Does unemployment insurance (UI) incentivise unemployment?

[Obamacult]

The empirical research:

The evidence suggests that benefit generosity increases unemployment. We view this evidence as fairly robust since the estimates are similar across alternative specifications.

Higher IU benefits are found to have a strong negative effect on the probability of leaving unemployment. However, the probability of leaving unemployment rises dramatically just prior to when benefits lapse.

I find that UI benefit extensions have raised the male unemployment rate by around 1.2 percentage points.

We calculate that, in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.

across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits

First, I find that increases in benefits have much larger effects on durations for liquidity constrained households. Second, lump-sum severance payments increase durations substantially among constrained households.

And this one is hilarious because it is from Obama’s former economic advisor Larry Summers. government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work and if you have read this far, give yourself a sheckel for not being a progressive drone who is too closed minded to read research undermining their worldview. Each unemployed person has a “reservation wage”—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer.

Of course, any logical and rational person knows that if you subsidize something -- you get more of it.

And if you tax something -- you get less of it.

Hence, it doesn't make much sense that govt. should tax the very firms that create jobs in order to incentivise the unemployed not to work.

But peruse the data, research and findings -- let me know what you think.

data

[Neo Art]

No.

[Saruhan]

No, every single person I've talked too who has been on Employment insurance (and I have talked to many, this being Newfoundland) have universally said it was an extremely shitty thing and hated being out of work and relying on it.

[Souseiseki]

What is unemployment insurance?

Is that when couples kill themselves because their lives are fucking miserable because benefits aren't "generous" enough? Is it just a fancy way of saying benefits?

[Choronzon]

No.

[Choronzon]

Most people choose to get fired and that the poor are poor and unemployed because they like being poor. It is known.

[Neo Art]

Most people choose to get fired and that the poor are poor and unemployed because they like being poor. It is known.

I mean, here's the thing. This isn't bravado. This isn't ego. This isn't bragging. This is just a single, stated fact. I am willing to bet that on all NSG, of all current posters, there is no one, not one single person, who knows the unemployment system in this country better than I do. As far as NSG goes, I am the absolute expert of this category.

And my answer remains.

No.

[Desperate Measures]

The empirical research:

The evidence suggests that benefit generosity increases unemployment. We view this evidence as fairly robust since the estimates are similar across alternative specifications.

Higher IU benefits are found to have a strong negative effect on the probability of leaving unemployment. However, the probability of leaving unemployment rises dramatically just prior to when benefits lapse.

I find that UI benefit extensions have raised the male unemployment rate by around 1.2 percentage points.

We calculate that, in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.

[url=http://ftp.iza.org/dp3667.pdf] across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits

First, I find that increases in benefits have much larger effects on durations for liquidity constrained households. Second, lump-sum severance payments increase durations substantially among constrained households.

And this one is hilarious because it is from Obama’s former economic advisor Larry Summers. government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work and if you have read this far, give yourself a sheckel for not being a progressive drone who is too closed minded to read research undermining their worldview. Each unemployed person has a “reservation wage”—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer.

Of course, any logical and rational person knows that if you subsidize something -- you get more of it.

And if you tax something -- you get less of it.

Hence, it doesn't make much sense that govt. should tax the very firms that create jobs in order to incentivise the unemployed not to work.

But peruse the data, research and findings -- let me know what you think.

data

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

[Choronzon]

The empirical research:




Of course, any logical and rational person knows that if you subsidize something -- you get more of it.

And if you tax something -- you get less of it.

Hence, it doesn't make much sense that govt. should tax the very firms that create jobs in order to incentivise the unemployed not to work.

But peruse the data, research and findings -- let me know what you think.

data

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Awesome.

Come get a hug.

[Desperate Measures]

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Awesome.

Come get a hug.

hugs!!

[Khadgar]

No, unemployment insurance pays incredibly little. You'll learn this when you get old enough to have a job.

[Neo Art]

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

What's awesome about this is how it utterly undercuts Ausablecult's little schpiel about being the one sane man who did his research and came to this conclusion. I mean, if this particular talking point has become common enough that the author of the cited piece has to address it in national media, it's pretty clear that the OP of this particular trainwreck, despite his insistance to the contrary, is coming up with absolutely nothing, and is just an endless stream of tired reposts of lines fed to him, probably from free republic.

I mean, when you read over two (at least) nations of post history, and view the collective diatribe not as "these are beliefs I really believe in and will defend" and as "stuff other people wrote that I"m now going to copy and paste on another forum and act like I came up with it", it starts to make a lot more sense.

And be a lot sadder.

[Velthannen]

The empirical research:

The evidence suggests that benefit generosity increases unemployment. We view this evidence as fairly robust since the estimates are similar across alternative specifications.

