One of the many policy debates regarding the functioning of the U.S. labor market is the question of how generous unemployment insurance benefits should be. Those who favor generous benefits point out that the more money households are able to spend after losing a job, the more stable is macroeconomic activity, including during periods of recession.
Generous unemployment benefits also give jobseekers more time to secure replacement employment that better fits their skills, aspirations, and credentials. The argument against generous benefits is that they weaken the incentive of jobseekers to aggressively search for replacement employment, which thereby increases total unemployment insurance costs.
New data from the JPMorgan Chase Institute helps shed light on the issue. In Florida, the maximum length of unemployment insurance benefits is tied to the state’s unemployment rate. Last year it was fourteen weeks. This year, it’s twelve.
Florida’s benefit payments are about thirty percent smaller than those in other states studied by the institute. The study finds that when benefits are offered for a shorter duration and are not as generous, people tend to find replacement employment far more quickly.
