Unemployment Benefits: Not So Beneficial After All

People receiving unemployment benefits are more likely to report deteriorating financial conditions than those who don't, according to a new study by Rutgers University.

The survey, which spent two years tracking 675 people who lost their jobs in the Great Recession, found that 62 percent of unemployed respondents who did not receive unemployment benefits thought they were financially worse off, versus 76 percent of those who did receive benefits. Similarly, among those who were able to find jobs after their initial unemployment, only 32 percent of those who didn't receive benefits saw themselves in a worse financial place, versus 50 percent of those who did receive benefits.

A few tasty morsels from the paper:

Those who did not receive UI [Unemployment Insurance] were more likely to obtain a job within less than a year. Among those who had exhausted their unemployment benefits before getting another, most took more than a year.

Among the reemployed, just over half took a cut in pay. UI recipients were twice as likely to experience lower pay as those who did not receive UI benefits (59 percent versus 32 percent) And 64 percent of exhaustees said they were forced to take a pay cut in order to find new full-time employment.

Carl Van Horn, director of the John J. Heldrich Center for Workforce Development, which conducted the study, told Politico:

The government is not really providing a lot of help to the vast majority of the long-term unemployed.

Of course, the study doesn't establish causality between receiving UI and being worse off financially. Demographic factors could possibly explain the differences in success between UI recipients and non-recipients; effectively targeted unemployment benefits would favor recipients less likely to succeed on their own. The point is that the benefits aren't working, as Van Horn points out. And it doesn't take an overdose of common sense to see why. As Reason keeps saying: Attaching incentives to unemployment encourages people to remain unemployed (surprise!) And despite the government's best efforts to extend the free ride indefinitely, eventually the money will run out.

Read Reason's November 2011 issue, Get a Job!

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  • Fluffy Got Demoted||

    Standard libertarian disclaimer, but I don't know if these are fair comparisons.

    The problem is that you can only get UI if your layoff is through "no fault of your own". That means that UI recipients will typically be part of large, non-performance-based layoffs.

    People who aren't collecting UI usually lost their position "for cause", which often boils down to "I told the manager he was a dick so they threw my ass out one day."

    That means that the UI collectors are more likely to be caught up in town-wide or region-wide dislocations, where everybody at a factory loses their job at once or where an entire industry shits the bed across a whole region. That's got to make it harder to look for replacement work than it would be if you lost your job for being an asshole but your town, region and industry are doing OK otherwise.

  • tarran||

    That's a very good point!

    Additionally, it includes people who left crappy jobs voluntarily for whatever reason.

  • Mo||

    Also, people who leave on their own generally either have something lined up, financially prepared themselves for leaving work or have reason to believe that getting a new job will be easier.

  • Mo||

    People who aren't collecting UI also are those that left their job willingly, which is obviously a much different situation and unemployed mindset than those that got laid off.

  • Old Mexican||

    Re: Fluffy Got Demoted,

    The problem is that you can only get UI if your layoff is through "no fault of your own".


    That doesn't change the fact that UI rises the opportunity cost of labor, F.

    That means that the UI collectors are more likely to be caught up in town-wide or region-wide dislocations,[...]where an entire industry shits the bed across a whole region.


    UI would only make it harder for people to consider alternative jobs, F, i.e. it would close their fucking minds instead of opening them. UI still rises the opportunity cost of labor.

    The saying goes that there's nothing better to clear your mind than a death sentence, and certainly not being supported by productive people while being unemployed is as close to that as one can get without losing your life.

  • Pip||

    I was unemployed 9 years ago for a few months and regardles of these statistics, if you need to make rent and eat, unemployment benefits come in mighty handy.

  • Sevo||

    So would a free yacht.

  • There is no "we"||

    Capitalizing the first letter now, Sevo, f/k/a "sevo"?

    Doesn't improve your game much.

    A "free yacht" would be utterly useless to the vast majority of Americans (except for its resale value).

