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1 Center or American Progress |   The Economic Case or Unemployment Insurance and the Supplemental Nutrition Assistance P

 The Economic Case for Unemployment

Insurance and the SupplementalNutrition Assistance ProgramHow They Help Our Economy During the Recession

Heather Boushey and Jordan Eizenga November 2010

Businesses can expec a dreary holiday shopping season i Congress does noconinue benes or he long-erm unemployed. Tese benes help amilies o

 weaher hard imes, and righ now millions o American amilies remain ou o 

 work or underemployed. Tey help amilies keep a roo over heir head and ood

on he able while hey search or work and wai or he economy o improve.

Unemploymen insurance, or UI, along wih he Supplemenal Nuriion

 Assisance Program or SNAP, ormerly known as ood samps, sabilize he econ-

omy by increasing he demand or basic goods and services. Sabilizing demand

remains criical o saving and creaing jobs and boosing earnings a his poin in

he economic recovery. I Congress allows benes or he long-erm unemployed

Unemployment insurance and SNAP put money in the pockets o amilies acing

unemployment who tend to spend many o these dollars in their local community

on housing, ood, and other basics. Retailers cannot keep tabs on how many o 

their customers receive unemployment insurance, but they do know how many

customers use SNAP.

Two grocery chains report in interviews with the Center or American Progress that

SNAP benefts now account or about a fth (18 percent to 23 percent) o their total

sales and support between 300 and 2,300 jobs depending on the grocery chain.

Retailers report that beneits matter to sales

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2 Center or American Progress |   The Economic Case or Unemployment Insurance and the Supplemental Nutrition Assistance P

o expire a he end o November, his could poenially reduce he gains in reail

sales in December by 14 percen compared o December 2009.

During he Grea Recession, unemploymen insurance and SNAP have kep

amilies ou o povery and as a resul boosed sales and seadied he economy as

amilies are able o keep up wih heir morgages and ren and aord necessiieseven as hey ace high unemploymen. Te UI sysem pulled 3.3 million people—

including 1 million children—ou o povery in 2009 alone.1 Tis is more people

han he enire populaion o he Chicago meropolian area.2 Food samps alone

lifed 2.4 million children ou o “deep povery,” 3 which is greaer han he number

o children living in all o Los Angeles Couny.4 

 The current debate over unemployment benefits

Congress is debaing wheher o coninue o und UI or he long-erm unem-ployed. I hey do no, 2 million jobless workers will lose heir long-erm UI

 benes a he end o November.

O his group, 1.2 million will exhaus heir 26

 weeks o regular unemploymen insurance ben-

es wihou nding work and be ou on heir

own. Ohers are currenly receiving UI hrough

he Emergency Unemploymen Compensaion

program, which provides an addiional 34 o 53

 weeks o unemploymen benes above regular

 benes. Tey will see hose benes expire

over he course o he monh.5 

Te oher 800,000 workers will experience an

immediae loss o heir Exended Benes. Te

Exended Benes program provides beween

13 and 20 addiional weeks o unemploymen

 benes o he long-erm unemployed; bu in

39 saes, unding comes rom he legislaion seo expire on November 30.6

Because o hisorically high shares o workers

ou o work and searching or a job or more

han six monhs he value o he benes o

Figure 1

Still a great need or long-term unemployment ben

Total unemployment beneits paid by type and month,

December 2007 to October 2010

Source: Bureau of Labor Statistics.

