End of Federal Unemployment Benefits Would Harm Wisconsin Economy


December 18, 2013

pdficonPDF version     pdficonPress release

Federal help for Americans unemployed for long stretches, which will expire at the end of December unless Congress acts, gives an important boost to local economies. Allowing it to end now would hurt Wisconsin businesses, as well as jobless workers and their families.

Unemployed workers who have been searching for a job for longer than 26 weeks can currently receive unemployment benefits funded by the federal government, a recognition that long-term unemployment remains high amid a weak recovery from the recession. But this lifeline that helps struggling individuals and families pay for food and other necessities is slated to disappear December 28.

The maximum duration of unemployment benefits in Wisconsin will drop by more than half, from 54 weeks to 26 weeks, unless Congress reauthorizes the program. For unemployed workers already receiving federal unemployment benefits, that help will come to an abrupt end, and their incomes and purchasing power will drop dramatically.

Loss of Federal Unemployment Benefits Would Hurt Businesses

Federal unemployment benefits serve two purposes: They provide a lifeline to long-term unemployed workers, and they increase spending in the economy and create jobs. Most unemployment benefits are spent immediately at local grocery stores and other businesses, pumping money into the economy.

If the federal help is not extended, Wisconsin businesses will be hit hard. Businesses in high unemployment areas will be harmed the most, as their customers will have dramatically less to spend. Unemployed Wisconsinites will lose an estimated $361 million in 2014. Much of that would have been spent on necessities at local businesses.

The lost spending would ripple through the economy, costing hundreds of thousands of jobs in 2014. More than 5,000 jobs would be lost in Wisconsin, according to the Council of Economic Advisors.

Poverty Will Rise if Federal Benefits End

Nationally, unemployment benefits lifted 2.5 million people out of poverty, including an estimated 38,000 people in Wisconsin. Last year, 9,000 Wisconsin children were lifted out of poverty by unemployment benefits, as shown in the table below.

Unemployment and poverty

If the federal portion of those benefits is eliminated, there will be more poor men, women, and children in Wisconsin. That will also hurt the state economy by making it harder for businesses to find customers with money to spend.

County-Level Estimates of Effect

If federal unemployment benefits are shut down, 99,000 Wisconsinites will see their incomes drop over the course of 2014. This number includes jobless workers who will lose their federal unemployment benefits abruptly at the end of the year, as well as other unemployed residents who subsequently exhaust their state benefits and lose access to federal help. The table on the next page shows an estimate of the number of people and the dollar loss in each Wisconsin county.

It’s Too Soon to End Federal Unemployment Benefits

With too few jobs to go around, 4.1 million people have been out of work 27 weeks or more — one-third of all unemployed Americans. Rather than eliminate benefits at the end of the year, Congress should allow the program to phase down gradually as the economy improves.

 

County level EUC estimates