See also: Animation: How Unemployment Insurance Helps the Economy by Heather Boushey
Unemployment benefits, the primary means of assistance that the federal and state governments provide to people who lose their job through no fault of their own and are unable to find a new one, will expire on December 31 unless Congress votes to continue them. If Congress fails to act, 2.2 million unemployed Americans will lose critical benefits by February 2012.
Without further extensions and continued benefits, it is highly likely that millions of people will still be looking for a job in 2012. This is bad news for the jobless and for our economy. Congress could mitigate the current inhospitable job climate and assist millions of active job seekers trying to make ends meet. Here are five reasons why they should:
- For every one job opening, there are four people actively looking for employment. As recently as October, nearly half of all unemployed workers, 43 percent or 5.7 million people, had been out of work and actively looking for a job for six months.
- By allowing unemployment benefits to end, Congress would allow the economy to lose around $50 billion in demand, which would further hinder its recovery and cost our country another 275,000 jobs.
- Benefits for those facing long-term unemployment have helped create around 700,000 jobs per quarter over the past few years.
- Unemployed people put their benefits back into the economy, helping it grow and recover, and are likely to spend their benefits quickly and completely. For every $1 spent on unemployment benefits, the economy gains $2.
- In 2010 unemployment benefits lifted 3.2 million Americans out of poverty.
Even though the positive effects of unemployment benefits are clear, conservatives in Congress still want to cut them and allow their extensions to expire.
In a May Senate debate, Sen. Jon Kyl (R-AZ) said that unemployment insurance “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.” Why? He contends that “people are being paid even though they’re not working.”
Actually, “Nothing could be further from the truth,” said Sen. Max Baucus (D-MT). “I don’t know anybody who’s out of work and is receiving some unemployment insurance believes that that payment is sufficient not to find a job. The payments are so much lower than any salary or wage would be, it’s just ridiculous.” He continued by commenting that people are indeed looking for work and that unemployment is not a choice.
But many people may feel like they have no choices left, thus leaving the workforce and the unemployment insurance program. Although the unemployment level decreased to 8.6 percent in November—its lowest point in two-and-a-half years—the drop is due at least in part to people completely leaving the workforce. Unemployed workers face daunting odds finding employment in this labor market. The employment rate—the share of Americans with a job—is 58.5 percent, and it remains just 0.4 percentage points higher than the near-30-year low point reached this July.
The extension of unemployment benefits cannot be allowed to expire. Far from giving people a reason not to find work, they have been shown to spare active job seekers from living in poverty, and to boost the struggling economy. This, in turn, can only serve to create the jobs that people both want and need.
Heather Boushey is Senior Economist at the Center for American Progress. Meghan Miller is an intern with the Center.
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