As Congress debates how to extend enhanced unemployment insurance (UI) in the next coronavirus stimulus package, one of the main arguments from Republican leaders against continuing the extra $600 per week in federal jobless benefits is that it discourages people from reentering the labor market because they are potentially earning more with it than they would from their job.
That argument has been found not to hold water in a few different studies over the past few months. Now, another new study finds that longer periods of UI are actually beneficial for workers and the economy more broadly: Extending the number of weeks people can collect jobless benefits gives them the time to find a job actually suited to their expertise and skills, instead of forcing them to accept any job they're offered. This in turn increases labor market efficiency and productivity overall.
That's according to a new working paper from the National Bureau of Economic Research, which compared the quality of the jobs people found under "ordinary" periods of unemployment to jobs found during the 2002 recession and the 2009 Great Recession in the U.S., when unemployment benefits were extended.
When the U.S. extended unemployment insurance benefits during those times — typically, individuals can qualify for up to 26 weeks of benefits on average in the U.S.; during the Great Recession, UI benefits averaged 79 weeks — workers found "better jobs, or jobs best suited for their education level and skill sets," than they would have otherwise, the authors find.
"UI generosity allows workers to search longer and eventually find jobs better suited to their skills," write the authors. This is especially true for women, people of color and less-educated workers, who don't have as much in savings to fall back on under normal economic conditions.
Because people collecting jobless benefits don't feel pressured to take a new job right away, it "frees up" that job for someone else better suited for it, creating a "chain reaction" of workers finding better jobs. "When a worker waits to get another job that is better suited to their skills, they turn down other jobs that may also be better suited for others," the authors write.
However, that doesn't mean all workers find better jobs. There's still the possibility that those who might have been offered a position that they are underqualified for now won't be.
Still, overall, workers find jobs that better suit them, the authors find.
Will Congress extend enhanced jobless benefits?
People in the U.S. who lost jobs as a result of the coronavirus pandemic could receive an extra $600 a week in jobless benefits from the federal government from March through July 2020. That money became a lifeline for many, helping millions without jobs pay for essentials like housing, groceries and more.
That benefit expired last week, though those who have lost their jobs can continue to collect state benefits for 39 weeks (and 41 weeks in Montana) through Dec. 31, 2020, up from the ordinary 26 week average but significantly lower than the Great Recession's average of 79 weeks. House Democrats have proposed extending normal unemployment benefits for gig workers, independent contractors, part-time workers and the self-employed through March 2021.
As for the extra $600 a week, some Republican lawmakers say the enhanced benefit shouldn't be re-upped in the next stimulus package because it disincentivizes people from looking for a job (again, recent research suggests this is not true). Senate Republicans have proposed an additional $200 per week through September, followed by 70% wage replacement.
Congressional Democrats and many economists argue that, with 30 million people still unemployed and just one job available for every four people without one, the $600 per week benefit should be extended through at least the end of the year. In other words, it's not that the benefits are keeping people out of the labor market, but that there aren't jobs to return to yet, regardless of if people are receiving enhanced unemployment or not. And in the meantime, people still have bills to pay.
Without the extra $600 a week in federal aid, the tens of millions of people currently unemployed could see their income drop by about two-thirds, to around $320 per week on average, according to data from the U.S. Department of Labor, though that varies by state.
Congress is currently debating what will be included in the next stimulus bill, with Democrats and Republicans working to strike a deal between $200 per week and $600 per week in additional benefits.
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