  • Colonel_Angus||

    You can live on a yacht. Some maintenance, no rent. Seafood. Can anyone spare some resin?

  • There is no "we"||

    Damn, am I a dick or what?

  • mustard||

    How big a dick? I can unhinge my jaw like a snake!

  • tarran||

    It's pronounced Throat-Warbler-Mangrove.

  • ||

    Actually the resale value of the free yacht I got instead of Unemployment Insurance Benefits cost me storage fees I could not afford since I was not working.
    I couldn't sell it either since I couldn't afford to join the Yacht Salesmans Union.

  • The Art-P.O.G.||

    Is that why you robbed Bluto?

  • ||

    The only thing I ever took from Bluto was my skinny gurlfriend. TOOT TOOT!

  • ||

    After a summer of seasonal work in 1985, I received unemployment which allowed me to move out of a depressed-economy region and into the city, where I have been fully employed ever since.

    And paying taxes.

    And destroying my liver.

    This city life is killin' me....

  • GW||

    So would saving and preparing for such circumstances. You know, like people used to do before UI.

  • There is no "we"||

    The fact that people not getting UI were less likely to receive a pay cut should have belied the fallacy that this study indicates something about "incentives."

    There is no rational mechanism by which somebody getting UI would be more "incentivized" to receive or accept a pay cut than somebody not receiving UI. The whole point of the incentives argument -- bullshit that it is -- is that denying people UI will make them more likely to accept a lower-paying job, thus "clearing the market" or whatever.

    Try breathing through your noses, morons.

  • Fluffy Got Demoted||

    Hey, I found the study flawed also, but this objection is not correct.

    One possible "rational mechanism" might be that by making unemployment less of a catastrophic event, UI encourages people to muddle through, sticking it out in dying fields or depressed regions, rather than capitulating and making a clean break. For some recipients, this could end up steering them, ultimately, into a lower-paying new position. Someone hanging out in Nevada waiting for a construction job and collecting UI might eventually take a retail or hospitality job in the same area for less money. Another Vegas resident with no UI to fall back on might say, "Holy shit, I better move to North Dakota stat!" and end up getting a higher-paying position as a result. There are many regions of the country and many fields where anything that makes people capitulate and bail will ultimately benefit those who would otherwise have been prisoners of their own inertia.

    You might be misconstruing the type of incentives argument the study is trying to make.

  • There is no "we"||

    That could be a mechanism, but it's not a "rational" mechanism. Rationally, UI would just delay the "holy shit" moment for the increment of the UI benefits, not avoid it entirely.

  • Old Mexican||

    Re: There is no "brain,"

    That could be a mechanism, but it's not a "rational" mechanism.


    It IS rational, There is no "brain."

    GET A BRAIN!

  • There is no "we"||

    If you were anyone else, I would suck your cock for a quarter, Old Mexican, but because I irrationally hate you, I'd have to charge you double.

  • mustard||

    I give five blowjobs for a dollar!

  • Old Mexican||

    Re: There is no "brain,"

    The fact that people not getting UI were less likely to receive a pay cut should have belied the fallacy that this study indicates something about "incentives."


    No, your conclusion sheds light on the fact that you have no brain, There is no "brain." There IS a rational mechanism that explains the phenomenon: It's called opportunity cost.

    A person that receives no benefits for unemployment will work harder to find a job that pays the same or more than his previous job more keenly than a person that receives benefits because the persont that receives benefits does not have to do anything besides existing to receive those benefits - his opportunity cost of finding a job is HIGHER than the unemployed person with no benefits. Why do you think welfare recipiens do not marry and do not find work? Since their leisure is subsidized, the opportunity cost of labor INCREASES. It's the SAME RATIONAL MECHANISM for both UI recipients and welfare recipients, you nitwit.

    GET A FUCKING BRAIN!

  • There is no "we"||

    Man, am I good at being a cocksucker!

  • mustard||

    I dare you to prove it.

