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Working people didn’t cause the recession but they sure have paid a price for it. While the current unemployment rate is significantly high, it doesn’t reflect the real unemployment rate, those that have given up and those that can only find part-time employment. Of the 13.3 million Americans officially counted as unemployed, nearly half of them have been unemployed for more than 26 weeks.
Unemployment insurance provides an essential safety net for people who lose their jobs through no fault of their own. In addition to its function as a safety net for the unemployed it also provides an economic stimulus to the general economy. For every one dollar of unemployment benefits, $1.64 of economic activity is generated, with benefits being spent immediately on groceries, housing, medical care, and other daily needs. Unemployment insurance kept 3.2 million Americans out of poverty in 2010, and increased GDP by $315 billion overall from the start of the recession through the second quarter of 2010.
Unemployment benefits make people lazy: fact or fiction?
A recent study by Jesse Rothstein, a professor of public policy and economics from the University of California Berkeley and former chief economist at the Department of Labor debunks the argument bolstered by many conservatives that unemployment benefits provide a disincentive for jobless workers to find new work and have contributed to the nation's high unemployment rate. Using data from the Department of Labor's Current Population Survey, Rothstein finds:
Any negative effects of the recent unemployment insurance extensions on job search are clearly quite small, too small to outweigh the benefits of transfers to people who have been out of work for over a year in conditions where job-finding prospects are bleak.
Rothstein findings indicate that unemployment insurance benefits extensions increased the share of people who became re-employed by about 1.3 percent because it motivated people to not exist the labor force and stop looking for work. Read the full study here.
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