JLF Triangle Blog

Yes, It’s True. And No, You’re Not Heartless To Acknowledge It’s True.

The Left is aghast over the idea that there is a connection between the duration of unemployment benefits extended, and when a recipient accepts a job. In reality, as John Hood explains in detail in this column, it is economic fact, no matter which analysis you choose to embrace.

How much do the estimates of this effect vary? Here are a couple of examples. Ina paper published last year, Makoto Nakajima of the Federal Reserve Bank of Philadelphia concluded that federal extensions of UI benefits had pushed the unemployment rate 1.4 percentage points higher than it would otherwise have been during the Great Recession. That works out to be about 30 percent of the increase in unemployment during the period studied.

On the other hand, Rob Valletta and Katherine Kuang of the Federal Reserve Bank of San Francisco published an earlier paper that, using a different model, yielded an effect of only four-tenths of a percentage point.

I say “only” in a relative sense. In absolute terms, we’re still talking about a sizable number of jobs. North Carolina’s U-3 unemployment rate in November 2012 was 9.1 percent, representing about 432,000 people out of a workforce of 4.7 million. If we took the midpoint between the two estimate effects – 0.9 percentage points – and applied it to North Carolina, we could say that without the federal government’s extended-benefits policy, our U-3 rate might be more in the range of 8.2 percent. In other words, about 40,000 more North Carolinians might well be employed today – often at jobs they wouldn’t have preferred, admittedly, but employed nevertheless – if Washington had not embarked on its extended-benefits program.

In the coming days and weeks, the Left will seek to paint any legislator who accepts this fact as an extremist. Remember the data Hood cites when you hear their rhetoric, for that is just what it is — rhetoric designed to denigrate a person rather than enlighten on a policy discussion.

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