Florida’s Cuts To Unemployment Benefits Could Reduce Economic Growth, Increase Poverty

The Florida legislature moved earlier this month, with the support of Gov. Rick Scott (R), to cut its unemployment benefit system, even while its unemployment rate hovers above 11 percent and its median duration of unemployment hangs at 27 weeks. As the National Employment Law Project pointed out, with the legislation, Florida will “go further than any other state in dismantling its unemployment insurance system.”

The money Florida is saving is being put toward a corporate tax cut in a state where corporate taxes are already exceedingly low. And as CAP’s Heather Boushey and Danielle Lazarowitz noted, the cut could actually reduce the sunshine state’s economic growth:

Economist Wayne Vroman in a study for the Department of Labor estimates that for every dollar spent on unemployment benefits by the government, an additional $2 was put back into the economy. During the Great Recession, the regular unemployment insurance program — the exact program targeted in the Florida legislation — reduced the fall in the gross domestic product by 10.5 percent. Cutting unemployment benefits would remove a substantial amount of demand from Florida’s economy.

As people collect, and spend, their relatively meager unemployment benefits, that money ripples through the economy, supporting other workers and businesses. Taking that demand away leads to unnecessary drops in consumer spending. Boushey and Lazarowitz also note that cutting unemployment benefits could increase Florida’s poverty rate, as such benefits have kept more than 3 million people across the country out of poverty during the Great Recession.

Florida is far from the only state trying to cut unemployment benefits, even with long-term unemployment sky-high and job creation sluggish. Michigan and Utah have both cut their benefits, with lawmakers in Utah justifying their move by promoting the myth that unemployment benefits keep people from looking for work. As the Huffington Post’s Arthur Delaney reported, South Carolina is looking like the next state on the list, as its state senate approved a bill reducing state unemployment benefits from the national standard of 26 weeks to 20 weeks.