Report: Long-term benefits don't keep people jobless 

Job seekers line the hall at a job fair in SeaTac, Wash. The number of people requesting unemployment benefits last week dropped slightly, but the fou...
Job seekers line the hall last year at a job fair in SeaTac, Wash. Long-term unemployment benefits aren't preventing people from getting jobs, a new study has found.Elaine Thompson / AP

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By Mark Koba

Giving unemployed Americans extended jobless benefits of up to 99 weeks did not stop them from taking jobs, a new report has found.

Released last month through the Federal Reserve Bank of San Francisco, the study says that the extended benefits given from 2009 to 2012 to the unemployed increased the overall employment rate by only 0.04 percentage points, which the report says is minimal compared to the peak recession unemployment rate of 10 percent.

"There was some criticism that people on long-term unemployment benefits would not want to go back to work," said Henry Farber, a professor of economics at Princeton University and co-author of the report.

"But that's not true. We could find no real effect of the benefits from keeping people wanting to work," Farber said. "People are not staying on unemployment to avoid taking jobs."

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Farber said his report looked at previous downturns in the economy when extended unemployment benefits were shorter—up to 79 weeks in early 2001-2002—than came out of the recession of 2007-2009. The findings for both periods were similar, he said.

"There was never much serious work done to look at this issue of extended benefits and the effect on the jobless rate," Farber said. "That's why we did this. We wanted to find out if there was a correlation and we didn't find one."

The current rate of unemployment is around 7.5 percent according to the Bureau of Labor Statistics, down from the 10 percent during the peak of the recession in 2009.

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Although the job picture is improving overall, the long-term unemployed aren't so lucky. That's because as the jobless rate improves, the federal government—which funds much of the unemployment benefit extensions—cuts back spending for benefits.

Congress has traditionally extended unemployment benefits in times of recession. In 2010 and 2011, benefits in some states reached 99 weeks of combined state and federal benefits—the highest extension on record.

But fewer than half of the 11.7 million unemployed in April received state or federal benefits, according to the Labor Department.

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Current extended benefits will continue for those receiving them, but they will not be renewed at the end of this year. There will be no more extended benefits for those going on unemployment now, unless job losses mount to recession-era levels.

California and Nevada are among the states that have the longest duration of benefits, at 76 weeks, while Utah, Wyoming, South Dakota and Kansas are among the states with the shortest duration, at 40 weeks.

Not everyone views extensions as beneficial—despite the evidence. Timothy Nash, an economics professor at Northwood University, said he believes extended benefits keep the unemployed from looking for work.

"There's a lot of debate about the impact of extensions but my gut feeling is that giving them hurts the job picture," said Nash. "If we look at countries like Sweden that had long term extensions and high unemployment, when they ended the extensions, the jobless rate went down."

"I think some people need them," Nash said. "People with certain skills who can use the extensions to take the time to find a job that's right for them. But without extensions, people feel a better sense of urgency that they have to find a job."

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"Having these extensions, while they give some people a way to live, are not the best thing to do," Nash argued. "I think they add to the long-term unemployment situation instead of ending it."

Currently, about 4.4 million Americans are long-term unemployed—defined as those who have been out of work for 27 weeks or more, according to the BLS.

That's an improvement over the high of 6.7 million long-term unemployed in April of 2010, but it's still not enough of an improvement, said Chris Rhomberg, a sociology professor who studies labor at Fordham University.

"The long-term unemployed need help, and they're not getting it," Rhomberg argued. "You've got a situation where employers can reject people who have been out of work for a long time and they don't suffer any consequences."

"Businesses are not hiring and extensions are down. It's cruel," Rhomberg said.