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News from EPI If Unemployment Insurance Extensions Expire, Economy Will Lose 310,000 Jobs In 2014

If federally funded extended unemployment insurance benefits expire as scheduled at the end of 2013, the economy will lose 310,000 jobs in 2014, a new EPI analysis finds. In Labor Market Will Lose 310,000 Jobs in 2014 if Unemployment Insurance Expires, Economic Policy Institute President Lawrence Mishel and economist Heidi Shierholz find that continuing unemployment insurance extensions through 2014 would not only give critical assistance to many of the 4.1 million workers who have been unemployed for more than six months, it would generate spending to support 310,000 jobs.

Government spending on unemployment insurance benefits extensions is one of the most effective measures that can be taken during an economic downturn. “Unemployed workers will spend their unemployment benefits on food, clothes, rent and other necessities, which boosts the economy,” said Shierholz. “When an unemployed worker can buy winter coats for his children because of unemployment insurance benefits, it means that the salesperson who sold him the coats is more likely to keep her job. Unemployment insurance helps the families of unemployed workers survive, but it’s also designed to reduce the domino effect of unemployment on the economy.”

Shierholz and Mishel also argue that extended unemployment insurance benefits give people a reason to continue looking for work in an economy that has discouraged many job seekers. Unemployed workers continue to face extremely long spells of unemployment because there are far more people looking for work than there are job openings; currently, the ratio of unemployed workers to job openings is 2.9-to-1. The labor market is no stronger than it was a year ago, when the current set of extensions were authorized. The unemployment rate has come down but only because workers have given up looking for work.

Spending $25.2 billion to continue the unemployment insurance benefit extensions through 2014 would generate a $37.8 billion increase in GDP and $14.1 billion in higher revenues and lowered expenditures, which means $14.1 billion of the $25.2 billion cost of the unemployment insurance benefits extension would be recouped from the taxes paid and expenditures lowered.