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Not the right time

Rochester Business Journal
December 27, 2013

The Emergency Unemployment Compensation program, authorized in 2008 during George W. Bush's presidency, was designed to address an immediate need; it was not supposed to be permanent. But how long should it last?
No longer, many Washington lawmakers seem to have decided. Under current law, the program ends tomorrow.
As a result, roughly 1.3 million Americans who have been out of work more than 26 weeks will lose their jobless benefits.
Those who think it's time to end extended unemployment benefits note that the nation's jobless rate has fallen steadily since the height of the recession, reaching 7 percent in November versus 10 percent four years ago. They also point to the cost of providing benefits-some $25 billion for another year.
Yet with the economy's recovery still modest at best, the cost of ending extended benefits could be greater. The White House estimates 240,000 jobs could be lost in 2014; the Congressional Budget Office says GDP growth would be 0.2 to 0.4 percentage point lower.
The CBO says UI benefits are among the government policies with the biggest impact on economic output and employment per dollar spent.
Other studies have shown that jobless benefits are not a work disincentive, as many believe.
When the EUC program became law in June 2008, the jobless rate was 5.6 percent and the average duration of unemployment was 17.1 weeks. Today, the jobless rate is 1.4 percentage points higher and the average length of unemployment is roughly 36 weeks, more than double the 2008 average.
What's more, the long-term unemployment rate-2.6 percent in October-still is at least twice as high as it was when any previous extended UI benefits program expired.
Some members of Congress have vowed to push for renewal of extended UI in the new year. If their effort fails, it's estimated that 3.6 million more people will lose benefits by the end of 2014. Businesses will be losers too, with a certain reduction in consumption.

No one is saying the EUC program should be made permanent. But now is not the time to end it.

12/27/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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