Unemployment benefits pay off in big way, study says


Unemployment insurance does more than keep out-of-work workers afloat. It prevents additional workers from losing their jobs and gives taxpayers a 2-to-1 return on investment, a new Labor Department study says. The study, commissioned during the Bush administration, makes it harder to understand why Congressional Republicans are so willing to pull the plug on 2 million unemployed workers between now and New Year’s Day.

Unemployment insurance benefits are helping in a big way to keep the economy from becoming even worse, the Labor Department study says. Without unemployment insurance:

• The nation’s jobless rate would be 1.2 points higher and could have climbed to over 11 percent during the depths of the recession. An average of 1.6 million more workers would be out of a job.

• The nation’s GDP would have fallen 18.3 percent more than it did. Instead, the economic impact of unemployment benefits boosted GDP by $175 billion in 2009, and by a total of $315 billion during the 19 months of the “great recession.”

Unemployment benefits are “one of the most effective targeted tools for maintaining American families’ purchasing power and keeping the economy on track during an economic downturn,” the Labor Department says.

Real money when people need it

In 2009, jobless workers received $128 billion in income from unemployment benefits, the study says. As recently as this April, nearly 10 million workers were relying on unemployment benefits. Economists call the benefits an “automatic economic stabilizer.” They work by reducing the snowball effect of unemployment. That’s where people who lose a job reduce their spending. Reduced spending hurts businesses, which causes other workers to lose their jobs. Instead, unemployment insurance gives jobless workers money they desperately need to provide for themselves and their families.

“By partially compensating the unemployed for the lost earnings, UI benefits help to break the negative cycle of increased unemployment leading to reduced consumption, which leads to a further reduction in economic activity,” the Labor Department’s study says.

During the “great recession,” unemployment benefits generated $2 in economic activity for every $1 taxpayers that spent. That multiplier effect – 2.0 – was even higher than during previous recessions, according to the study, which was conducted by the research firm IMPAQ International in conjunction with the Urban Institute.

Republicans side with millionaires first

Most unemployed workers qualify for 26 weeks of unemployment benefits when they lose their job. Because of the “great recession,” Congress expanded that to as many as 99 weeks for some workers hit by long-term unemployment.
However, the longest extensions expired on Nov. 30. In the last two weeks, Congressional Republicans twice blocked attempts to continue the benefits for those who have been out of work six months or longer.

The Economic Policy Institute calculates that extending benefits for all of 2011 would create or save 723,000 full-time-equivalent jobs. Just by itself, that’s more jobs than the economy has created in the last eight months combined.

But instead of extending unemployment insurance, Congressional Republicans say their highest priority is extending Bush-era tax giveaways. Continuing those tax breaks would keep the gravy train rolling for millionaires and billionaires while depriving the U.S. treasury of $700 billion over the next decade.

Even though the recession is officially over (economists say it lasted from December 2007 until June 2009), 14.8 million workers are still out of work. About 42 percent of them have been jobless for at least six months, the Labor Department says; about 23 percent have been out of work at least a year. An additional 11.8 million have given up or are working part-time even though they would prefer to work full-time