On extending unemployment pay

Obama will host Americans who have lost their long-term unemployment benefits at the White House on Tuesday.

“When Congress first past this version of emergency unemployment compensation in 2008, and the president [George W Bush] signed the law, the unemployment rate was 5.6%, and the average duration of unemployment was 17.1 weeks. Today, the unemployment rate is 7%,” Perez said. “The average duration of unemployment is now 36 weeks.”
Betsey Stevenson, a member of the White House’s council of economic advisers, said that while the broad economic outlook was positive, the long-term unemployment rate – currently 2.6% – has remained enduringly high. “To put that in perspective, [during] average or normal times we’d expect to see an unemployment rate that was below 1%.”

The argument being that because long term unemployment is high therefore benefits should be extended.

However, there’s another, much less popular I have to admit, argument that the extension of long term benefits (in the US, benefits usually only last for 26 weeks, this has been extended in the current times) is, in some part, what causes a rise in the long term unemployment.

And the point about this argument is that it is true. The simplest proof being that traditionally long term US unemployment is that 1%, while long term unemployment over here, where we don’t have time limits on benefits, is more like 3 or 4 % (figures dimly remembered from a Richard Layard paper).

There have been more recent studies showing that the extension of unemployment benefits do indeed lengthen the period of unemployment in the US.

This doesn’t, of course, mean that if the extension is not granted then all of those long term unemployed will find jobs. Rather, it means that some of them will: and also that those who don’t will be entirely skint. Leaving a trade off: a trade off that you can decide either way. Do we be cruel to be kind to rescue some from the scrap heap of long term unemployment, at the cost of the destitution of some others?

Your choice really: but it’s undoubtedly true that the more the US has European style programs for the long term unemployed then the more US long term unemployment will look like European.

5 thoughts on “On extending unemployment pay”

  1. I would add that the government’s unemployment rate figures are rubish. Labor participation rate is way down, as millions have given up finding a job. Actual unemployment is over 11%.

  2. @ Gamecock
    Over here the true rate is even higher – and it is chronic, not a result of the recession: in 2007 pre-crash 4.4 miliion were on out-of-work benefits – 13% (latest about 5.,4 million or 15%).

  3. Which brings us back to the question of why any nation governed by rational beings would import large quantities of additional low-skilled labour, when there is already a surplus.

  4. If we are to follow the US model, we should of course massively increase the prison population to reduce unemployment.

    Sorry, can’t be bothered to link, but see stumbling & mumbling (Chris Dillow) on the relatively high rates of unemployment when the workhouse was what the unemployed got.

Leave a Reply

Your email address will not be published. Required fields are marked *