Higher IU benefits are found to have a strong negative effect on the probability of leaving unemployment. However, the probability of leaving unemployment rises dramatically just prior to when benefits lapse.

I find that UI benefit extensions have raised the male unemployment rate by around 1.2 percentage points.

We calculate that, in the absence of extended benefits, the unemployment rate would have been about 0.4 percentage point lower at the end of 2009, or about 9.6% rather than 10.0%.

[url=http://ftp.iza.org/dp3667.pdf] across the 50 states and D.C., job search is inversely related to the generosity of unemployment benefits

First, I find that increases in benefits have much larger effects on durations for liquidity constrained households. Second, lump-sum severance payments increase durations substantially among constrained households.

And this one is hilarious because it is from Obama’s former economic advisor Larry Summers. government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work and if you have read this far, give yourself a sheckel for not being a progressive drone who is too closed minded to read research undermining their worldview. Each unemployed person has a “reservation wage”—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer.

Of course, any logical and rational person knows that if you subsidize something -- you get more of it.

And if you tax something -- you get less of it.

Hence, it doesn't make much sense that govt. should tax the very firms that create jobs in order to incentivise the unemployed not to work.

But peruse the data, research and findings -- let me know what you think.

data

If only it were that simple...
Here's an idea: you live on the kind of budget that unemployment benefits would allow you to live on for a month, and then get back to us on whether it "incentivizes" unemployment

[Page]

To quote my own macroeconomics term paper which is about a year old:

How did this unprecedented extension of benefits mitigate the adverse effects of unemployment on the national economy, and did these benefits alter unemployment itself? Context is important to answering these questions. Shigeru Fujita (2010), a senior economist for the Federal Reserve Bank of Philadelphia, notes that “the merits of UI benefits are often taken for granted in public policy discussions.” This 99 week extension may have been the most significant, although it was not the first one ever put into place, Fujita notes that it is in fact relatively common for governments to react to economic downturns with aid in the form of UI extension (2010, p. 1).

Some direct effects can be inferred and empirically observed; continuing to provide the unemployed with income allows them to continue purchasing goods and services. And in a recession in which unemployment rates reached record highs, extended benefits may be more practical than other methods such as tax cuts for increasing the disposable income of the labor force. In this way, it can be argued that these substantial benefit extensions helped prevent a deepening of the recession, and by consequence, an increased unemployment rate.

Still, some would argue from an opposite standpoint, that these benefits took away motivation of workers to seek jobs, what Fujita names “the incentive effect.” However, given that unemployment payments often fall short of a full time job’s wage, and that those who receive benefits must typically provide proof that they are actively seeking work, this standpoint is dubious (2010, p. 7). Despite that, those who collect extended unemployment benefits are statistically recorded as part of the unemployed, and after benefits expire they may no longer be. Yet Fujita admits that the data is flawed because “it does not tell the status of workers, that is, whether the worker found a job or simply dropped out of the labor force after exiting from the UI system.” In short, extended unemployment benefits may increase both the statistical duration of unemployment and the unemployment rate, yet still may be overall beneficial to economic recovery.

Overall, there seems to be a consensus among economists that UI benefits do not, in the long run, have a significant effect on employment in general. To say that this massive extension of unemployment benefits directly deals with the issue of unemployment itself would not be accurate; however it does seem to promote economic recovery during low points. Economist Jesse Rothstein (2011) of University of California Berkeley and the NBER determines from statements made by the Congressional Budget Office that “extensions can have macroeconomic benefits as well, as the unemployed likely have a high marginal propensity to consume and UI payments thus have relatively large multipliers.” Like Fujita, Rothstein also finds extension of unemployment benefits to be a sound choice for promotion of recovery and growth, but not an actual solution to the high unemployment rate, as he notes the “historically weak” (2011, p. 1) labor markets remain even as the Great Recession itself was outgrown.

[Ashmoria]

if there aren't jobs to be had, how can it incentivize unemployment?

until there are hundreds of thousands of unfilled, easily filled jobs in the US you cant say that having unemployment payments is a drag on employment.

having that extra money in the economy means MORE JOBS. taking the money out of the economy would mean FEWER JOBS. no one hires people when there is no demand for their services.

[Obamacult]

The empirical research:




Of course, any logical and rational person knows that if you subsidize something -- you get more of it.

And if you tax something -- you get less of it.

Hence, it doesn't make much sense that govt. should tax the very firms that create jobs in order to incentivise the unemployed not to work.

But peruse the data, research and findings -- let me know what you think.

data

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Amusingly, Summers was against UI before he was for it ??!!!

This is typical of politically motivated self-serving elites who change positions based on the political winds.

Enjoy.

[Neo Art]

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Amusingly, Summers was against UI before he was for it ??!!!

This is typical of politically motivated self-serving elites who change positions based on the political winds.

Enjoy.

