy director, respectively, of The Hamilton Project, wrote in a paper that "the evidence continues to suggest that extended [unemployment] benefits provide a sizable boost for workers and the economy, but have little negative effect on work incentives and unemployment." To the oft-cited charge that unemployment benefits induce people to stay unemployed longer, the authors conclude that "the evidence suggests that extended benefits are having at most a small effect on the duration of unemployment. Rather, today’s tough economic situation is the central cause of these lengthy durations of unemployment."

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