  • romulus augustus||

    In some states, you can't get UI if you are getting severance pay. So, someone getting a severance full pay for 20 wks. who then finds another job will feel better off financially than someone who didn't get severance but got some UI benefit for 20 weeks.

  • Neu Mejican||

    threats to validity...
    How do they work again?

  • ||

    Didn't pass my smell test either. Too many Apples and Oranges.

    Besides, it should come as no surprise that people on UI are less incentivized to be aggressive in their job pursuits. Whether this is good or bad is subjective.

  • Old Mexican||

    Get a brain too, NM. You forget opportunity costs.

  • ||

    The government is not really providing a lot of help to the vast majority of the long-term unemployed.

    Am I the only one who read this as "We need to spend more money."?

  • ||

    Unless they're in a super-heated economy, I don't think there's much hope for the chronically unemployed.

    It seems like we 'pay' them just to stay out of the way.

  • ||

    Well unemployment benefits helped me out. Hopefully I'm never in that situation again.

  • CE||

    ...effectively targeted unemployment benefits would favor recipients less likely to succeed on their own...

    Since we're all being forced to pay into these unemployment "insurance" schemes, what do you mean by "targeted" benefits? Targeting them away from those who paid would turn them into welfare, just like extending them beyond the planned expiration date does.

  • Plastic Fork||

    Online virtual worlds are great places to meet people enjoying their unemployment!

    I have met people that didn’t bother looking for work until the last few weeks of their benefits. You would then hear the, “Well, unemployment is running out, guess I had better find a job.” lol No kidding!! (Ah, so that explains how they could afford to spend 24/7 online!)

    As one soon to be unemployed, my job is going poof thanks to Obamacare, I may make use of the benefits myself and be glad for it, but it doesn’t change the fact that some folks simply won’t even look until the money is cut off.

  • ||

    Many, many of my acquaintances did the same thing.

    Some would also follow through with comments on how lazy black people are too.

  • There is no "we"||

    ObamaCare? Really? I'm so sure.

  • There is no "we"||

    I'd suck Obama's cock for free.

  • Joe Biden||

    What am I... chopped liver?

  • mustard||

    Can I join in?

  • Logical Joe||

    Oh Causality, how can we understand thee?

  • alice bowie||

    So what is the libertarian answer?

    I know I know...get rid of u.i. and fuck those lazy people that are unemployed...the can always get jobs changing bed pans.

  • Brett L||

    Private charities. I have no problem if you want to give money to support unemployed persons and/or their families. I just might give some, too.

  • Old Mexican||

    Re: Alice Bowie,

    So what is the libertarian answer? I know I know...get rid of u.i. and fuck those lazy people that are unemployed[...]


    Yes, that's it.

    BUT, you forgot: Getting rid of minimum wage laws, payroll taxes, labor laws, OSHA, MSHA, the Wagner act, the EEO and all other impediments to employment you simply forgot to mention because you're a nitwit.

  • Alice Bowie||

    There u go...my point exactly.

  • Old Mexican||

    Re: Alice Bowie,

    There u go...my point exactly.


    It ain't "your point" exactly, you stupid lying sack of dog excrement.

    Go fuck yourself.

  • There is no "we"||

    We should hang out, Alice.

    Do you like to perform fellatio?

  • mustard||

    Ooooh! Ooooh! I know the answer!

  • j||

    I was denied unemployment benefits at a comfortable position that I held for 5 years after a disagreement with the CFO of our company. Despite being a high-travel position (I was required to work and travel on weekends, work holidays on commission only basis, etc), the reason for dismissal was erroneously placed as absenteeism, and thats it.

    A surprise illness wiped out my savings. I would love to relocate somewhere where work is more readily available - however after medical expenses I do not have the cash to relocate.

    This study is obviously flawed for a few reasons - the most compelling being people without access to UI will tend *generally* to be of a much lower income than those with UI (for instance, part time employees who are ineligible that then move on to a full time position). Upward mobility when you are working a part time gig at mcdonalds is not difficult.

