Punishing unemployed people doesn't help them find work

A new study from the Boston fed looks at the effect of unemployment insurance, and finds it doesn't encourage unemployment.

Punitive treatment of the unemployed is usually justified in terms of the incentives it provides. So, for instance, the rationale for increasing the wait until you can claim unemployment benefits from 3 to 7 days is apparently that it "send[s] the message from the very start that rights to benefits are conditional on the requirement to search for work".

One particular argument made is that unemployment benefits in general stop people searching for work. That's most frequently heard in the context of long-term unemployment; it is, for instance, at the heart of the myth that welfare policy needs to tackle the problem of households with "three generations of worklessness". If welfare queens are languishing on unemployment benefit, content to be paid by the state not to work, then cutting that benefit will encourage them back into work.

But – surprise! – it seems that that plan doesn't actually work. A paper from the Boston fed looks at the effect of the unemployment insurance on the Beveridge curve. That's the chart showing the relationship between unemployment and the number of vacancies:

 

The US has experienced a worrying alteration in the shape of its Beveridge curve since the recession. There are now many more people unemployed for each vacancy than there were in the years running up to 2009 (a fact easily visible in the shift between the blue and red sections of the curve in the chart above). Traditionally, that's seen as indicating a failure to match unemployed people to available jobs, perhaps through a skills shortage or a geographical dislocation. But some suggest it's due to a recent extension of unemployment insurance in the country, which allowed unemployed people to claim the benefit for 99 weeks after losing their job.

The paper's author, Rand Ghayad – the same researcher who exposed just how damaging long-term unemployment is in April – devised a natural experiment to examine whether unemployment insurance was the cause.

(A natural experiment takes advantage of some quirk in the world at large which sorts people quasi-randomly into different groups, and then assigns different treatments to them. A classic example is to look at the fates of people who were one mark above, and one mark below, a grade boundary: their intelligence is likely equal, and so any difference in outcome can be attributed to passing the exam)

In this case, Ghayad compared long-term unemployed people who were eligible for the insurance with those who had voluntarily quit their job, those who had never worked before, and those who had left the labour market for a period, all of whom are not eligible for the extended benefits. The characteristics of the two groups are obviously different, but the comparison is revealing nonetheless. Here's the shift in the Beveridge curve for those who are eligible for unemployment insurance:

That's still an outward shift, and thus still represents a weakened labour market. But it's nothing compared to the shift in the Beveridge curve for those who are ineligible:

The unemployment rate for that group shot up in the recession – and then never dropped, even as job openings began to reappear.

In other words, unemployment benefits really don't seem to discourage people from seeking work. If anything, they appear to help: the groups which can get unemployment insurance saw their joblessness fall after the recession. It's easy to come up with reasons as to why this might be the case: perhaps not having to worry about how the bills are going to be paid in the short term gives you time to effectively look for a job in the long term? Or perhaps punitive treatment of the unemployed just pushes them into the shadow economy sooner?

Either way, the study ought to be another nail in the coffin of the idea that the way to get people back into work is with liberal application of the stick. It seems that might be the worst thing you could do.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Let's face it: supporting Spurs is basically a form of charity

Now, for my biggest donation yet . . .

I gazed in awe at the new stadium, the future home of Spurs, wondering where my treasures will go. It is going to be one of the architectural wonders of the modern world (football stadia division), yet at the same time it seems ancient, archaic, a Roman ruin, very much like an amphitheatre I once saw in Croatia. It’s at the stage in a new construction when you can see all the bones and none of the flesh, with huge tiers soaring up into the sky. You can’t tell if it’s going or coming, a past perfect ruin or a perfect future model.

It has been so annoying at White Hart Lane this past year or so, having to walk round walkways and under awnings and dodge fences and hoardings, losing all sense of direction. Millions of pounds were being poured into what appeared to be a hole in the ground. The new stadium will replace part of one end of the present one, which was built in 1898. It has been hard not to be unaware of what’s going on, continually asking ourselves, as we take our seats: did the earth move for you?

Now, at long last, you can see what will be there, when it emerges from the scaffolding in another year. Awesome, of course. And, har, har, it will hold more people than Arsenal’s new home by 1,000 (61,000, as opposed to the puny Emirates, with only 60,000). At each home game, I am thinking about the future, wondering how my treasures will fare: will they be happy there?

No, I don’t mean Harry Kane, Danny Rose and Kyle Walker – local as well as national treasures. Not many Prem teams these days can boast quite as many English persons in their ranks. I mean my treasures, stuff wot I have been collecting these past 50 years.

About ten years ago, I went to a shareholders’ meeting at White Hart Lane when the embryonic plans for the new stadium were being announced. I stood up when questions were called for and asked the chairman, Daniel Levy, about having a museum in the new stadium. I told him that Man United had made £1m the previous year from their museum. Surely Spurs should make room for one in the brave new mega-stadium – to show off our long and proud history, delight the fans and all those interested in football history and make a few bob.

He mumbled something – fluent enough, as he did go to Cambridge – but gave nothing away, like the PM caught at Prime Minister’s Questions with an unexpected question.

But now it is going to happen. The people who are designing the museum are coming from Manchester to look at my treasures. They asked for a list but I said, “No chance.” I must have 2,000 items of Spurs memorabilia. I could be dead by the time I finish listing them. They’ll have to see them, in the flesh, and then they’ll be free to take away whatever they might consider worth having in the new museum.

I’m awfully kind that way, partly because I have always looked on supporting Spurs as a form of charity. You don’t expect any reward. Nor could you expect a great deal of pleasure, these past few decades, and certainly not the other day at Liverpool when they were shite. But you do want to help them, poor things.

I have been downsizing since my wife died, and since we sold our Loweswater house, and I’m now clearing out some of my treasures. I’ve donated a very rare Wordsworth book to Dove Cottage, five letters from Beatrix Potter to the Armitt Library in Ambleside, and handwritten Beatles lyrics to the British Library. If Beckham and I don’t get a knighthood in the next honours list, I will be spitting.

My Spurs stuff includes programmes going back to 1910, plus recent stuff like the Opus book, that monster publication, about the size of a black cab. Limited editions cost £8,000 a copy in 2007. I got mine free, as I did the introduction and loaned them photographs. I will be glad to get rid of it. It’s blocking the light in my room.

Perhaps, depending on what they want, and they might take nothing, I will ask for a small pourboire in return. Two free tickets in the new stadium. For life. Or longer . . . 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times