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Why Congress Must Extend Emergency Unemployment Benefits

SOURCE: AP/Alex Brandon

Former House Speaker Nancy Pelosi (D-CA) speaks during an enrollment ceremony to extend emergency unemployment insurance in 2010. Emergency unemployment benefits will expire at the end of 2013.

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Since 2008, federal lawmakers have provided extra weeks of unemployment benefits for Americans who want a job but cannot find one—a group that totals 11.3 million people today. Recognizing that unemployment rates have remained high since the start of the Great Recession of 2007 to 2009, Congress has repeatedly enacted legislation to extend these benefits. Under the most recent extension, the American Taxpayer Relief Act of 2012, emergency unemployment benefits will expire at the end of 2013. But extending emergency unemployment benefits will prevent 3.1 million Americans from being cut off from benefits in the coming months and will lead to the creation of 310,000 additional jobs next year. Maintaining these benefits is the right thing to do for the U.S. economy and for the families who rely on unemployment insurance to pay their bills.

If Congress does not extend emergency unemployment compensation before the end of the year, 1.3 million Americans will lose their benefits just after Christmas, and another 1.9 million will lose their benefits in the first six months of 2014. Allowing emergency unemployment benefits to expire would constitute yet another self-inflicted wound to the U.S. economy. It would reduce economic growth by 0.4 percentage points in the first quarter of 2014 and cost our economy 310,000 jobs next year.

This is because unemployment benefits are not just good for workers; they are also good for the economy. By putting money into the pockets of people who will spend it, unemployment benefits boost demand, spur economic growth, and create jobs. In fact, the nonpartisan Congressional Budget Office has found that unemployment benefits are one of the most effective fiscal policies to increase economic growth and employment. Mark Zandi, chief economist at Moody’s Analytics, has found that every $1 spent on unemployment insurance grows the economy by $1.55. All these dollars circulating through the economy create jobs. According to an Economic Policy Institute analysis, extending emergency unemployment benefits would create 310,000 additional jobs in 2014.

Extending unemployment benefits is also important because there are still too many Americans who cannot find work. The national unemployment rate remains relatively high at 7.2 percent, and workers in many parts of the country are facing much higher rates of unemployment. The unemployment rate in Michigan, for example, is 9.1 percent, which means that ending emergency unemployment compensation would cut off 130,300 Michiganders from benefits at a time when the labor market is still incredibly weak; unemployment benefits in that state have already been cut by more than half in the past two years.

Maintaining federal emergency unemployment benefits is crucial because state benefits are not sufficient at a time when Americans are out of work for longer periods of time than ever before. While the average unemployed person is out of work and searching for a new job for 36 weeks, states only provide unemployment benefits for a maximum of 26 weeks. Not surprisingly, close to half of unemployed workers run out of state unemployment benefits before finding a new job. Federal extended benefits provide much-needed income support during this time, when many Americans would otherwise be unable to pay their rent or put food on the table.

Unemployment benefits also prevent millions of Americans from falling into poverty. A Congressional Research Service analysis found that unemployment benefits lifted 3.3 million people out of poverty in 2009, including nearly 1 million children living with a family member who received unemployment benefits. The same study found that the poverty rate for families who received unemployment benefits was about half of what it would have been without those benefits. By extending unemployment benefits, we keep millions of families afloat and out of poverty.

Federal cuts have already dramatically reduced the amount of unemployment benefits available to workers. In early 2012, Congress cut the number of weeks of federal unemployment benefits available to all states and raised the unemployment-rate threshold at which states can receive maximum benefits. Now, federal unemployment benefits in every state are significantly less generous than in the recent past. Unemployment benefits have dropped by more than 50 percent in some states, including Florida, Georgia, Kansas, Michigan, Minnesota, and North Carolina. (see interactive for state-by-state reductions in unemployment benefits) Only one in three long-term unemployed workers already receives federal benefits; if Congress allows emergency unemployment compensation to expire, only one in four jobless workers would receive benefits. Moreover, sequestration has resulted in a decrease in the weekly benefit amount. The average worker now collects just $269 per week, compared to $296 one year ago.

America cannot afford the human and economic costs of ending emergency unemployment compensation now. Congress should immediately approve legislation that fully extends emergency unemployment benefits through 2014.

Sarah Ayres is a Policy Analyst in the Economic Policy department at the Center for American Progress.

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