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Conservatives often claim that unemployment insurance, or UI benefits discourage the unemployed from seeking employment. They argue that reduced job seeking on the part of the unemployed actually increases unemployment as people choose to rely on benefits rather than find a new job.
Republican Sen. John Kyl, for example, has said that “[Unemployment insurance] doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.” Similarly, Pennsylvania Republican Gov.-elect Tom Corbett noted while on the campaign trail that “People don't want to come back to work while they still have unemployment [benefits]. ... if we keep extending unemployment the people are going to sit there.”
The facts tell a different tale, however. Our nation’s extraordinarily high level of unemployment is due to a lack of demand for workers rather than a lack of people willing to work.
Consider that right now there’s only one job opening for every five job seekers and this has been the case—or worse—since January 2009. Think of this like a game of musical chairs: There’s one chair but five players (or 3 million chairs and 15 million unemployed). When the music stops, four out of five people won’t be able to find a seat. These long odds of finding a job are highly unusual. Before the recession began in 2007 there was just over one worker seeking a job for every opening available (1.5 workers per job opening).
Four in 10 of the unemployed (41.8 percent as of October 2010) have been out of work and seeking a job for at least six months. Our economy has seen more “long-term” unemployed during the Great Recession than at any other point since the Department of Labor began tracking unemployment in the 1940s.
Because the problem is a lack of demand for workers the link between receiving UI benefits and weak job search effort is currently very weak. Research by the San Francisco Federal Reserve Bank shows that unemployed workers who qualify for UI benefits stay unemployed for only 1.6 weeks longer than those who do not qualify for such benefits. In a strong labor market more weeks of UI benefits may not make sense, but in this especially challenging economy they help those who simply cannot find work.
Read More http://www.americanprogress.org/issues/2010/11/ui_disincentive.html
By Heather Boushey, Jordan Eizenga
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