Billions of U.S. dollars

$16

$14

$12

$10

$8

$6

$4

$2

$0

   D  e  c  -  0   7

   F  e   b  -

  0   8

  A  p  r  -  0   8

  J  u  n  -  0   8

  A  u  g   -  0   8

  O  c  t  -  0   8

   D  e  c  -  0   8

   F  e   b  -

  0   9

  A  p  r  -  0   9

  J  u  n  -  0   9

  A  u  g   -  0   9

   F  e   b  -

  1  0

  A  p  r  -  1

  0

  J  u  n  -  1

  O  c  t  -  0   9

   D  e  c  -  0   9

Benefits for those unemployed longer than 26 weeks

Regular benefits for those unemployed less than 26 weeks

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3 Center or American Progress |   The Economic Case or Unemployment Insurance and the Supplemental Nutrition Assistance P

he long-erm unemployed is now greaer han he oal benes paid ou o

hose who have been ou o work or six monhs or less (see Figure 1). Tis

means ha more so han beore he long-erm unemployed’s benes comprise

a criical componen o an eecive scal simulus, as well as helping hose who

have been hi hardes by he Grea Recession.

Discontinuing the program would hurt retailers and the

economy at large

Disconinuing he UI program or he long-erm unemployed will have real conse-

quences or our economy. I will likely be el mos quickly among reailers during

he upcoming holiday shopping season.

 As we move hrough he holiday season he immediae cu-o in benes or he

long-erm unemployed could have signican negaive implicaions or our naion’sreailers. Te workers losing benes have an average weekly bene o a litle over

$290 per week, which ranslaes ino a oal loss o abou $2.5 billion dollars in

 benes over December. 7 Tis is equal o abou one in seven dollars o he oal gain

in reail sales seen beween December 2008 and December 2009.8 

I Congress does no ac—or creaes he impression ha hey will no ac—his will

also aec he purchasing decisions o he workers whose unemploymen insurance

 benes have no ye been cu o. Tese workers and heir amilies will likely pare

 back heir holiday spending in anicipaion o losing benes in early 2011.

How unemployment insurance and food stamps help the economy

Unemploymen insurance and ood samps are one o our economy’s rs lines o 

deense o address recessions. Tese programs are imporan or amilies and he

economy a large. Tey creae and save jobs and grow he economy.

Job creation

• Unemploymen benes or he long-erm unemployed have kep an average o 

1.6 million American workers in jobs every quarer during he recession.9 • Te U.S. Deparmen o Agriculure esimaes ha $1 billion in ood samps

creaes beween 8,900 and 17,900 ull-ime jobs.10

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Growing the economy

• Since he recession began every dollar spen on benes or unemployed has

grown he economy by $2.00, and every dollar spen on ood samps grew he

economy by approximaely $1.79. 11 •

Unemploymen insurance benes reduced he all in gross domesic produc by 18.3 percen, which mean ha nominal GDP was $175 billion larger in 2009

han i would have been wihou hese benes.12 • UI benes have increased GDP by $315 billion overall rom he sar o he

recession hrough he second quarer o 2010. 13

• Pulling benes or he unemployed ou o he economy would remove 0.7

percen o oal U.S. personal income. Over he course o he recession, oal

personal income ell by 1.6 percen. Tis means ha disconinuing long-erm

UI would produce an impac ha is nearly hal as large as he recession’s oal

impac on personal income.14 

Conclusion

Tis Congress should sand up or American workers and rejec he idea ha wha

our economy needs is a dose o auseriy. Exending unemploymen insurance ben-

es o he long-erm unemployed booss demand and generaes jobs, which helps

us all. In he process, we do righ by he Americans hi hardes by he recession.

For he pas hal cenury, Congress has always exended unemploymen benes

o he long-erm unemployed when unemploymen was high and doing so in his

recession should be no dieren. Mainaining unemploymen benes unil he

unemploymen rae comes back down and he economy improves is necessary 

and he righ hing o do.

Cuting o aid o he long-erm unemployed will no make hem go away and

 will drive down labor sandards or he economy a large. Diana Furhgot-Roh,

chie economis a he Deparmen o Labor under Presiden George W. Bush, has

argued ha we should no exend benes o he long-erm unemployed because

i discourages people rom aking jobs: “I people have been on unemploymen benes or wo years and canno nd a similarly placed job o he one hey were

laid o, i is ime or hem o ake lower paying jobs.”15 I everyone did his, i

 would, o course, reduce demand—and reail sales—even more.

