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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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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