Wednesday, May 07, 2008

Extending Unemployment Benefits

Robert Samuelson argues in favor of extending "unemployment insurance from the standard 26 weeks to 39 weeks."
The great danger of unemployment insurance is that people are paid to be jobless. Benefits that are too generous or that last too long can raise unemployment. This is a problem in Europe, where benefits are relatively lavish. But it's a smaller issue here; some academic studies find that extending unemployment benefits by 13 weeks might slightly slow the flow of workers back into jobs. People don't start looking so quickly or are more picky. But the effects aren't large, because the benefits are fairly stingy.
My anecdotal experience is consistent with those academic studies. But there's something you can do to minimize the effect - give the same average weekly benefit over the full 26 (or 29) weeks, but have more generous benefits at the outset and a reduced extended benefit. That gives a much-needed boost to people who unexpectedly lose their job and scramble to find a new one, but provides a periodic incentive to the less motivated to pound the pavement and send out the résumés.

I'm not unsympathetic to the fact that some people are actively searching for work throughout the entire period of their unemployment benefits, but for a variety of reasons keep running into brick walls. But I think on the whole a system that provides better short-term relief and adds an incentive to find a job quickly, without reducing total benefits, is an alternative that should be explored.

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