- The Washington Times - Wednesday, October 1, 2014

Employers were more willing to create jobs and workers were more willing to take them after the expiration in January of a program entitling unemployed workers to collect nearly two years of benefits.

That’s the conclusion of a study this week by the New York Federal Reserve Bank. It found that the number of new jobs that came open each month exploded by 20 percent to 4.7 million by June, six months after the extended jobless benefits ended.

The rate of new job openings also soared to its prerecession peak of 3.3 percent of all workers just months after Congress allowed the benefits to end after Democrats and Republicans failed to agree on an acceptable way to pay for them.

“Job openings are arguably one of the most important indicators of recovery in the labor market, as they reflect employers’ willingness to hire,” said Fatih Karahan, one of the authors of the Fed study.

“The expiration of the extended benefits increased the willingness of firms to hire, leading to the large increase in job openings in the first half of 2014,” he said.

The study found that employers put off hiring when generous unemployment benefits were available because they felt that workers were unwilling to take low-paying jobs as long as they had checks coming in the mail under the benefits program.

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In the battle in Congress over the benefits, Democrats predicted that the loss of benefits would hurt the economy because unemployed workers would have less money to spend on necessities like groceries and rent. But Republicans argued that it was the availability of benefits that was keeping many workers from taking jobs that were available.

At the time the extended benefits expired, about 1.3 million unemployed workers lost an important source of income. Their unemployment checks averaged around $300 per week.

While the benefit checks did provide some stimulus to the economy, as Democrats contended, the Fed study found that they also prompted employers to hold back on job offers, knowing that many workers would not accept the low wages the jobs paid, Mr. Karahan said.

“Increases in unemployment insurance generosity put upward pressure on wages since it becomes more expensive to lure people into work,” he said.

“Unemployed workers might also respond to unemployment insurance extensions by searching less intensively or by being picky about job opportunities,” he added. “As a consequence, firms anticipate lower profits and cut back job creation, which lowers the job finding rate and increases the unemployment rate.”

Confirming that low pay was an issue for many workers, a separate Rutgers University survey of workers who lost jobs during the recession found that 44 percent had to take new jobs that paid less than the jobs they lost.

Their drop in wage income reflected the fact that many of the jobs lost during the Great Recession were high-income and middle-income jobs in fields such as mortgage finance and construction, while the jobs added during the recovery have been concentrated in lower-wage areas like retail, restaurants and hotels.

The Rutgers survey found that even those who kept their jobs during the recession suffered setbacks in wages, income and wealth. Some 40 percent of all workers had suffered a loss in their standard of living as the result of the financial crisis, it found.

“Laid-off workers who found another job seldom improved their financial situation: Two-thirds say their new jobs either paid less than their previous one or paid the same,” said Carl Van Horn, one of the authors of the Rutgers study.

“Given these experiences, it is no surprise that nearly half of these re-employed workers say their new job was a step down for them compared to what they were doing five years ago,” he said.

• Patrice Hill can be reached at phill@washingtontimes.com.

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