No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs

Job seekers stand in line at a job fair in Miami CREDIT: AP
Job seekers stand in line at a job fair in Miami CREDIT: AP

When 1.3 million long-term unemployed people lost benefits because Congress let the program lapse, some claimed that taking away the checks would encourage people to go out and get a job. That isn’t panning out for the 74,000 people who are no longer getting checks in Illinois.

In January, one month after they lost benefits, 64,000 of them, or 86 percent, were still unemployed, according to an analysis of wage records by the Illinois Department of Employment Security (IDES). February was similar: 61,3000 people were still unemployed, or 82.7 percent of the original group. That means two months later, four out of five people who were cut off from benefits still weren’t bringing in wages.

“This notion that temporary unemployment benefits provide people a reason not to return to work really needs to end because it is not supported by the data,” IDES Director Jay Rowell said.

Other natural experiments have shown that, rather than spurring a flurry of hiring, cutting off benefits can have disastrous consequences. North Carolina was ahead of the pack, making such drastic cuts to its benefits system that it was dropped entirely from the federal long-term compensation program. The number of state residents receiving benefits dropped by 40 percent to 45,000 by December. Since then, the unemployment rate has dropped, but not likely because people are finding work but because they’re giving up altogether. More than 22,000 found a job after the loss of benefits, but the state’s labor force is experiencing the largest contraction in history, with 77,000 fewer people working or looking for a job in October compared to the previous year.

Research has come to similar conclusions. The job search requirements have been found to incentivize people to spend more time job hunting. Other research has found that receiving the checks doesn’t discourage people from getting work.

So what does happen when people lose their benefits? A 2012 report from the Government Accountability Office found that their poverty rate spikes by 5 percent, a third turn to government programs, and 90 percent turn to family members or money from retirement or savings accounts.

Today, more than 2 million people across the country are now going without benefits. By the beginning of April, that had meant the lost of $5.4 billion in support, which also means a loss in spending for their local communities. In Illinois, IDES notes, the loss of benefits has meant the loss of $23.7 million in purchasing power every week.