Tuesday, October 4, 2011

Economics:  Jobless Benefits Discourage People from Finding Jobs

Many people getting unemployment start work only when it's running out.

The chart displays the fraction of persons (in Pittsburgh) receiving unemployment benefits who began working again, as a function of the number of weeks until their unemployment benefits were scheduled to be exhausted. For example, a hazard value of 0.04 for week -14 means that, among unemployed persons with 14 weeks remaining until their benefit exhaustion date, 4% of them either began working a new job or returned to their previous job.
Very few people started working during the two to three weeks prior to the exhaustion of their unemployment benefits (weeks -3 and -2 in the chart). But almost 30% started work just a week later (19% started a new job, 10% returned to a previous job).

Demand may have been lacking in Pittsburgh in the early 1980s, but that did not stop unemployed people from responding to the work incentives presented to them by the unemployment insurance program (economists also looked for this pattern during a Swedish recession, and found it there too).

For more, see Do Jobless Benefits Discourage People from Finding Jobs? by Casey B. Mulligan, March 17, 2010 at Economix.

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