As you’ve probably noticed there’s an ongoing debate about the role of Unemployment Insurance in creating high unemployment. There’s a lot of empirical evidence that in normal times, UI does have a disemployment effect. People see job openings for jobs they don’t really want and figure they’ll keep waiting. But if UI is about to run out or already has, they get more eager to settle. Liberals say, however, that in today’s circumstances this impact is dominated by the objective lack of jobs:
At any rate, for better or (more likely) for worse the country is soon to be embarking on a great natural experiment on the impact of Unemployment Insurance amidst a deep labor market downturn. That’s because Congress is unwilling to extent UI eligibility beyond 99 weeks. Which means that soon enough we should see . . . something. But what? My guess is not much. My guess is that basically nobody wants to hire the vast majority of the current long-term unemployed. So my guess is that the labor market prospects of people who’ve been unemployed for 98 weeks will look an awful lot like people who’ve been unemployed for “only” 70 weeks. I wonder what people with a more right-of-center approach would predict? Are we going to see a surge in employment among people around the 99 week mark? Will they uncover hidden secret jobs that are stashed away somewhere?