Conservatives Cheer Research Saying Cuts To Unemployment Benefits Helped The Economy

Students view mobile devices while waiting to speak to a representative at the International Business Machine Corp. (IBM) boo
Students view mobile devices while waiting to speak to a representative at the International Business Machine Corp. (IBM) booth during an engineering and technology career fair at the New York University (NYU) Polytechnic School of Engineering in the Brooklyn borough of New York, U.S., on Thursday, Feb. 12, 2015. Applications for unemployment benefits climbed last week to a level thats consistent with progress in the U.S. labor market. Photographer: Michael Nagle/Bloomberg via Getty Images

WASHINGTON -- A new research paper suggests Congress helped the economy to the tune of nearly 2 million jobs when lawmakers killed long-term unemployment benefits at the end of 2013.

The working paper, by economists Marcus Hagedorn, Iourii Manovskii and Kurt Mitman, is a boon to congressional Republicans who insisted the benefits not be renewed. The Wall Street Journal editorial board trumpeted the findings and the House Ways and Means Committee, chaired by Rep. Paul Ryan (R-Wis.), touted the paper on its blog.

But while the study might help the GOP take credit for an improving economy, the story isn't so simple, as several other recent studies have found the long-term benefits weren't holding back workers.

The new paper says the benefit cut led to 1.8 million additional jobs last year. "Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized," the authors write.

They reached their conclusion by comparing the 2014 employment growth of adjacent counties in separate states, since the federal unemployment insurance program that expired in December 2013 offered different durations of benefits depending on a state's unemployment rate. Using Labor Department data, the paper found that counties in states that lost out on more weeks of benefits saw higher job growth. In other words, they were better off without the benefits.

The finding is contrary to predictions from the Obama administration and the Congressional Budget Office, which assumed keeping the extended unemployment compensation through 2014 would boost the economy. Other studies have found that the long-term jobless aid in place since 2008 didn't reduce the likelihood that laid off workers would take available jobs.

Some commentators, both liberal and conservative, have taken issue with the paper's methodology. Using a different set of Labor Department data, Dean Baker of the Center for Economic and Policy Research found a smaller increase in employment in states where the benefit cut was deeper.

For some of the workers whose benefits ended that December, hardship ensued -- at least in the short term. Things got desperate for Charlie Walker of Phoenixville, Pennsylvania, for instance, before he got a new job last fall. And Brian Krueger of Mount Horeb, Wisconsin, only got back to work in May 2014 after going on food stamps and nearly losing his house. He doesn't see himself as part of a happy story about the economy improving.

"It's just a coincidence that I have work," he said.

CORRECTION: An earlier version of this post said Dean Baker used county-level data. He used state data.



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