Labor & Employment Law

Unemployment Insurance Boosts Entire U.S. Economy, Study Finds

By Mike Hall

A new study shows that the economic impact of unemployment insurance (UI), especially for long-term jobless workers, has a huge positive effect on the economy, not only for the jobless, but by keeping millions of other workers on the job.

With Republican lawmakers balking at maintaining UI for millions of jobless workers out of work for more than six months in an economy that has nearly five job seekers for every opening, the new research bolsters the case for maintaining the programs.

If lawmakers don?t act by Nov. 30, 2 million jobless workers will be without help by the end of the year.

The study, commissioned by the U.S. Department of Labor, shows the UI program had an even more positive impact on the economy this time around than in previous recessions.

Among the key findings:

• For every dollar spent on UI, economic activity increases by $2.
• During each quarter of the recent recession, UI benefits kept an average of 1.6 million Americans on the job.
• At the height of the recession, UI benefits averted 1.8 million job losses and kept the unemployment rate approximately 1.2 percentage points lower.
• UI benefits reduced the fall in GDP by 18 percent. Nominal GDP was $175 billion higher in 2009 than it would have been without UI benefits. In total, unemployment insurance kept GDP $315 billion higher from the start of the recession through the second quarter of 2010.

As Labor Secretary of Labor Hilda Solis says, ?Unemployment insurance is one of the best investments we can make,?

not only for the millions of people that utilize UI benefits to provide for their families in a time of need, but for the millions more whose jobs are kept secure because of the stabilizing affect it has on our economy as a whole.

Solis says it’s crucial Congress act as soon as possible.

While the economy and the job market are on the road to recovery, the loss of consumer sales from removing billions of dollars in unemployment benefits will set us back. Now is not the time to turn our backs on the families that rely on these benefits and the businesses that serve them.

Click here for the full report.

Full post as published by AFL-CIO NOW BLOG on November 16, 2010 (boomark / email).