Writing at CarolinaJournal.com, JLF’s John Hood alerts us to new research from the New York Fed on the relationship between unemployment benefits and the labor market. The results are quite unfriendly to the Left’s frequent recommendation that the state extend unemployment benefits.
They examined counties on the borders of states with differing UI policies. Because the economies of adjoining counties are otherwise similar, such a model has a good chance of isolating the effects of state policy from other causal factors.
What the Fed researchers found is that extending unemployment-insurance benefits results in higher levels of unemployment. In fact, “most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility,” they found. While extended benefits tend to discourage recipients from accepting available jobs, the much-bigger problem is that extended benefits discourage the creation of new jobs — by holding wages above the market-clearing rate, for example, or perhaps by signaling to potential employers that payroll taxes will be rising in the future.
A reasonable interpretation of this and related econometric research is that by reducing the average duration of UI benefits, the North Carolina legislature has increased the incentive for employers to create jobs and for workers to fill them.
Personal attacks and adolescent preening won’t rebut these insights. If they want to be taken seriously, liberals need to do their homework and come up with better arguments.
