Unemployment Benefits and Work Incentives: The U.S. Labor Market in the Great Recession
AbstractIn the midst of massive job destruction and sharply rising long-term unemployment, a series of unemployment insurance (UI) eligibility extensions were enacted in 2008-09 that raised the regular 26-week limit to as many as 99 weeks. In response, many leading economists and business press editorials invoked the 'laws of economics' to warn that since extended benefits reduce work incentives, UI extensions would exacerbate the long-term unemployment problem. This paper reviews the evidence put forward in support of the orthodox prediction, which has relied on extrapolating from pre-Great Recession conditions, particularly through the application of "spike at benefit-exhaustion" findings from the early 1980s. Much more compelling evidence can be found by direct examination of the 2008-10 data, which shows no support for UI related work disincentive effects.
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Bibliographic InfoPaper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA Working Papers with number 2011-7.
Length: 29 pages
Date of creation: May 2011
Date of revision:
Unemployment; Unemployment Insurance; Recession; Labor Market;
Other versions of this item:
- David R. Howell & Bert M. Azizoglu, 2011. "Unemployment benefits and work incentives: the US labour market in the Great Recession," Oxford Review of Economic Policy, Oxford University Press, vol. 27(2), pages 221-240.
- NEP-ALL-2011-05-30 (All new papers)
- NEP-HRM-2011-05-30 (Human Capital & Human Resource Management)
- NEP-IAS-2011-05-30 (Insurance Economics)
- NEP-LAB-2011-05-30 (Labour Economics)
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