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Unemployment Aid Helps More Than the Jobless

David Moberg Dec 3, 2010

Everyone—well, perhaps everyone except the Congressional Republicans—recognizes what a lifesaver unemployment insurance (UI) benefits are for workers who have lost their job. That’s especially true in a deep job market slump like the present, with five job-seekers for every job opening, and a record 42 percent of the jobless who have been out of work six months or more—the standard duration of state unemployment benefits.

But even UI supporters may not realize how many other people benefit, including people who have held on to their jobs, from the two programs extending unemployment payments up to 99 weeks in states with high unemployment. Both expired this week as a result of opposition from Republican, who insisted that any extension be paid through cuts elsewhere.

By the end of October, 14 million people had received some extended benefit since 2008, according to a report released Thursday from the Council of Economic Advisors (CEA). Five million out of the 6 million workers considered long-term unemployed currently receive benefits.

The average household receiving extended UI relies on those payments for roughly a third of its income. For sole wage earners, those UI checks make up 90 percent of their income, a bit less—80 percent—if they have children.
And 42 percent of unemployed receiving extended benefits do have children.

The CEA figures that from the passage of the extension through October, 10.5 million children living in households with recipients of extended aid have benefited. So have 15.5 million other adults in those households. That brings the total number of people helped by extended unemployment benefits to 40 million.

They have been somewhat disproportionately middle income—previously earning between $20,000 and $100,000. Although lower-income workers have disproportionately suffered the loss of jobs in this recession, many don’t qualify for any unemployment aid, let alone the extensions. Only roughly two-thirds of all the unemployed collect benefits. And even if Congress passes an extension, over 2 million unemployed workers—the “99ers”–are likely to exhaust their total of 99 weeks without finding a job.

But without the extension, 2 million people will lose benefits this month, about 6.7 million by a year from now. And millions of others will also suffer as a result.

UI benefits prevent sharp drops in spending, and that spending keeps more people employed, and overall output higher. The CEA calculated that UI extensions had, through September, boosted employment by 793,000 jobs and GDP by eight-tenths of a percent since 2008. The higher growth and employment reduced what governments would otherwise spend on aid and raised revenue, thus reducing the net cost of the extensions.

And contrary to conservatives, who worry that UI discourages job-seeking, a San Francisco Federal Reserve study showed that workers were finding jobs at about the same rate whether or not they were eligible for extended UI.

If benefits are not renewed CEA estimates that employment in a year will be 593,000 lower than with an extension, and GDP would be six-tenths of a percent lower.  Overall the extension will save or create around 730,000 “job-years,” for a total of 2.3 million “job-years” from 2008 to 2012.

So if you have a job, you owe it in some part to the unemployment compensation other unemployed workers receive. Solidarity pays.

This article was originally published on Working in These Times.

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