Fact Check: Unemployment Insurance Doesn’t Disincentivize Work

In response to the latest monthly job report, some conservative lawmakers are peddling the myth that expanded unemployment insurance (UI) benefits disincentivize work. However, the data shows this is just not true.

Empirical evidence and countless studies have shown that UI benefits do not disincentivize recipients from working: 

  • Increased UI benefits during Covid did not outweigh the value of a longer-term stable income in workers’ decisions to accept job offers and confirmed that supplemental payments had little or no adverse effect on job searches. 

  • Evidence from the Great Recession shows that UI benefits had neither statistically significant nor economically meaningful effect on employment, positive or negative.

  • About 70% of likely UI recipients who returned to work in May and June of 2020 were making more on UI than their prior wage.

  • When the labor market does better, workers exit unemployment benefits for available jobs. In the 13 states with the lowest unemployment rates, continued UI claims are down 26% since their 2021 peak in Feb. In the 13 states with the highest unemployment rates, claims have declined only 17%.

  • Studies on UI benefits after the Great Recession found that UI extensions have not had large moral hazard effects on recipients’ job-finding rates, either during the worst period of the Great Recession or during the subsequent recovery.

  • Overall, studies have shown no evidence that expanded UI benefits disincentivize work. Additionally, workers who faced larger expansions in UI benefits returned to their previous jobs over time at similar rates as others.

“The concern about the disincentive effect has been massively overblown. […] Concerns about the work disincentive simply ignore the realities of the labor market for working people, who will be very unlikely to turn down a job for a temporary boost in benefits—particularly when it is now clear that jobs are going to be scarce for a very long time.”

— The Economic Policy Institute

“[Evidence from the Great Recession] should reassure policymakers facing a future recession that providing relief to job-losers by extending U.I. will not have substantial unintended effects upon economic activity.” 

— Arindrajit Dube, associate professor of economics at
the University of Massachusetts Amherst

Arguments that UI benefits disincentivize work are predicated on racist stereotypes. 

“These conservatives argue that many people make more money on unemployment than they did at their jobs, so they have no reason to go back. This heavily coded argument isn’t new; in fact, it’s rooted in a long history of racist labor policy in the United States. […] Even though it has always been true that there are more white than Black people using welfare programs, the image of the ‘welfare queen’ plays on America’s racism and demonization of people of color who dared accept help from the same government that institutionalized racism. […] It’s an American pastime to characterize Black workers as lazy, and to label any attempt to help us as encouraging our inherent laziness.”

— Maurice BP-Weeks, Co-Executive Director Of
The Action Center On Race & The Economy

“Conservatives want to use tired, racist tropes to insinuate workers on UI are lazy, and we can’t let them get away with it, particularly when we know Black workers already are more likely to have UI applications rejected, are concentrated in states with stingier UI, and receive lower benefits than their white counterparts.” 

— Groundwork Collaborative

“Republicans have opted to peddle the myth that people, at their core, are lazy and unwilling to work, evoking the racist stereotype of the ‘welfare queen’ instead of ensuring that Americans can pay their bills, do not fall into poverty, and still spend money in an economy starved for consumers” 

— The Boston Globe