Cutting Unemployment Benefits Did Not Promote Work

Over the last few years Republican politicians and thought leaders have pushed the idea that the reason the unemployed were not finding jobs was because unemployment insurance benefits were too generous.

The GOP House refused to extended federal jobless benefits that allowed some unemployed workers to receive up to 99 weeks of payments. A number of Republican controlled states also slashed state unemployment benefits cutting the number of weeks one could receive as well as the size of the benefit. The most radical cuts happened in North Carolina.

These state level benefit cuts helped to create a natural experiment where economists and other social scientists could compare states that had cut unemployment benefits with those states that did not cut unemployment benefits.

Economists on the left and the right have been looking at the data. Comparing outcomes in states that made benefit cuts like North Carolina, to nearby states that did not cut benefits shows at a minimum benefit cuts do not help the unemployed find a job. Groups like the left wing Economic Policy Institute and the right wing American Enterprise Institute have confirmed that cuts to unemployment did not help the states making cuts to grow faster or have less unemployment.

The evidence also shows that unemployment insurance payments help stabilize a weak economy. Economists examining the great recession found that the Federal expansions of UI helped to avert about 1.4 million foreclosures and $70 billion of housing-related deadweight losses between 2008 and 2012.

Unemployment benefits are a vital part of the safety net. The benefits are earned through work and are only available to people who have worked enough to qualify. One would think that unemployment benefits would be the last type of benefits to be cut when the economy is still not fully recovered from a major recession.

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