Unemployment Benefits Cut Will Worsen Things.

CalculatedRiskBlog reports:

Here is a depressing report from the National Employment Law Project: States Made Unprecedented Cuts to Unemployment Insurance in 2011

NELP’s new analysis shows that in 2011, six states cut the maximum number of weeks that jobless workers can receive unemployment insurance to less than 26 weeks—a threshold that had served as a standard for all 50 states for more than half a century, until this year. Michigan, Missouri, and South Carolina cut their available weeks down to 20; Arkansas and Illinois cut down to 25; and Florida cut to between 12 and 23 weeks, depending on the state’s unemployment rate. Double-digit unemployment in Michigan, South Carolina, and Florida did not discourage lawmakers there from making the cuts.

… Indiana changed the formula it uses to calculate weekly benefit amounts so that the average unemployment check will drop from $283 to $220 a week.

Ouch.
This makes things worse.  It increases the risk of  another drop in GDP.  See, when people who have been getting unemployment benefits have their benefits cut, they cut their spending.  That means some businesses are selling less stuff. Those businesses in turn layoff more workers, or at best case avoid hiring new ones.
As for the argument that people who get unemployment benefits avoid working just to get the benefits, there’s two responses.  First, even by the micro-economic models and theories so beloved by conservatives, it’s totally irrational to do so.  I mean, do you really believe people pass up opportunities to have $48,000 a year or more (median household income) in order to collect $8,000 (maximum unemployment benefits for 26 weeks)?  No, it’s totally irrational.  Second, cutting unemployment benefits to try to get people to have jobs is essentially punishing the unemployed. If there are no jobs to be had, it makes no difference how much we punish them.  They can’t get a job.  The beatings will continue until morale improves.

3 thoughts on “Unemployment Benefits Cut Will Worsen Things.

  1. To my opinion, the correlation between cutting benefits and as a sequence decrease of national GDP is not that great to be afraid of. And I definitely believe that too many people abuse this program unwilling to look for a job and thus enforce to some degree the process of getting employment.

  2. Cutting welfare does not really solve anything, but shifting that welfare to some kind of government employment situation would. It really demoralizes people to just receive a check/cheque and then going back to work becomes very frightening, because it feels so alien. Cutting welfare in the amount will just make a downturn in all the existing businesses. The best thing to do is get them into some kind of retraining or pay them to do something constructive so that their morale stays high, they can get good references, and be back on the job trail.

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