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  • The Case for UC Benefits and the Jobless

The Case for UC Benefits and the Jobless

July 6, 2010 Leave a Comment Written by Neal Griebling

On this past Sunday’s New York Times op-ed page, Paul Krugman makes a persuasive case for extending UC benefits for the nation’s unemployed. On the face of it, this would seem to be a no brainer. Stimulus dollars are running out, thereby undermining support for job creation in the public sector. Private sector job creation is tepid. There are five unemployed workers for every job opening. The case for extending UC benefits would seem to be very clear. Yet the divisive political climate has made case-making a much more difficult task, with even centrist Democrats clearly worried about running up more government debt. That’s why it was heartening to read Krugman’s thoughtful response.

To a key question: Do UC benefits reduce the motivation for the jobless to continue their search. Krugman cites recent economic research that indicates UC benefits have far less impact on job seeker motivation than previously believed; in good economic times worker reluctance to pursue jobs is a big problem; in the current economic climate it has far less impact given the enormous loss of jobs during the current Great Recession.

Weak consumer demand contributes to a weak economy because it limits job growth.  Extending UC benefits puts money into the pockets of the unemployed and thereby increases consumer demand because the target audience is able to purchase more goods. Extending benefits is actually a very cost effective stimulus. Allowing benefits to lapse now is actually a prescription for further job loss.

Will extending benefit raise the deficit? Yes, Krugman concedes but, again only slightly. In his view, it’s a small price to pay to ward off a deeper recession that could further extend the current joblessnes rate for another 30 months or more. He asks centrist Democrats to put aside their fears and join their liberal friends in the party to override Republican rhetoric and pass new legislation to extend the much needed UC benefits.

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