Unemployment Insurance Doesn't Cause Unemployment

A blog about business and economics.
Nov. 22 2011 5:01 PM

Unemployment Benefits Don't Discourage Job-Seeking

It's easy to see why extending Unemployment Insurance benefits will raise aggregate demand. People on UI are typically in marginal economic situations and are going to have a high marginal propensity to spend. If you own a store in a town with a lot of unemployed people, you're definitely going to see sales go down if people's benefits are cut off. That's going to have downstream impacts on your suppliers and your staff. But it also seems intuitive that a government program which, by definition, you become eligible for by not finding a job will have an averse supply-side impact on the labor market. Yet here, courtesy of Mike Konczal, is an empirical look at the state of play:

1321999078331

As you can see, there's no clear indication that UI eligible people really are staying out of the labor market in a substantial way. One can understand that in part in terms of the fact that there are substantial non-pecuniary reasons to not be unemployed (respect of your peers, etc.) and those particularly apply to the previously employed. All things considered, I'm sure you could imagine a better-designed program that currently existing Unemployment Insurance but the bottom line is that in addition to important humanitarian benefits it does a fair amount to stimulate demand and very little to restrict labor supply.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

The Juice

Ford’s Big Gamble

It’s completely transforming America’s best-selling vehicle.

Should the United States Grant Asylum to Victims of Domestic Violence?

The Apple Watch Will Make Everyone Around You Just a Little Worse Off

This Was the First Object Ever Designed

Don’t Expect Adrian Peterson to Go to Prison

In much of America, beating your kids is perfectly legal. 

Moneybox

How the Apple Watch Will Annoy Us

A glowing screen attached to someone else’s wrist is shinier than all but the blingiest jewels.

Music

A Little Bit Softer Now, a Little Bit Softer Now …

The sad, gradual decline of the fade-out in popular music.

Is Everyone Going to Declare Independence if Scotland Does It? 

I Tried to Write an Honest Profile of One of Bollywood’s Biggest Stars. It Didn’t Go Well.

Trending News Channel
Sept. 12 2014 11:26 AM Identical Twins Aren’t Really Identical
  News & Politics
Jurisprudence
Sept. 14 2014 2:37 PM When Abuse Is Not Abuse Don’t expect Adrian Peterson to go to prison. In much of America, beating your kids is perfectly legal. 
  Business
Moneybox
Sept. 12 2014 5:54 PM Olive Garden Has Been Committing a Culinary Crime Against Humanity
  Life
Inside Higher Ed
Sept. 13 2014 8:38 AM “You’re More Than Just a Number” Goucher College goes transcript-free in admissions.
  Double X
The XX Factor
Sept. 12 2014 4:05 PM Life as an NFL Wife: “He's the Star. Keep Him Happy.”
  Slate Plus
Behind the Scenes
Sept. 12 2014 5:55 PM “Do You Know What Porn Is?” Conversations with Dahlia Lithwick’s 11-year-old son.
  Arts
Music
Sept. 14 2014 11:44 PM A Little Bit Softer Now, a Little Bit Softer Now … The sad, gradual decline of the fade-out in popular music.
  Technology
Future Tense
Sept. 12 2014 3:53 PM We Need to Pass Legislation on Artificial Intelligence Early and Often
  Health & Science
New Scientist
Sept. 14 2014 8:38 AM Scientific Misconduct Should Be a Crime It’s as bad as fraud or theft, only potentially more dangerous.
  Sports
Sports Nut
Sept. 12 2014 4:36 PM “There’s No Tolerance for That” Pete Carroll and Jim Harbaugh say they don’t abide domestic abuse. So why do the Seahawks and 49ers have a combined six players accused of violence against women?