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Why unemployment benefits must be extended

By Ayers, Sarah
Proquest LLC

Since 2008, federal lawmakers have provided extra weeks of unemployment benefits for Americans who want a job but cannot find one - a group that totals 11.3 million people today.

Recognizing that unemployment rates have remained high since the start of the Great Recession of 2007 to 2009, Congress has repeatedly enacted legislation to extend these benefits. Under the most recent extension, the American Taxpayer Relief Act of 2012, emergency unemployment benefits will expire at the end of 2013. But extending emergency unemployment benefits will prevent 3.1 million Americans from being cut off from benefits in the coming months and will lead to the creation of 310,000 additional jobs next year. Maintaining these benefits is the right thing to do for the U.S. economy and for the families who rely on unemployment insurance to pay their bills.

If Congress does not extend emergency unemployment compensation before the end of the year, 1.3 million Americans^ will lose their benefits just after Christmas, and another 1.9 million will lose their benefits in the first six months of 2014. Allowing emergency unemployment benefits to expire would constitute yet another self-inflicted wound to the U.S. economy. It would reduce economic growth by 0.4 percentage points in the first quarter of 2014 and cost our economy 310,000 jobs next year.

This is because unemployment benefits are not just good for workers; they are also good for the economy. By putting money into the pockets of people who will spend it, unemployment benefits boost demand, spur economic growth, and create jobs. In fact, the nonpartisan Congressional Budget Office has found that unemployment benefits are one of the most effective fiscal policies to increase economic growth and employment. Mark Zandi, chief economist at Moody's Analytics, has found that every $1 spent on unemployment insurance grows the economy by $1.55. All these dollars circulating through the economy create jobs. According to an Economic Policy Institute analysis, extending emergency unemployment benefits would create 310,000 additional jobs in 2014.

Extending unemployment benefits is also important because there are still too many Americans who cannot find work. The national unemployment rate remains relatively high at 7.2 percent, and workers in many parts of the country are facing much higher rates of unemployment. The unemployment rate in Michigan, for example, is 9.1 percent, which means that ending emergency unemployment compensation would cut off 130,300 Michiganders from benefits at a time when the labor market is still incredibly weak; unemployment benefits in that state have already been cut by more than half in the past two years. Maintaining federal emergency unemployment benefits is crucial because state benefits are not sufficient at a time when Americans are out of work for longer periods of time than ever before. While the average unemployed person is out of work and searching for a new job for 36 weeks, states only provide unemployment benefits for a maximum of 26 weeks.

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Not surprisingly, close to half of unemployed workers run out of state unemployment benefits before finding a new job. Federal extended benefits provide much-needed income support during this time, when many Americans would otherwise be unable to pay their rent or put food on the table.

Federal cuts have already dramatically reduced the amount of unemployment benefits available to workers. America cannot afford the human and economic costs of ending emergency unemployment compensation now. Congress should immediately approve legislation that fully extends emergency unemployment benefits through 2014.

By Sarah Ayers

Sarah Ayres is a Policy Analyst in the Economic Policy department at the Center for American Progress.

Copyright:(c) 2014 Michigan Chronicle
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