Unemployment as measure of welfare

Explore the latest strategic trends, research and analysis With the sharp increase in the unemployment rate during the recent recession, Congress enacted a series of unemployment insurance extensions, allowing jobless individuals to collect up to 99 weeks of benefits in some states. Even though the labour market has been improving, there are still nearly three unemployed workers for each job opening, and the average duration of unemployment is currently 40 weeks — longer than the 26 weeks of benefits that an unemployed worker is normally eligible to collect BLS

Unemployment as measure of welfare

Unemployment as measure of welfare

For this reason it is 3, words long and contains a lot of economics terms references. It is meant as a help for anyone who wants an in-depth study of the topic with supporting facts and figures. For a short version in plain English see here. The essay was marked the best in my class of 80 students.

It won the Undergraduate Award in Economics along with someone from Yale. It examines if higher benefit levels or longer benefit durations lead to higher Unemployment as measure of welfare rates. Surprisingly, it finds that the disincentive effect is negligible to non-existent.

A wide range of different studies have found little or no disincentive effect. The orthodox economic view which states that workers will quit their jobs if they will receive more money from unemployment benefits has been found to be naive and unrealistic. Despite the large number of people who believe it to be true, it simply is not supported by evidence.

Unemployed workers suffer psychological damage from their lack of a job.

Unemployment benefits - Wikipedia

They suffer from a higher rate of mental illness than those working and gain a boost in mental wellness when re-employed. The orthodox theory does not take into account the fact that many workers gain self-fulfilment from their work. There is no evidence that they suffer from a lack of work ethic either.

The traditional theory ignores inconvenient facts such as the fact that many unemployed workers are not eligible for unemployment benefits or the full range of allowances.

Many allowances apply only to families, whereas most of the unemployed are childless. These findings apply both in Ireland and abroad. In most countries it is necessary to have worked a certain length of time before it is possible to receive benefits, this would actually cause benefits to have a positive rather than negative impact on participation in the labour force.

Comparisons across countries find no link between generous benefits and high unemployment. In fact, the countries with the most generous benefits Sweden, Denmark, Norway, and the Netherlands have some of the lowest levels of unemployment. This paper concludes that, after taking the wealth of studies available on the topic, generous welfare benefits do not lead to high unemployment.

Conventional wisdom holds that if welfare rates are too high, people will simply stop working and go on the dole. It is seen as such an obvious statement that few question it.

This has spread to economics where it is stated as fact that people will go on welfare if the rates are high enough. But when you get out of the political rhetoric and stereotypes, there is surprisingly little evidence to support such claims.

Few studies have found a link between welfare rates and unemployment and those that have, found correlations much smaller than classical economics would have us believe. The classical or orthodox view is quite straight forward.


If unemployment benefits are too high people will not have an incentive to get a job. Reduce benefits and duration will decline. Generally they reveal what they assume, not what the data reveal. This is because unemployment insurance requires a person to have worked a certain amount of time before they can claim benefits.

This should not be surprising, since, as noted below, in many countries, substantially less than half of the unemployed actually get benefits, and among those that do, most get income for limited durations that is far below previous earning levels.

Similarly benefits are denied to those who are not available for work or who refuse suitable job offers. While there is a lot of commentary on the benefits families receive for each child they have, they are not representative of the unemployed as a whole.

In their review of the literature, they find that most estimation calculate a very small effect. Instead it is the maximum amount of time a claimant can draw benefits.

It has been estimated a cut in the maximum length is twice as effective as a cut in benefit rates. Even still the effects are quite small.

Unemployment benefits - Wikipedia

An increase in maximum benefit duration lengths of one week only increases average duration by between 0. In response to the OECD claim that there is a lag of or even years, figures 4 and 5 dispute this and show that there is no correlation. Long potential duration of benefits, also fails to explain high unemployment and in fact the correlation works in the opposite direction.

This too is negatively correlated to unemployment in figure 7, but in the short and long run.Roughly , people filed to receive unemployment welfare last week. In the week ending on Dec. 6, , , people made an initial claim for unemployment, according to a Thursday report from the Department of Labor (DOL).

The unemployment rate fell slightly to percent. Feb 20,  · There's been something of a furore about whether extended unemployment benefits increased the unemployment rate or not. On the one side those saying that of course the extension from the usual 26 weeks to 99 meant that some people stayed unemployed longer than they would have done without the extension.

Measure of Economic Welfare (MEW) During the late s, many economists began to question the over-reliance of governments and agencies on narrow, exclusively GDP-based, measures of economic welfare. National Unemployment Rate (from the Current Population Survey) A monthly household survey provides comprehensive information on the employment and unemployment of the population classified by age, sex, race, and other characteristics.

With the sharp increase in the unemployment rate during the recent recession, Congress enacted a series of unemployment insurance extensions, allowing jobless individuals to .

Unemployment or joblessness is the situation of actively looking for employment but not being currently employed.. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor attheheels.com periods of recession, an economy usually experiences a relatively high.

How the Government Measures Unemployment