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Lowering living sandards canno be he policy response o he Grea Recession.

 Wih so many vying or oo-ew jobs even i every worker agreed o sharp salary 

reducions here would sill no be enough jobs o go around. Furher, i is no in

our naion’s ineres o have millions o workers skilled in one occupaion oiling

in anoher—i wases human capial and discourages uure invesmens in skills.

Te unemployed did no cause he Grea Recession. I was caused by a lack o regu-

laion o Wall Sree. Conservaive policymakers allowed he condiions o develop

ha creaed oday’s jobs crisis, and now hey should ake seps o pu he economy 

on he righ rack—no obsruc policies ha our economy very much needs.

Endnotes

1 Arloc Sherman, “Looking at Today’s Poverty Numbers” (Washington: Center on Budget and Policy Priorities, 2010), avail-able at: http://www.othechartsblog.org/looking-at-today’s-poverty-numbers.

2 U.S. Census Bureau “Income, Poverty, and Health Insurance Coverage in the United States:2009” (2010), available at:http://www.census.gov/prod/2010pubs/p60-238.pd. 

3 Deep poverty is defned as being below 75 percent o the poverty line, as defned by the National Academy o Sciences.See Center on Budget and Policy Priorities, “Policy Basics: Introduction to the Food Stamp Program” (2010), available at:http://www.cbpp.org/cms/index.cm?a=view&id=2226.

4 This was calculated by taking the U.S. Census Bureau population estimate or 2009 or Los Angeles County and multiply-ing this fgure by the estimated percentage o the population aged 18 years and younger (as o 2009). Both fgures arelisted by the U.S. Census Bureau. U.S. Census Bureau, “State and County Quick Facts” (2010), available at: http://quick-acts.census.gov/qd/states/06/06037.html.

5 Christine Riordan and others, “Out in the Cold Over the Holidays” (New York: National Employment Law Project, 2010),available at: http://www.nelp.org/page/-/UI/2010/november.extension.report.pd?nocdn=1?nocdn=1.

6 Riordan and others, “Out in the Cold Over the Holidays”; Heather Boushey, Christine Riordan, and Luke Reidenbach, “To-day’s Unemployment Crisis by the Numbers,” (Washington: Center or American Progress, 2010), available at: http://www.

americanprogress.org/issues/2010/06/pd/ui_numbers.pd 

7 Riordan and others, “Out in the Cold Over the Holidays.”

8 Author’s calculations using Bureau o the Census Annual Retail and Trade Statistics.

9 Wayne Vroman, “The Role o Unemployment Insurance As an Automatic Stabilizer During a Recession” (Washington:IMPAQ International and the Urban Institute, 2010).

10 Economic Research Service, USDA, “The Food Assistance National Input-Output Multiplier Model and the Stimulus Eectso SNAP” (2010), available at: http://www.ers.usda.gov/Publications/ERR103/ERR103_ReportSummary.pd .

11 Vroman, “The Role o Unemployment Insurance As an Automatic Stabilizer During a Recession”; Food Research andAction Center, “SNAP/Food Benefts Provide Real Stimulus” (2010), available at: http://rac.org/initiatives/american-recovery-and-reinvestment-act/snapood-stamps-provide-real-stimulus/.

12 Vroman, “The Role o Unemployment Insurance As an Automatic Stabilizer During a Recession.”

13 Vroman, “The Role o Unemployment Insurance As an Automatic Stabilizer During a Recession.”.

14 Author’s calculations. Personal income rom Bureau o Economic Analysis, “Personal Income and Outlays,” (2010), availableat: http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm;Unemployment benefts rom U.S. Department o Labor, “Monthly Program and Financial Data” available at http://workorcesecurity.doleta.gov/unemploy/claimssum.asp and http://workorcesecurity.doleta.gov/unemploy/euc.asp.

15 “Should Unemployment Benefts be Extended?” Fox Business News, July 19, 2010, available at: http://video.oxbusiness.com/v/4285576/should-unemployment-benefts-be-extended/