Story at a glance
- Some critics of unemployment benefits claim that they discourage recipients from finding employment.
- Senate Republicans are now proposing cutting benefits in the coronavirus relief plan.
- A new study shows no evidence that reducing unemployment benefits would affect employment.
“In certain cases where we're paying people more to stay home than to work, that's created issues in the entire economy,” Treasury Secretary Steven Mnuchin said earlier this week when asked about Senate Republicans' proposal to reduce unemployment benefits.
It’s a common criticism of unemployment benefits that high benefits encourage employers to lay off workers and discourage people from returning to work. Under the CARES Act, passed in response to the coronavirus pandemic, unemployed Americans are eligible to receive a $600 weekly payment in addition to state unemployment benefits. But a new report by Yale economists found no evidence that these "enhanced jobless benefits" reduced employment.
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“The data do not show a relationship between benefit generosity and employment paths after the CARES Act, which could be due to the collapse of labor demand during the COVID-19 crisis,” said Joseph Altonji, the Thomas DeWitt Cuyler Professor of Economics in the Faculty of Arts and Sciences, and a co-author of the report.
The study also debunks a few common myths about unemployment. For one thing, in order to receive these expanded benefits, you must already meet your state’s requirements for receiving unemployment benefits. If you quit your job, you’re ineligible. And if you receive a “suitable offer of employment," even if you turn it down, you’re also ineligible.
Using data on hundreds of thousands of hourly workers across the U.S. and Canada, primarily in lower income brackets, researchers concluded that the expanded benefits did not increase layoffs at the outset of the pandemic or discourage workers from returning to their jobs over time.
"As many states struggle with surges in Covid-19 cases as they move to reopen, there are still good reasons to not incentivize everyone to return to work and to continue to support displaced workers regardless of the labor market effects of such social insurance. However, we find no evidence to support concerns about adverse aggregate labor supply effects of expanded UI generosity in the context of the current pandemic," the study said.
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