Effects of Unemployment Benefits

James Sherk / May 13, 2010

The economic effects of prolonged unemployment insurance (UI) have become a controversial topic recently. Conservatives have pointed to a raft of economic studies to demonstrate that, in addition to the benefits they provide, extended UI benefits also come with an economic cost – lengthening the amount of time that those without jobs stay unemployed. Many liberals ridicule conservatives for suggesting this could happen. Speaker Nancy Pelosi recently called the notion “an insult to these millions of people who have lost their jobs through no fault of their own.” If liberals want to point fingers at insulting economists, however, they should start with the Obama administration.

Alan Krueger, the current Assistant Secretary of the Treasury for Economic Policy and a highly respected labor economist has said in his academic writing exactly that: unemployment insurance causes the unemployed to stay unemployed longer. (more…)