Expiring Unemployment Benefits Will Affect Thousands of Kentuckians

A Kentucky think tank is warning that unemployment benefits for tens of thousands of people in the commonwealth will expire Dec. 28 if Congress does not act.

The emergency benefits were created five years ago under President George W. Bush to combat the recession, and it now gives workers up to 73 weeks of unemployment compensation.

But for the first time lawmakers have failed to renew the assistance, which means an estimated 53,000 Kentuckians will lose income support over the next year. Progressive advocates argue the recovery is still fragile and that there are still three job-seekers for every opening.

“In an economy that’s still so bad, where there’s still over three job seekers for every job, these folks are going to have a very hard time replacing that income from their benefits,” says Jason Bailey, director of the Kentucky Center for Economic Policy. “So they’re going to be looking at potentially going to food banks or homeless shelters, or going to even more desperate measures to try to make ends meet.”

Bailey says Kentucky has 98,000 fewer jobs than before the recession and the amount of time state unemployment benefits were allowed decreased by 36 percent. Added to that are federal sequester cuts and recently proposed reductions to food stamps for low-income residents.

Some lawmakers such as Sen. Rand Paul, R-Ky., however, argue further extensions of these benefits are a “disservice” to workers because it detours employers from hiring them.

From CNN:

“I do support unemployment benefits for the 26 weeks that they’re paid for. If you extend it beyond that, you do a disservice to these workers,” he said, appearing on “Fox News Sunday.”

(SNIP)

“When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy. And it really – while it seems good, it actually does a disservice to the people you’re trying to help,” Paul said.

A Paul spokesman pointed WFPL to this study by the Federal Reserve Bank of Boston when asked which report the senator was citing.

Other studies appear to concur with Paul’s assessment of the situation in part, even though the conclusions on which policy works best remains foggy.

From The Washington Post:

Recent research from Henry Farber of Princeton University and Robert Valletta of the San Francisco Fed shows that paying extended unemployment benefits slightly increases the unemployment rate. The unemployment rate was about 0.4 percentage points higher in 2010 — it was 9.0 percent instead of 8.6 percent — than it would have been without the benefits, according to their estimates.

(SNIP)

Despite the extension of long-term unemployment benefits last December, the number of those who haven’t had a job in more than six months fell by 718,000 in the past 12 months. Some of the long-term unemployed are finding jobs.

On average, the benefits give the long-term unemployed workers $1,100 per month.

Those in favor of another extension argue these income supplements also represent a stimulus for the economy, which if taken away could lower the Gross Domestic Product by 0.2 percent next year. It is also coming at a time when more reports are showing the income gap is hurting the U.S. economy,

“This is the exact wrong thing we should be doing in an economy that’s so weak and so in need of additional spending,” says Bailey. “It’s taking money out of people’s pockets that they would spend at local businesses. So it harms not just them, but local economies across the state.”

The issue is expected to be taken back up when Congress reconvenes in January.

(Image via Shutterstock)

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