An estimated 1.8 million jobs were created in 2014 in the US due to unemployment benefit cuts

[Axulus]

We measure the effect of unemployment benefit duration on employment. We exploit the variation
induced by the decision of Congress in December 2013 not to reauthorize the unprecedented benefit
extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to
47 weeks across U.S. states at the beginning of December 2013 were abruptly cut to zero. To achieve
identification we use the fact that this policy change was exogenous to cross-sectional differences
across U.S. states and we exploit a policy discontinuity at state borders. We find that a 1% drop in
benefit duration leads to a statistically significant increase of employment by 0.0161 log points. In
levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. 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.

Full paper here:

http://c0.nrostatic.com/sites/default/files/w20884.pdf

 

[Sarpedon]

From the cover page:

NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed
or been subject to the review by the NBER Board of Directors that accompanies official
NBER publications.

Let me know when it gets published.

 

[Trausti]

The paper may still be in the peer-review process, but I have a hunch it'll withstand the scrutiny. It seems to recognize something observed in life but often played down, i.e, the power of stress. If you develop a policy that the consequence of job-avoidance is continued government benefits, there certainly will be a subset of the unemployed who will wait out the benefit. It's a nice sentiment to think that all people are equally motivated and industrious, but life doesn't supply the evidence for that. I'm of the view the while public aid is sometimes necessary to help someone who has fallen down, from time to time the best medicine is a good kick in the pants.

 

[laughing dog]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

 

[DBT]

How and why were the new jobs created? What do these new jobs pay? Do some employers see an opportunity for the availability of cheap labour?

 

[bilby]

I would be more interested in seeing how many people go from being net beneficiaries to net taxpayers.

There is little point in getting people off the unemployment lists if they are going into jobs that don't pay enough to live on.

Making the stats look good without improving the lot of the unemployed and/or poor is not uncommon, and is far from laudable.

 

[Canard DuJour]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

I guess "jobs created" sounds better than 'made to take existing dead-end jobs in which they're no better off than on welfare, and probably still need it.'

 

[Axulus]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

You are having a semantic dispute with the author's use of "created". "Created" in this context simply means the increase in the number of individuals employed during the year. This word is often used in this context by the media and by politicians, so I don't really understand your objection to the particular word. Therefore the summary is not inaccurate, you just don't like the word they choose to use and the context in which they are using it.

 

[Togo]

The paper may still be in the peer-review process, but I have a hunch it'll withstand the scrutiny. It seems to recognize something observed in life but often played down, i.e, the power of stress. If you develop a policy that the consequence of job-avoidance is continued government benefits, there certainly will be a subset of the unemployed who will wait out the benefit. It's a nice sentiment to think that all people are equally motivated and industrious, but life doesn't supply the evidence for that. I'm of the view the while public aid is sometimes necessary to help someone who has fallen down, from time to time the best medicine is a good kick in the pants.

While that may feel logical, the results in the paper are that 60% of the increase was due, not to people previously claiming benefits now getting jobs, but due to non-participants entering the labour market. Or to put it in context, the spouse, retiree or adolscent entering employment, presumably to support the benefit claimant who is now destitute.

I'm also a little dubious about the methodology. The UK also had an upswing in employment at the same time, as did several other countries yet this underlying factor is ignored, because the only controls are pair-comparison and a placebo run for the previous year. They don't seriously tackle the idea that a global upswing just happened to coincide with a US policy change, even though there is plenty of evidence that this occured.

However, there probably is a (small) real effect here. If you cut people off without a cent, someone is going to have to enter the labour market to support them, either for the first time, or as a reduction in their career aspirations. Its' not a healthy development, it does little for the development of long-term skills in the market, and it's a recipie for encouraging exploitation, but I can well believe the effect is there.

But they won't get through peer review until they deal with the wider picture - that their chosen time period saw an increase in employment in most of the western world.

 

[Medicine Man]

We measure the effect of unemployment benefit duration on employment. We exploit the variation induced by the decision of Congress in December 2013 not to reauthorize the unprecedented benefit extensions introduced during the Great Recession.

You Bu$h fans need to come-to-grips with the fact you continued backing a losing-"horse"....from the BU$HCO-stables....and, no amount of rewritten-history....

*​

...Will Change The Outcome

*​

"A December 1, 2002, news story in the New York Times on the National Bureau of Economic Research, Inc., of Cambridge, MA, called the institution non-partisan but failed to identify a penny of the $10 million it receives in conservative philanthropic underwriting.

"Reporter David Leonhardt found time to report that the bureau, headed by Martin S. Feldstein, guru to Bush-economics, is the 'nation's premier economic research organization,' but couldn't do a simple Google search to determine where it gets its money."

 

[Medicine Man]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

Imagine that.....

