Unemployment Benefits Cutoff – Heartless Or Tough Love?

This week, Congress allowed federal unemployment benefits for millions of out-of-work Americans to expire to as it failed to pass an extension on those benefits for another year. The below was featured as one of a collection of opinions in POLITICO that discuss whether those benefits actually further increased unemployment by discouraging recipients from seeking full-time jobs or whether those benefits could be considered a humane act in an unforgiving economy.

Employment conditions remain extremely weak, with the payroll gains this year making up for only a small share of the more than 8 million jobs that were lost to the recession (and that’s not including the jobs that would have been created for our expanding population if the economy hadn’t slumped). In these circumstances, there is a strong case for extending emergency unemployment benefits. Part of the argument is humanitarian—it would allow many job losers and their families to avoid painful cutbacks in consumption. But, there would also be broader benefits to the economy, as the spending of these families would contribute to the overall demand for goods and services, which, in turn, would feed back into business’s willingness to hire. Hence, the Congressional Budget Office’s conclusion that offering federal aid to the unemployed is among the most cost-effective ways for the government to increase employment.

Yes, extending emergency unemployment benefits would mean that some people receiving benefits will not look as hard for new jobs or be pickier about the jobs they are willing to accept. In a stronger economy, this behavior could contribute to persistently high unemployment. But, it’s not something to worry about right now, as we currently have no shortage of people to fill jobs that others pass up.