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Bootstrap Unlaced: Studies from Right- and Left-Leaning Think Tanks Show Cuts to Unemployment Benefits Don't Create Jobs

In January 2014, when a federal program extending unemployment benefits failed to be renewed in Congress, there was speculation about what might happen to those on unemployment. It is a popular idea with some that an unemployed individual isn’t motivated to seek out a job as long as a government check is coming in regularly. North Carolina Gov. Pat McCory (R) who ended extended benefits in his state, claimed the attitude among those collecting was to hold that job until my unemployment benefits end.” Experts weren’t sure and no reliable data was available.    

Now there is a report about some data. And the cut the benefits up-by-yer bootstraps school have it mostly wrong.  

States that cut unemployment benefits following the Great Recession didn’t help the jobless or taxpayers, according to a recent report by the Economic Policy Institute (EPI), a left-leaning think tank.    

What we looked at was the employment-to-population ratio, specifically for prime-age workers. We wanted to see if these policies had a measurable effect on employment, the theory being that when people are cut off from benefits they become so desperate as to re-enter the job market and get a job right away. That did not occur. The employment-to-population ratio from before the policy change continued after the policy change.

Well, the EPI think tank that leans to the left has some who lean to the right agreeing with them. The American Enterprise Institute (AEI) has second thoughts about “bootstrapping” as a cure for unemployment. This from an AEI policy blog titled: Did cutting jobless benefits promote work? Not so much

[…] evidence suggest this “bootstraps” theory might be wrong. First, a new paper from the Boston Fed paper looking at the Not-So-Great Recovery finds that, yes, the unemployed tended to remain so until their UI benefits were exhausted. But their next move wasn’t into a job. Rather, they became “more likely to drop out of the labor force […]

Ending unemployed benefits, kicking people “off the dole,” can’t make jobs for them appear where none exist. The EPI concludes:

Whether or not unemployment benefits are available to you sort of has nothing to do with the labor market problems writ large.

 So pull as hard as you want on your bootstraps, no harm, but that will never be a job.

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