Extended Unemployment Benefits Don't Discourage Job Seeking: Study

Job seekers
Getty Images
By Senior Editor

Despite arguments to the contrary, giving unemployed Americans extended jobless benefits of up to 99 weeks didn't prevent them from taking jobs, according a new report.

Released last month through the Federal Reserve Bank of San Francisco, the study says that the extended benefits given from 2009 to 2012 to the unemployed increased the overall employment rate by only 0.04 percentage points, which the report says is small in comparison to the peak recession unemployment rate of 10 percent.

"There was some criticism that people on long-term unemployment benefits would not want to go back to work," said Henry Farber, a professor of economics at Princeton University and co-author of the report.

"But that's not true. We could find no real effect of the benefits from keeping people wanting to work," said Farber. "People are not staying on unemployment to avoid taking jobs."

Farber said his report looked at previous downturns in the economy when extended unemployment benefits were shorter -- up to 79 weeks in early 2001-2002 -- than came out of the recession of 2007-2009. The findings for both periods were similar, he said.

"There was never much serious work done to look at this issue of extended benefits and the effect on the jobless rate," Farber said. "That's why we did this. We wanted to find out if there was a correlation and we didn't find one."

'They Add to the Long-Term Unemployment Situation'

The current rate of unemployment is around 7.5 percent according to the Bureau of Labor Statistics, down from the 10 percent recessional peak in 2009.

Still, while the job picture is improving for some, the long-term unemployed aren't so lucky. That's because as the jobless rate improves, the federal government -- which funds much of the unemployment benefit extensions -- cuts back spending for benefits.

Congress has traditionally extended unemployment benefits in times of recession. In 2010 and 2011, benefits in some states reached 99 weeks of combined state and federal benefits -- the highest extension on record.

Sponsored Links
But less than half of the 11.7 million unemployed in April received state or federal benefits, according to the Labor Department.

Any current extended benefits will continue for those receiving them, but they will not be renewed at the end of this year. And there will be no more extended benefits for those going on unemployment now, unless job losses mount to recession-era levels.

California and Nevada are among the states that have the highest duration of benefits, at 76 weeks, while Utah, Wyoming, South Dakota and Kansas are among the states with the lowest duration, at 40 weeks.

Not every one sees extensions as beneficial -- despite any evidence to the contrary. Timothy Nash, an economics professor at Northwood University, said he believes extended benefits keep the unemployed from looking for work.

"There's a lot of debate about the impact of extensions but my gut feeling is that giving them hurts the job picture," said Nash. "If we look at countries like Sweden that had long term extensions and high unemployment, when they ended the extensions the jobless rate went down."

"I think some people need them," Nash went on to say. "People with certain skills that can use the extensions to take the time to find a job that's right for them. But without extensions, people feel a better sense of urgency that they have to find a job."

"Having these extensions, while they give some people a way to live, are not the best thing to do," Nash argued. "I think they add to the long-term unemployment situation instead of ending it."

Currently, there are some 4.4 million Americans listed as long-term unemployed-defined as those who have been out of work for 27 weeks or more., according to the BLS.

While that's better than the high of 6.7 million in April of 2010, it's still not enough of an improvement, said Chris Rhomberg, a sociology professor and labor expert at Fordham University.

"The long-term unemployed need help, and they're not getting it," Rhomberg argued. "You've got a situation where employers can reject people who have been out of work for a long time and they don't suffer any consequences."

"Businesses are not hiring and extensions are down. It's cruel," said Rhomberg.

More from CNBC
Delayed Launch: How (and Why) to Delay Your Entry into the Job Market
See Gallery
Extended Unemployment Benefits Don't Discourage Job Seeking: Study

The classic method for avoiding the job market, graduate school has the added benefit of -- under the right circumstances -- making you look even more attractive to employers and recruiters. On the other hand, a poorly-chosen degree can also leave you with even more debt and no improvement in your job prospects.