My source is a political hack who shouldn't be trusted!

...wow. That usually takes more than a page.

Oh well, sign of the times, I guess.

[Ashmoria]

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Amusingly, Summers was against UI before he was for it ??!!!

This is typical of politically motivated self-serving elites who change positions based on the political winds.

Enjoy.

so.... you think that government policy on employment should be the same regardless of economic conditions?

[SaintB]

"Some opponents of providing relief to unemployed families have been making the fallacious claim that unemployment benefits are a cause of the unemployment we are facing today. Some of them have even taken an article I wrote two decades ago, under different economic circumstances, and used excerpts out of context to suggest that I share their view.

This is a misreading both of my research and of the economic situation today."
Lawrence H. Summers
http://www.huffingtonpost.com/lawrence- ... 45666.html

Amusingly, Summers was against UI before he was for it ??!!!

This is typical of politically motivated self-serving elites who change positions based on the political winds.

Enjoy.

How dense do you have to be to hear or read someone say "People deliberately used my words out of context to make it sound like I shared a point of view that isn't my own," and take it to mean "Lol yeah I totally flip flopped on that one."?

[SaintB]

Amusingly, Summers was against UI before he was for it ??!!!

This is typical of politically motivated self-serving elites who change positions based on the political winds.

Enjoy.

so.... you think that government policy on employment should be the same regardless of economic conditions?

They probably think that unemployment is a waste of money. They probably also never held a real job.

[Neo Art]

if there aren't jobs to be had, how can it incentivize unemployment?

until there are hundreds of thousands of unfilled, easily filled jobs in the US you cant say that having unemployment payments is a drag on employment.

having that extra money in the economy means MORE JOBS. taking the money out of the economy would mean FEWER JOBS. no one hires people when there is no demand for their services.

I mean, here's the thing. In a lose sense, UI may well discourage people from taking work. It does not however encourage unemployment. There's a strong misunderstanding that unemployed means "not having a job".

An unemployed worker, as defined by federal law, is a worker who has lost their most recent employment, through not fault of their own, and although available for work, capable of performing work, and engaged in a systematic work search, has been unable to obtain suitable full time employment.

That bolded part is important, because it's the crux of the entire fucking system. Our society works when people are employed in a capacity that best utilizes them.

Is the fact that there's an unemployment system preventing a laid off accountant from taking a job pushing shopping carts at Shaws because why would they do that if they have unemployment benefits? Yes, I'm sure it is. And that's ok. In fact, that's kinda the whole idea. Why?

Because we want the acocuntant working as an accountant. Because one, we benefit from society more when accountants are accountants, and not shopping cart pushers, and two, we need something for the shopping cart pushers to do too.

UI isn't keeping accountants from being acocuntants, that's fucking stupid (and, as someone very familiar with the system, I promise you, it doesn't happen). It's stopping accountants from taking jobs as secretaries, which then forces secretaries to take jobs as receptionists, thus leaving receptionists to have to take jobs bagging groceries. Which leaves the grocery baggers out in the cold pushing shopping carts.

And those menial jobs, that allowed the poor, uneducated, sometimes somewhat disabled individuals to do, and actual benefit society? They're back to being drains on society, because all the menial jobs got filled with non menial workers.

Of course, since we cut those support system, all the menial works just sort of...starve.

And here we have the real reason for the right wing's war on the unemployment system. It's not that it prevents an EFFICIENT use of the work force (it doesn't, people will do the job they're qualified for before taking UI, it's well documented, and nonsensical to claim otherwise). It prevents downward pressure on the work force by not forcing a skilled unemployed worker to take a job, ANY job, in order to survive. Which means it helps prevent poor people from starving to death in the streets.

And if there's anything the right wing opposes, it's any policy that prevents poor people from starving to death on the streets.

[Ashmoria]

so.... you think that government policy on employment should be the same regardless of economic conditions?

They probably think that unemployment is a waste of money. They probably also never held a real job.

<suppresses rant>

yeah.

[Neo Art]

They probably think that unemployment is a waste of money. They probably also never held a real job.

<suppresses rant>

yeah.

I mean, again, the problem is, the wording is wrong, UI doesn't incentivise "UNEMPLOYMENT" because unemployment is the state of being able, available, and actively seeking employment but unable to obtain suitable work.

It doesn't.

Virtually nobody on UI when offered a suitable job turns it down. And, in fact, doing so is grounds for revocation of unemployment benefits.

People do turn down unsuitable work. And that's fine. We don't want people doing jobs that are below them. All it does is create downward pressures.

[Ashmoria]

if there aren't jobs to be had, how can it incentivize unemployment?

until there are hundreds of thousands of unfilled, easily filled jobs in the US you cant say that having unemployment payments is a drag on employment.

having that extra money in the economy means MORE JOBS. taking the money out of the economy would mean FEWER JOBS. no one hires people when there is no demand for their services.

