Did Expiration of Benefits Cause a Drop in the Long-Term Unemployed?
CNN Money presents an interesting case that the recent drop in the number of long-term unemployed workers -- one of the brighter spots in recent job reports -- is actually bad news.
In other words, it's just as possible that workers give up altogether when benefits expire as it is that they take a job that wasn't one they particularly wanted. Either way, it's an indication that unemployment insurance needs to be restructured to improve the incentives facing workers.
With that noted, I think the evidence is not totally in favor of the idea that the long-term unemployed are dropping out of the work force as a group because of the expiration of long-term unemployment benefits.
As the CNN Money article notes, unemployment benefits in some states were scaled back in January because those states reached a cutoff level of general unemployment. But this isn't the first time unemployment benefits have been shortened. In February of last year, the maximum duration of benefits was cut from 99 to 73 weeks, nationwide. Yet, as this chart from Calculated Risk shows, there hasn't been much of a discontinuity in the long-term unemployment rate in the time since. In fact, it's been a fairly steady decline since early 2010:
The fact that the changes in unemployment benefits eligibility haven't shown up in this data -- yet -- suggests that the effects of unemployment insurance on the choices of the unemployed aren't as dramatic as we thought.