If the federally funded extended unemployment insurance benefits expire at the end of 2012, as they are currently scheduled to do, the economy will lose 400,000 jobs in 2013, a new EPI analysis finds. In Labor market will lose 400,000 jobs in 2013 if UI extensions expire, EPI President Lawrence Mishel and economist Heidi Shierholz finds that continuing the UI extensions through 2013 would not only give many of the five million workers who have been unemployed for more than six months critical assistance, it would generate spending that would support 400,000 jobs.
Unemployed workers are very likely to spend their unemployment benefits on rent, groceries and other necessities, thus increasing economic activity. This economic activity saves and creates jobs throughout the economy. In fact, economists, including those at the Congressional Budget Office, widely recognize government spending on unemployment insurance benefits as one of the most effective measures that can be taken during an economic downturn to generate jobs. If the federal government spent $30 billion on unemployment insurance benefits extensions in 2013, GDP would grow by an estimated $48 billion, translating into roughly 400,000 jobs. (In comparison, continuing the upper-income Bush-era tax cuts in 2013 would cost $52 billion and generate only 102,000 jobs.)
Finally, of the $48 billion increase in GDP, 37.4 percent, or roughly $18 billion, would be recouped in higher revenues and lower expenditures. So while the “sticker price” of continuing the UI benefit extensions is $30 billion, the effective cost to the government would be $12 billion.
“The ratio of unemployed workers to jobs openings has been 3-to-1 or greater since September 2008. For two out of three workers, there are no jobs available,” Shierholz said. “In other words, the vast majority of the unemployed are not going to be able to find a job no matter what they do.”
The Economic Policy Institute (EPI) is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States.