Federal Unemployment Stimulus Aid Divides Lawmakers
Path to next round of aid far from clear

by Julia Cardi

Last week, federal unemployment aid providing $600 weekly to supplement state unemployment benefits for laid-off workers expired, and for the past few weeks lawmakers have locked horns about how to replace it. Republicans have proposed a $200-per-week benefit until a new model can be adopted for federal and state benefits to replace up to 70% of laid-off workers’ wages.

A key argument for reducing the federal boost to unemployment aid is that people will not have an incentive to return to work if they receive as much or more in employment benefits as they did at their job. But that argument may not be based on much more than rhetoric deployed to support traditional arguments against expanding social safety nets.

A recent study by economists at Yale University did not find evidence the additional $600 benefit has decreased people’s motivation to find work. The study used data from timesheet and scheduling software company Homebase and found the boosted benefits overall did not appear to either encourage layoffs for businesses to cut costs or discourage people from returning to work.

Jennifer Greenfield, an associate professor at the University of Denver’s Graduate School of Social Work, said other studies over the years of unemployment benefits in the U.S. and other countries have found more generous unemployment benefits actually tend to increase people’s motivation to look for work.

Greenfield said that effect is probably a result of a mix of practical and psychological factors, such as increased ability to pay for childcare while job searching and the sense of self-actualization that comes from working.

“I think that we also tend to discount some of the psychological effects,” she said. “But we find that people actually do prefer to work, and it’s actually a fairly deeply ingrained value in the United States that people don’t like to just take handouts. … Typically, when these things are modeled by economists, it doesn’t take into account those kinds of psychological factors that would create motivations outside of just the pure economic motivations.”

This article appears in the Aug. 3 issue of Law Week Colorado. To read the rest of this article, and others from that issue, order a copy online.