Congress allowed federal long-term unemployment benefits to expire in December, causing 1.6 million Americans to lose this vital lifeline. The share of unemployed workers who have been out of work for six months or more has now reached 38 percent, higher than at any previous time when Congress allowed emergency benefits to expire. After Congress failed to renew the benefits earlier in January, Senate Majority Leader Harry Reid has said that a vote will be held this week.
Unemployment benefits help job-seekers survive in hard times, and they strengthen the economy by putting money into the hands of people who are likely to spend it quickly, thus creating the sales that allow businesses to expand and hire more workers. These are straightforward observations, well-supported by data. So commentators who wish to show otherwise must engage in some remarkable leaps of logic. In order to combat the conservative talking points that result, it is sometimes necessary to examine the flawed logic in detail.
While much of the mainstream media has chosen to ignore the crisis, Fox News stepped in recently with an opinion piece arguing that unemployment benefits do not help the unemployed or the economy. Economist Peter Morici noted that when North Carolina cut unemployment benefits last July, the unemployment rate fell over the next five months. The loss of benefits, he wrote, motivated people to “more earnestly seek jobs and accept positions they had previously shunned.”
There is more than one thing wrong with this argument.
The first problem is that the fact that benefit cuts are correlated with a drop in the unemployment rate in this instance does not indicate that one caused the other, as Morici implies. Indeed, there is ample evidence against that assumption in this case. And more generally, Morici and other conservative commentators have mixed up cause and effect. Morici wrote that “extended unemployment benefits caused most of the persistently high unemployment after the Great Recession.” Of course, in reality, extended unemployment benefits are a result of persistently high unemployment. When there are three job-seekers for every job opening, how can taking away unemployment benefits cause significant job creation?
There is another flaw in the North Carolina argument. Upon hearing that unemployment dropped in the five months after the state cut unemployment benefits, we might reasonably ask: What about the other states that cut benefits? And: What about periods of time other than that five months? There is a reason why Morici chooses not to share that information with his readers. As the Center for Economic and Policy Research points out, an examination of the data for all seven states that cut benefits shows that there is not even a clear correlation between cutting benefits and decreasing unemployment. In North Carolina, the drop in unemployment in the second half of 2013 was preceded by a rise in unemployment during the first half of the year, almost surely a statistical anomaly.
It is unfortunate that logical flaws and the cherry-picking of evidence are so prevalent in this debate. Let’s hope that the reality-based community prevails, and Congress renews unemployment insurance, for the benefit of job-seekers and the economy as a whole.