Without Congressional action by the end of the year, unemployment benefits will abruptly stop for millions of people who have been out of work past the typical state-level benefit cutoff of 26 weeks. But reauthorizing the program would save as many as 240,000 jobs, according to a White House report. The report also notes estimates from the Congressional Budget Office (CBO) and JP Morgan that indicate that a failure to extend the benefits would mean a drop in GDP growth by 0.2 to 0.4 percentage points.
Unemployment benefits don’t just offer a lifeline to those who have been out of work for six months or more. They boost the economy given that the recipients are usually in need of immediate help with day to day expenses, so they are likely to spend the money quickly, increasing consumption. The CBO has found that unemployment aid has “the largest effects on output and employment per dollar of budgetary cost” for this reason. The program also partially offsets its own costs by helping to generate tax revenue through the increased economic activity.
On the other hand, a typical family whose head of household is out of work but doesn’t get benefits spends 22 percent less on food. Household income drops by about 16 percent when benefits are exhausted due to time limits. And without the financial support, many families have to rely on other government programs, such as food stamps or Temporary Assistance to Needy Families (TANF, formerly known as welfare). Given all of these factors, the report notes, “the net cost to the Federal government is less than the official cost.”
The report also notes the beneficial impact for the unemployed besides these financial supports. Benefits for the long-term unemployed keep them from dropping out of the labor force and giving up on trying to find a job altogether. Even though the rate at which they’re able to find a job is lower than for those who have been out of work for a shorter period of time, keeping them on the hunt increases the chances that they will eventually get new work.
Congress has reauthorized the program 11 times since it was first enacted in 2008, and Democrats have been pushing to do so again before the year-end deadline. But Republicans are indicating that they won’t support an extension as part of the current budget negotiations. That will mean 1.3 million people losing the checks that they currently rely on. More than 4 million people have been out of work for more than 27 weeks, accounting for 37 percent of all unemployed people.
The stories of just three people out of the million who face losing their benefits illustrate how important they are. Lillian Humphrey, 62, told ThinkProgress she faces tough odds in getting a new job because of her age, but she needs to work. Without the benefits, she’ll have to tap into Social Security and still need a part-time job to get by. John De Marchi will have to exit his career as a 3-D artist and take any job he can get to keep supporting his household. And Alan will have to give up on his interest in getting training to teach English as a second language and move in with a friend in another state.