Unemployment Benefits: A Job Creator?

13 Jul

Nancy Pelosi is calling for more money from Obama’s stash for unemployment benefits.  She recently stated “let me say that unemployment insurance… is one of the biggest stimuluses (sic) to our economy. Economists will tell you, this money is spent quickly. It injects demand into the economy, and it’s job creating. It creates jobs faster than almost any other initiative you can name.”

Although I really trust Nancy Pelosi on matters of economics and job creation, I thought I’d take a look and see what the Heritage Foundation has to say about the consequences of extending unemployment benefits.  In a piece titled The Economics of Extending Unemployment Benefits, they noted:

Unemployment benefits reduce the incentive and the pressure to find a new job by making it less costly to remain without work. Consequently, workers with UI benefits look for new jobs less rigorously than do workers without them. The typical unemployed worker spends about 32 minutes a day looking for a new job.[1] Workers eligible for UI benefits spend about 20 minutes a day looking for work during their 15th week of unemployment. They look much harder when their benefits are about to end, spending more than 70 minutes a day job hunting in the 26th week of unemployment.[2] Since workers with unemployment benefits search less rigorously for work until their benefits are about to expire, it typically takes them longer to find new jobs. Labor economists estimate that extending the potential duration of unemployment benefits by 13 weeks increases the average amount of time workers on UI remain unemployed by two weeks.[3]

This has economic consequences. Workers do not create economic wealth during the additional weeks they remain unemployed. They save and consume less because UI replaces only a portion of their wages. Labor markets become less flexible because it takes more time for workers to transition from one industry or state to another. This hinders overall economic growth.”

The Heritage Foundation also points out that “academic research shows that only 55 cents of every $1 in benefits gets spent, as unemployment benefits discourage spousal work. Unemployment benefits have been handed out for two years now and there still remains a jobs deficit of 7.4 million.”

But, not to worry Nancy, you’ve got the Democrat media faithfully carrying your water each and every day.  They get their daily talking points from the Democrats in Washington and quickly hit the airwaves with their marching orders.


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