Boosted Jobs

Unemployment insurance


Did the decision to cut federal unemployment benefits at the end of 2013 contribute to the 2014 employment boom? Economists Marcus Hagedorn, Kurt Mitman, and Iourii Manovskii think the evidence says yes.

In a study published in January by the National Bureau of Economic Research, the economists found that "1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized."

The study divides states into two groups, based on the duration of their employment benefits, and then compares how the jobless fared. The authors also compare border counties in which the respective states had different unemployment benefit extension policies, finding that "employment growth was much higher in 2014 in the border counties that experienced a larger decline in benefit durations." They conclude that 61 percent of 2014's employment growth was likely caused by the benefit cut.

Other economists have objected. The most prominent critique of the study suggests that the larger employment jumps in states that most aggressively cut back benefit extensions may have been caused by states bouncing back naturally from a larger initial fall.