I mean, here's the thing. In a lose sense, UI may well discourage people from taking work. It does not however encourage unemployment. There's a strong misunderstanding that unemployed means "not having a job".

An unemployed worker, as defined by federal law, is a worker who has lost their most recent employment, through not fault of their own, and although available for work, capable of performing work, and engaged in a systematic work search, has been unable to obtain suitable full time employment.

That bolded part is important, because it's the crux of the entire fucking system. Our society works when people are employed in a capacity that best utilizes them.

Is the fact that there's an unemployment system preventing a laid off accountant from taking a job pushing shopping carts at Shaws because why would they do that if they have unemployment benefits? Yes, I'm sure it is. And that's ok. In fact, that's kinda the whole idea. Why?

Because we want the acocuntant working as an accountant. Because one, we benefit from society more when accountants are accountants, and not shopping cart pushers, and two, we need something for the shopping cart pushers to do too.

UI isn't keeping accountants from being acocuntants, that's fucking stupid (and, as someone very familiar with the system, I promise you, it doesn't happen). It's stopping accountants from taking jobs as secretaries, which then forces secretaries to take jobs as receptionists, thus leaving receptionists to have to take jobs bagging groceries. Which leaves the grocery baggers out in the cold pushing shopping carts.

And those menial jobs, that allowed the poor, uneducated, sometimes somewhat disabled individuals to do, and actual benefit society? They're back to being drains on society, because all the menial jobs got filled with non menial workers.

Of course, since we cut those support system, all the menial works just sort of...starve.

And here we have the real reason for the right wing's war on the unemployment system. It's not that it prevents an EFFICIENT use of the work force (it doesn't, people will do the job they're qualified for before taking UI, it's well documented, and nonsensical to claim otherwise). It prevents downward pressure on the work force by not forcing a skilled unemployed worker to take a job, ANY job, in order to survive. Which means it helps prevent poor people from starving to death in the streets.

And if there's anything the right wing opposes, it's any policy that prevents poor people from starving to death on the streets.

well yeah but it also has the benefit (or would have without UI) of encouraging the accountant to work for much less. an accountant who is reduced to stocking shelves at walmart for minimum wage for a few months will be willing to take an accounting job for half of what he was getting before because it is still far more than he is making at walmart.

[Desperate Measures]

if there aren't jobs to be had, how can it incentivize unemployment?

until there are hundreds of thousands of unfilled, easily filled jobs in the US you cant say that having unemployment payments is a drag on employment.

having that extra money in the economy means MORE JOBS. taking the money out of the economy would mean FEWER JOBS. no one hires people when there is no demand for their services.

I mean, here's the thing. In a lose sense, UI may well discourage people from taking work. It does not however encourage unemployment. There's a strong misunderstanding that unemployed means "not having a job".

An unemployed worker, as defined by federal law, is a worker who has lost their most recent employment, through not fault of their own, and although available for work, capable of performing work, and engaged in a systematic work search, has been unable to obtain suitable full time employment.

That bolded part is important, because it's the crux of the entire fucking system. Our society works when people are employed in a capacity that best utilizes them.

Is the fact that there's an unemployment system preventing a laid off accountant from taking a job pushing shopping carts at Shaws because why would they do that if they have unemployment benefits? Yes, I'm sure it is. And that's ok. In fact, that's kinda the whole idea. Why?

Because we want the acocuntant working as an accountant. Because one, we benefit from society more when accountants are accountants, and not shopping cart pushers, and two, we need something for the shopping cart pushers to do too.

UI isn't keeping accountants from being acocuntants, that's fucking stupid (and, as someone very familiar with the system, I promise you, it doesn't happen). It's stopping accountants from taking jobs as secretaries, which then forces secretaries to take jobs as receptionists, thus leaving receptionists to have to take jobs bagging groceries. Which leaves the grocery baggers out in the cold pushing shopping carts.

And those menial jobs, that allowed the poor, uneducated, sometimes somewhat disabled individuals to do, and actual benefit society? They're back to being drains on society, because all the menial jobs got filled with non menial workers.

Of course, since we cut those support system, all the menial works just sort of...starve.

And here we have the real reason for the right wing's war on the unemployment system. It's not that it prevents an EFFICIENT use of the work force (it doesn't, people will do the job they're qualified for before taking UI, it's well documented, and nonsensical to claim otherwise). It prevents downward pressure on the work force by not forcing a skilled unemployed worker to take a job, ANY job, in order to survive. Which means it helps prevent poor people from starving to death in the streets.

And if there's anything the right wing opposes, it's any policy that prevents poor people from starving to death on the streets.

I never understood the issue like that or even thought to get an actual understanding of the issue at all. This is why I love NSG.