Is Unemployment Insurance Stimulative?

Does unemployment insurance stimulate the economy? This question has been debated by economists from different schools of thought for decades.

Stephen Moore’s recent Wall Street Journal opinion gave a great answer. He said:

“I have two teenage sons. One worked all summer and the other sat on his duff. To stimulate the economy, the White House wants to take more money from the son who works and give it to the one who doesn’t work. I can say with 100% certainty as a parent that in the Moore household this will lead to less work.”

You can learn more facts (and related resources) about how unemployment increases average unemployment and whether it is stimulative in my Unemployment Insurance Fact Sheet that Cascade Policy Institute released last year: http://cascadepolicy.org/news/2010/08/11/unemployment-insurance-fact-sheet/.

This entry was posted in Asset Ownership, Cascade Website, Christina Martin, Entitlement, Unemployment Insurance and tagged , , , . Bookmark the permalink.

3 Responses to Is Unemployment Insurance Stimulative?

  1. Dennis S says:

    Paying people not to work! It is like paying farmers to not plant crops. Helping people temporality out of work is OK; it should not be a life style! People working and paying taxes will create more jobs.

  2. desack says:

    THis is a strawman argument, and actually below what this institution should be publishing. Basing economic theory on the actions of teenage children that live with their parents is idiotic to start with, but this article doesn’t even address the point.

    So 1 child worked and 1 didn’t. The question is whether unemployment is stimulative. Well, if you insist on using children as the example, would the economy have more activity if the lazy child had no money, or received some money? Obviously if the second child had money there would be more spending and the economy would be stimulated.

    So, if you extend it beyond what this article suggested into the real world it still holds. Giving unemployment insurance benefits to people, which they oftentimes pay into for decades before making a claim, will result in more spending and therefore a stimulated economy when compared to one w/ no unemployment benefits. This money will be spent on things to keep the person from falling behind, i.e. mortgage or other bills.

    The entire basis and framing of this article is that people are receiving unemployment benefits because they are lazy. As I said before, this is below what an actual reputable institution such as the C.P.I. should be putting out. I guess it is possible that Cascade has some research suggesting that all of a sudden in 2008 10% of the population decided to be lazy and quit working, but I haven’t seen the paper.

    I am starting to wonder why I even contribute to this organization anymore. Actually, as of now, I am starting to wonder whether I will ever contribute to this organization again.

    • Brian Campbell says:

      desack, you missed one big point. You say giving money to the 2nd (non-working) child will stimulate the economy. The problem is that the money the 2nd child gets came from someone else’s earnings (e.g. the 1st child’s). That money would have stimulated the economy either way; it just would have been spent/saved by the worker, rather than the unemployed person.

      I agree that, as a rule, unemployment is not due to laziness, and, as a former intern for Cascade, I did not get the impression that the organization does either. The point of this example was that non-workers receiving money that workers earned discourages the workers.

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