Why we should extend unemployment insurance


Recently, some conservatives in Congress have been standing in the way of extending unemployment benefits to the millions who’ve been hit by this recession, arguing it’s exacerbating the economic downturn.


Right now unemployment benefits are one of the mechanisms keeping the economy afloat. Remember it’s a jobless recovery.  So if people aren’t collecting unemployment insurance, fewer of them will be buying necessary goods, like food.  Stimulus spending on extended unemployment insurance actually generates an estimated $1.61 in economic activity per dollar spent.  Without it, we’d have more layoffs and a slower recovery. Until a sufficient number of jobs are created, this insurance is necessary.

Let’s backtrack a little bit here.  In October of 2009, Minnesota’s unemployment rate hit a recession high of 8.4 percent. That month, the number of people who were unemployed rose to 250,584. A month later, Congress voted 98-0 to extend unemployment insurance for an additional 14 weeks.  Shorter extensions have also been approved, and for good reason; the situation has improved only slightly.

Look at last month’s numbers.  Yes, we had a net gain of 5,600 jobs (54% was Census hiring), but 213,844 Minnesotans are still unemployed. The market is no where near producing enough jobs to keep up with lay offs.

The national rate is still barely below October 2009’s 10.2% high, yet extending unemployment insurance has somehow become a liberal excess.  Last week, Congress voted 56-40 not to end the filibuster blocking extension of unemployment benefits.


Apparently, more than just hardcore conservative policymakers believe that extending unemployment benefits is somehow a disincentive to job-hunting.

Ask nearly anyone receiving the average $353 per week unemployment benefit if he or she wouldn’t rather be working.

Research from the San Francisco Fed shows that argument is flawed. As of late 2009, length of unemployment rose by 18.7 weeks for people who lost jobs and are receiving benefits compared to 2006-2007 figures; for those who quit jobs or are new to the market and aren’t receiving unemployment, it took an additional 17.1 weeks to find a job.

These numbers show extended unemployment insurance seems to have produced a difference of a mere 1.6 weeks, which means extending benefits doesn’t cause a “foot-dragging” effect in the job search. Meanwhile, the benefits add to aggregate demand and prevent employers from laying off even more people.

Yes, we need to be careful of not falling into an indefinite obligation, but in the short run, extended unemployment benefits are stimulating the economy.  As more jobs are added, we can reduce this kind of aid, but in the meantime, unemployment insurance extensions are helping people stay above the poverty line and are maintaining demand for goods and services.  The economy is on the mend but it won’t be for long if we fail to renew necessary economic stimulus measures.