*​

Spotlight On Marty
February 10, 2003

*​

"Harvard students have known for nearly two decades that Ec10 is flagrantly biased. Disgruntled students have even gone so far as to organize Students for a Humane and Responsible Economics (SHARE). It is a blotch on the University’s academic record that it has allowed Baker Professor of Economics Martin S. Feldstein ’61, since he began teaching the class in 1984, to use Harvard’s only introductory economics course as a forum to vent his personal views. Given students growing frustration, and the current review of the Core Curriculum, the administration must reform Ec10.

Even the national media is catching on. In a Dec. 1 profile of Professor Feldstein, the New York Times recognized that Ec10 is hardly neutral in its readings or its lectures. The article reports that over the last two decades, thousands of Harvard undergraduates have received a decidedly anti-tax, free-market-leaning introduction to economics. Professor Juliet Schor, an Economics professor from Boston College, was recently invited by students to speak at Philips Brooks House on the ideologically limited nature of Feldstein’s course. Schor, who actually used to teach a section of Ec10, said that she had encountered students complaining about this for years. Schor said that the complaints go back to the 1980s when Feldstein purged liberal ideas and readings from the curriculum and made his lectures a venue for his own views."

 

[Medicine Man]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

You are having a semantic dispute with the author's use of "created". "Created" in this context simply means the increase in the number of individuals employed during the year.

​

 

[Jimmy Higgins]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

You are having a semantic dispute with the author's use of "created". "Created" in this context simply means the increase in the number of individuals employed during the year. This word is often used in this context by the media and by politicians, so I don't really understand your objection to the particular word. Therefore the summary is not inaccurate, you just don't like the word they choose to use and the context in which they are using it.

No, the jobs always existed and weren't created... where "created" means the definition included in the dictionary. A drop in unemployment benefits may be more accurately noted to lower unemployment.

 

[Sarpedon]

Precisely: the paper claims that jobs were 'created' by adding stress. What it really means is that 'people were coerced into taking jobs they wouldn't have otherwise taken.' Also, I'm sure that the term 'job' isn't clearly defined. Probably, employers divided up what would be full time jobs into part time jobs, cut the pay and benefits, and people were forced to accept them.

The idea that removing money from the economy creates jobs is absurd. This paper is hagiography, ignoring the economic trends of the time, and commits the correlation/causation error.

 

[dismal]

You are having a semantic dispute with the author's use of "created". "Created" in this context simply means the increase in the number of individuals employed during the year. This word is often used in this context by the media and by politicians, so I don't really understand your objection to the particular word. Therefore the summary is not inaccurate, you just don't like the word they choose to use and the context in which they are using it.

No, the jobs always existed and weren't created... where "created" means the definition included in the dictionary. A drop in unemployment benefits may be more accurately noted to lower unemployment.

Why the semantic bickering?

A "job" comes into being when an employer and a worker agree on terms. Before that happens you may have employers who want to hire but can't find someone at a price they are willing to pay and workers who want a job but can't find someone to pay them enough to want to work. Economists long ago learned how to draw fancy curves to represent these things called "demand curves" and "supply curves". If you took a course in economics, you may remember these.

An economist would expect unemployment benefits to alter the supply curve. All other things being equal, the price a worker would require to accept a job would be higher if the worker gets paid money not to work. One could argue about the magnitude of the effect, but it's hard to imagine how one would argue against the sign of it.

 

[Nice Squirrel]

A "job" comes into being when an employer and a worker agree on terms.

Really? Because most jobs that have come into being in my life is from a need or want of a person to do a job.

 

[dismal]

A "job" comes into being when an employer and a worker agree on terms.

Really? Because most jobs that have come into being in my life is from a need or want of a person to do a job.

Maybe read my post. Only 5 or 6 sentences. It covers that.

 

[laughing dog]

The summary of the paper is inaccurate. There is nothing in their analysis that suggests that reduction in the duration of unemployment increases the number of available jobs. Their paper addresses employment of vacant jobs, not job creation.

You are having a semantic dispute with the author's use of "created". "Created" in this context simply means the increase in the number of individuals employed during the year. This word is often used in this context by the media and by politicians, so I don't really understand your objection to the particular word. Therefore the summary is not inaccurate, you just don't like the word they choose to use and the context in which they are using it.

A professional economist in a professional paper ought to use terminology properly. This term is misleading, because it clearly lends the impression that this paper shows that reducing the duration of unemployment leads to jobs that would otherwise not have existed. The study does not even attempt to model or study such a result. At best, the results of this paper show that reducing the duration of unemployment benefits induces more unemployed people in and out of the labor force to find and accept offers to work in existing jobs. That is a significant difference.

 

[Keith&Co.]

It's just usually, when people make speeches and promise they're going to 'create' jobs, they're implying that their goal is to increase opportunities.

Not coerce people into already existing, suboptimal opportunities.

 

[Nice Squirrel]

Really? Because most jobs that have come into being in my life is from a need or want of a person to do a job.

Maybe read my post. Only 5 or 6 sentences. It covers that.

It covers the agreement, not the need.

Necessity, the mother of jobs.