    Unemployment insurance is not a bad idea - if it were offered on the private market, I would have purchased it myself. That being said, the fact that I did in fact pay for the insurance and I was denied reimbursement based on a dispute with my employer is absurd on its face.

    Also, the notion that unemployement creates a *compelling* incentive is ludicrous. Even with the maximum UI benefit , I would not have been able to pay just rent and utilities.

    Homelessness is not an incentive.

  • Alice Bowie||

    You would have found the same problem (IF NOT WORST) in private insurance...which is more likely to weasel out of paying a your claim to keep profits low.

  • wareagle||

    Alice..seriously:
    1) WORSE, not worst
    2) industry, as a rule, does not work to "keep profits low".

    thanks for playing; no lovely parting gifts but you do get the home version of the game.

  • Old Mexican||

    Re: J,

    Despite being a high-travel position (I was required to work and travel on weekends, work holidays on commission only basis, etc), the reason for dismissal was erroneously placed as absenteeism, and thats it.


    An employer can dismiss you for any reason he or she wants - its NOT your money, it is his or hers. And that's it.

    I would love to relocate somewhere where work is more readily available - however after medical expenses I do not have the cash to relocate.


    Sell your house. Or sell cups of elote con mayonesa to tourists if you need to. Just stop it with the sob story.

  • Colonel_Angus||

    "An employer can dismiss you for any reason he or she wants - its NOT your money, it is his or hers. And that's it."

    This would be correct if it was a completely private, non taxpayer funded, non coercive, non government system. The truth is that it is a government system with arbitrary premises. It should be eliminated.

  • Alice Bowie||

    Very very interesting.

    I manage a pretty large group of IT people (100+) including directs and subordinates.

    Due to strict labor laws and the risk of being sued, most of the Major NY Banks don't fire people, they lay people off. So, generally speaking, in Banking, people that are laid off are those that are deemed under-performers. And, I'll tell u know, you don't have to be an actual under-performer to be classified as under-performer. Politics Politics Politics and Crapitalism. And, the under-performers are all pretty much the same (40+, mis-fits, renegades, rabble-rousers, the non-cool, and even people that just simply became comfortable in their jobs, etc.).

    Piece of advice: If you wanna get laid off to receive severance pay...DO NOT TELL PEOPLE you want to get LAID OFF !!!

    Most of the people in power to LAY people off DON'T eat DEAD ANIMALS...there must be BLOOD in the KILL!!! Plus, they already know you wanna go, so they'll just make your life miserable until you go...and save on pay SEVERANCE.

    If you wanna get LAID off, tell your management and people around you how fearful you are of losing your job. How losing your job would bring hardship to your family.

    Watch, you'll be LAID off real quick.

    And remember, these middle managers are usually too rich to be liberal and too poor to be limo-liberals. So, chances are that they are heartless scumbags that'll enjoy seeing the misery.

  • Old Mexican||

    Re: Alice Bowie,

    If you wanna get LAID off, tell your management and people around you how fearful you are of losing your job. How losing your job would bring hardship to your family.

    Watch, you'll be LAID off real quick.


    Never mind that a person that talks like that problably knows already he is pretty much worthless for the company. Guilt would make a person externalize such realizations.

    So, chances are that they are heartless scumbags that'll enjoy seeing the misery.


    You're a paranoid imbecile, Alice B. Management hates losing people; they just hate losing money more.

  • wareagle||

    And, the under-performers are all pretty much the same (40+, mis-fits, renegades, rabble-rousers, the non-cool, and even people that just simply became comfortable in their jobs, etc.).
    --------------------------

    because no successful company can have too many misfits, renegades, and rabble-rousers.

  • Mr. FIFY||

    "too rich to be liberal"

    That's gonna have me puzzled for at least an hour.

  • ||

    they're hiring at GFAONLINE.INFO

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