Politics & Policy

The Case for Extending Jobless Benefits in Seven Charts


A crowded job fair in New York

Photograph by Mark Lennihan/AP Photo

A crowded job fair in New York

The Senate will vote on Tuesday morning as to whether to take up legislation to renew emergency federal unemployment compensation, which expired on Dec. 28 and cut off 1.3 million jobless workers. Democrats and President Obama support this three-month extension; Republicans do not (with a few exceptions, including Senator Dean Heller of Nevada, who is co-sponsoring the bill). Supporters will need 60 votes to break a Republican filibuster, and unless a Dickensian apparition visited a half dozen or so Republican senators last night and induced a change of heart, they’re probably not going to get them.

That’s too bad, because it’s far too soon to cut off benefits for the long-term unemployed. The U.S. labor market hasn’t nearly recovered from the Great Recession. Abandoning these jobless workers isn’t just cruel, it’s bad for the economy. Here’s why Congress should find a way to renew the program:

The number of long-term unemployed—those who have been out of work for at least 27 weeks and exhausted their state benefits—remains much higher than the cut-off point for emergency aid in previous recessions. About twice as high, in fact:

cbpp.org

Here’s an even more vivid illustration of the severity of the recession, the job loss it has wrought, and why it’s too soon to end emergency benefits:

cpbb.org

And the long-term unemployment rate has remained stubbornly high, even as the overall unemployment rate has fallen:

Bureau of Labor Statistics

One reason is that the labor market is still very weak. There are many more workers looking for jobs than there are jobs available. To be super specific, my Bloomberg terminal says that right now there are 2.7789 unemployed people for every job available—and this constitutes an improvement:

A further reason it’s a good idea to extend the emergency program is that we have an example of what might happen if benefits aren’t renewed: North Carolina. Last July, Republican Governor Pat McCrory signed a bill cutting state benefits, which disqualified North Carolina from the federal program. A couple things happened after that. First, North Carolina’s unemployment rate fell pretty dramatically—check out the black bar:

John Quinterno, South by North Strategies

Great news, right? Actually, no—look at the blue bars. The number of employed people barely budged. How could the unemployment rate fall so fast if people weren’t getting jobs? Because most of them appear to have quit looking for work altogether and fallen out of the labor force. People who aren’t actively looking for work aren’t counted as “unemployed.” Look at what’s happened to North Carolina’s labor-force participation rate, which hit a 37-year-low (!) in October:

That’s bad for a number of reasons. While the families of these people are going to suffer mightily, it’s bad for everybody else, too. Able-bodied people who want to work but can’t find jobs are wasted resources. They represent lost U.S. economic potential. Cutting them off doesn’t necessarily save taxpayers money, either, since many wind up on disability, food stamps, or collecting Social Security earlier than they would like to. Historically, disability claims move in tandem with the unemployment rate, and once workers go on disability they almost never return to the workforce. Sure enough, disability claims have skyrocketed since the start of the recession:

Data: Bloomberg

Failing to extend federal unemployment benefits would exacerbate these bad trends and cause all kinds of economic damage.

Green_190
Green is senior national correspondent for Bloomberg Businessweek in Washington. Follow him on Twitter @JoshuaGreen.

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