Feb 01, 2014

Unemployment Insurance Extensions: A View

Over the past five years, at least 600,000 workers in the United States have been out of the labor force. During this time, unemployment benefits have been in high demand. However in December 2013, unemployment benefits fell to 330,000, signaling fewer layoffs and steady job growth. The numbers from the U.S. Department of Labor support this, with the latest employment report showing an unemployment rate of 6.7 percent. The combination of the economy picking up and the country returning to a normal status of employment gain are part of the reason the federal government has decided to ends its program to give emergency unemployment benefits to long-term unemployed workers. This extended program results in a cost of $25 billion annually.

In 2008, Congress set up an emergency benefits program to take over when state unemployment benefits ran out, usually after 26 weeks. With this federal program, benefits were extended up to 99 weeks in states with extremely high unemployment. However, in December 2013, the program was not renewed, and on December 28th, about 1.3 million people were cut off.

Different Viewpoints

Critics of the unemployment insurance extensions believe that paying people not to work takes away the motivation to actively search for a job. However, opponents to ending the program point out that while the unemployment rate has dropped from a high of 10 percent to 7 percent, there are still 2.7 unemployed job seekers for every opening. At the beginning of the recession in December 2007, there were 1.8 unemployed workers per opening.

Additionally, long-term unemployment (defined as being out of work for 27 weeks or more) is at a high level comparable to the World War II peak. The White House Council of Economic Advisers points out that not extending the benefits will put a dent in job-seekers’ incomes that would have an influence on the economy, costing 240,000 jobs this year. 

Number of Unemployed Workers per Job Opening

Unemployment by Area

Among the 49 metropolitan areas with a Census 2000 population of 1 million or more, Riverside-San Bernardino-Ontario, California, had the highest unemployment rate in November 2013, at 9.4 percent. Minneapolis-St. Paul-Bloomington, Minnesota-Wisconsin, had the lowest rate among the large areas, at 4.0 percent.

Unemployment Rates for Selected Large Metropolitan Areas

Unemployment rates were lower in November than a year earlier in 293 of the 372 metropolitan areas, higher in 71 areas, and unchanged in 8 areas. Twenty-one areas had jobless rates of at least 10.0 percent, and 73 areas had rates of less than 5 percent.

“When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy.” ~Senator Rand Paul of Kentucky