…on the Larry Kudlow show, towards the end of the hour. Riffing off of this from last night.
I’m sure I’ll hear a lot about how Unemployment Insurance (UI) benefits amount to a paid vacation for a bunch of lazybones who would find a job immediately if we shut off the program.
But I don’t buy it for a second. This economy is demand constrained and there simply aren’t enough jobs to go around. This is one area where facts must bust their way into the fact-free-zone.
–According to the BLS Jobs Opening Survey, there were 3.4 million job openings in September (most recent data); that month there were 6.9 million people receiving UI and 14 million unemployed (see figure). Go after UI and all we’re talking about here is a mean-spirited, economically destructive game of musical chairs.
Sources: job openings, BLS JOLTS; on UI, Dept of Labor UI Accounts; Unemployed, BLS
–Remember, the average weekly benefit is around $300 bucks. It’s not nothing but it’s below the 10th percentile of weekly earnings for full-time workers (see table 5 here). And we’re not just talking about poor people—just under 70% of all UI recipients have household incomes that put them in the middle three fifths of the income scale–between the 20th and 80th income percentile.
–A particularly authoritative paper by economist Jesse Rothstein looks at this question particularly carefully, tapping the variation between the states in all the different flavors of the UI programs currently in place (i.e., because similar types of people face different UI program parameters across states, we’ve got pseudo-experimental variation). Rothstein finds that you can legitimately assign only about 0.3 of a percentage point (30 basis points) of the 4+ point increase in the unemployment rate to UI.
–Moreover, and this is particularly germane in the current job market, with so many folks giving up the job search based on the unfavorable numbers shown in the figure above, Rothstein estimates that two of those three-tenths are due to the increase in the unemployment rate that results from people staying in the job market and keeping up the search—as is required in the program—instead of dropping out. That is, the labor force participation rate—already depressed—would be slightly more so absent people on UI looking for work.
–Finally, UI has a hefty multiplier effect, generating about $1.60 in growth for every dollar spent on the program. That’s because, unlike a lot of allegedly stimulative tax cuts, it’s well targeted. Jobless folks kinda need the money.
So, while I will assiduously avoid yelling and fisticuffs, neither will I go gentle into that good night on this one.