Surprise! Ending unemployment benefits increased employment: Fed
By refusing to authorize an extension of unemployment benefits, Republicans did more for the unemployed than President Obama and the Democrats have done in 6 years.
The New York Federal Reserve conducted a study of the issue and found that there was a huge increase in the number of job openings in the 6 months following the end of extended benefits - an increase of an astonishing 20%.
Employers were more willing to create jobs and workers were more willing to take them after the expiration in January of a program entitling unemployed workers to collect nearly two years of benefits.
That’s the conclusion of a study this week by the New York Federal Reserve Bank. It found that the number of new jobs that came open each month exploded by 20 percent to 4.7 million by June, six months after the extended jobless benefits ended.
The rate of new job openings also soared to its prerecession peak of 3.3 percent of all workers just months after Congress allowed the benefits to end after Democrats and Republicans failed to agree on an acceptable way to pay for them.
“Job openings are arguably one of the most important indicators of recovery in the labor market, as they reflect employers’ willingness to hire,” said Fatih Karahan, one of the authors of the Fed study.
“The expiration of the extended benefits increased the willingness of firms to hire, leading to the large increase in job openings in the first half of 2014,” he said.
The study found that employers put off hiring when generous unemployment benefits were available because they felt that workers were unwilling to take low-paying jobs as long as they had checks coming in the mail under the benefits program.
n the battle in Congress over the benefits, Democrats predicted that the loss of benefits would hurt the economy because unemployed workers would have less money to spend on necessities like groceries and rent. But Republicans argued that it was the availability of benefits that was keeping many workers from taking jobs that were available.
At the time the extended benefits expired, about 1.3 million unemployed workers lost an important source of income. Their unemployment checks averaged around $300 per week.
While the benefit checks did provide some stimulus to the economy, as Democrats contended, the Fed study found that they also prompted employers to hold back on job offers, knowing that many workers would not accept the low wages the jobs paid, Mr. Karahan said.
“Increases in unemployment insurance generosity put upward pressure on wages since it becomes more expensive to lure people into work,” he said.
“Unemployed workers might also respond to unemployment insurance extensions by searching less intensively or by being picky about job opportunities,” he added. “As a consequence, firms anticipate lower profits and cut back job creation, which lowers the job finding rate and increases the unemployment rate.”
And to all of this, I say, "duh." You don't have to have a Nobel Prize in economics like Paul Krugman to have figured this out. Being forced to take a job - even one that doesn't pay as much as your old job, or that you don't want - is being a responsible adult. The Democrats were perfectly willing to continue to take from the productive class and give to those who were eminently capable of supporting themselves, but for one reason or another, refused to do so.Which is more cruel? Forcing people to be adults and contribute to society, or coddle them like little children in need of support?