If you qualify for a fellowship, assistantship, or scholarship that will cover your tuition costs and give you a stipend, going for an advanced degree becomes a no-brainer. While grad stipends are far from princely, with careful planning, you may be able to get out of grad school with no increase in debt, a degree that will likely improve your employability, and a shot at job-hunting in a friendlier environment. That being said, it especially helps if your degree is in a high-paying field. Georgetown University's Center on Education and the Workforce offers some useful information on choosing the advanced degrees with the best returns on investment.
There's an old saying: If you have to pay for grad school, you probably shouldn't be there. In other words, if you can't get an assistantship or fellowship, you might want to reconsider your postgraduate education. For that matter, if you're carrying a lot of private student loan debt, you might want to hold off even for a program with a stipend: Those loans, unlike the government-backed variety, won't be deferred while you're in grad school, so if you take one of those not-so-generous stipends, keeping up with your  payments will likely be difficult.

Another classic method for postponing the day you have to get a "real" job, the Peace Corps gives young people the opportunity to travel the world, see exciting things, and make new friends. And, when you get back, you'll have the added benefit of foreign language skills and a great line on your résumé.

Photo: SNRE, Flickr.com

If you're interested in seeing the world, aren't averse to living surrounded by extreme poverty, and aren't carrying much private loan debt, the Peace Corps can be a great choice. During your time in the corps, your federal student loans -- and some private loans -- will be deferred, and your Perkins loans may even be partially forgiven. And, when you get back home, you'll have a readjustment allowance to help you get back into the swing of things.

Photo: Treesftf, Flickr.com

The Peace Corps doesn't pay much, which can make your financial life difficult if you're carrying a lot of private loan debt. For that matter, the Corps has recently had problems with ensuring the safety of its volunteers, which could be a serious problem, depending on where you're posted. Beyond that, if you aren't sure you'll be able to adapt to living in rougher circumstances, surrounded by extreme poverty, you may want to think twice about signing up.

Photo: Shawnzam, Flickr.com

If you're looking for a way to enter into the teaching profession, or if you just want to try out being in front of a classroom for a few years, consider Teach for America. The program places college graduates into low-income classrooms across the country, offering them a salary, loan forbearance, money for education, and -- when they leave -- up to $6,000 in loans and grants to help them get reintegrated into society.

Photo: Teach For America Facebook

If you're interested in teaching, are enthused about the idea of working with low-income students, and don't have a lot of outstanding private loans, Teach for America can be a great bet. It looks good on a résumé, and is an excellent way to get started in teaching.

Photo: Teach for America Facebook

This is going to start to sound repetitious, but it keeps applying: if you're carrying a lot of private loan debt, Teach for America may not be for you. Even if you can get a deferment on your loan, you'll still be accumulating interest, which will leave you further in the red. Beyond that, if you are uncomfortable living and working in lower-income areas, this program is definitely not for you.

Photo: Teach for America Facebook

Interested in joining the Peace Corps, but don't want to get vaccinated for yellow fever? If so, AmeriCorps might be the choice for you. Working in education, public safety, environmental protection and health care, it places volunteers with dozens of different programs. Depending on your placement, AmeriCorps service could land you in a classroom or the field, building houses or working with FEMA. Benefits also vary greatly, depending on the program, but can include a living allowance, childcare stipends, an education benefit, and some health care.

Photo: AmeriCorps Facebook

AmeriCorps members may qualify for up to $5,550 in education assistance, which can be used to pay off existing loans or to fund further schooling. Additionally, the childcare allowance can make it more attractive to people with children. And, as an added benefit, your volunteer work could help you pick up some marketable skills.

Photo: AmeriCorps Facebook

AmeriCorps' education assistance is not as impressive as the benefits offered by other programs, which may make it less attractive if you're carrying a heavy student loan burden. Also, because the work placements vary so widely, there's a good chance that your skills may not be all that marketable.

Photo: AmeriCorps Facebook

Read Full Story

From Our Partners