Unemployment Extension 2014: Benefits Do Not Make People Lazy, Fed Study Confirms

One of the main Republican arguments against a new unemployment extension in 2014 — an argument also made by some conservative economists — was that receiving unemployment benefits makes people lazy when it comes to finding work.

Kentucky Senator Rand Paul stated the position perhaps most clearly in January, when he said that passing a 2014 unemployment extension would be doing a “disservice” to the long-term unemployed.

“The longer you have it (unemployment benefits), it provides some disincentive to work, and that there are many studies that indicate this,” Paul asserted.

But now, an exhaustive study by the United States Federal Reserve, looking at 35 years of unemployment data, proves once and for all that the Republican claim is just malarkey.

There have been attempts to pass a new unemployment extension this year, with a bill passing the Senate in April only to die in the Republican-controlled house, at least in part because of the Republican belief that receiving unemployment benefits — which average $300 per week — cause people to go longer without looking for work.

If the Republican claim were true, the unemployment rate should go up as the long-term jobless continue to receive unemployment benefits.

But the new, definitive study shows that there’s just no data to support the Republican argument. In fact, the study found, unemployment rates are not significantly affected one way or the other by unemployment benefits.

“We find that Extended Unemployment Benefits increased the unemployment rate by about one-third percentage point in the most recent recession but did not affect the participation rate,” the study’s authors wrote. “In previous recessions, the effect of EEB on the unemployment rate was even smaller.”

But the Fed’s trashing of the notion that extended unemployment benefits actually cause more unemployment will certainly come as cold comfort for the more than 3 million people out of work for more than six months who saw their benefits cut off starting last December.

While the official unemployment rate reached a staggering 10 percent in 2009, at the height of the recession, the jobless rate is now down to 6.1 percent according to the latest data.

But that figure is still too high. The Federal Reserve considers a rate no higher than 5.5 percent to be “full employment.”

Whether the new study will change the minds of House Republicans and lead to a vote on a new 2014 unemployment extension appears unlikely.