University of Minnesota digs into why people with generous unemployment benefits take longer to find work

Unemployment insurance is designed as a safety net for people who lost their jobs through no fault of their own.

Economic studies show that when people are offered more generous unemployment benefits — such as a longer time horizon and higher payments — they take longer to find new jobs.

"The question is why?" said Connie Wanberg, a University of Minnesota professor and internationally known researcher in unemployment, job search and careers.

"I don't see a lot of evidence of slackers. The U.S. has a lot of checks and balances on people looking for work."

Wanberg's latest research, published in June in the Journal of Applied Psychology, offers nuanced results for policymakers.

Working with an international team, Wanberg compared how varying levels of unemployment benefits in the United States, Germany and the Netherlands affect the speed and quality of re-employment as well as the level of financial and psychological stress of job seekers.

The study is the first to apply psychological methods with economic models, Wanberg said, providing a bigger picture of the complexities of employment.

"They have less financial strain so they didn't spend as much time getting their résumé done quickly," she added. "They didn't submit job applications as quickly. They weren't networking as quickly."

But this group also ended up with much stronger mental health and better quality jobs, something that economists studying macro-level data can't tease out.

"People have more time to turn down jobs they don't want or get jobs that are a better fit," she said. "There's more to it than income. Someone might care how far they have to drive to work."

Based on surveys of more than 1,600 job seekers, the results held across all countries.

Job seekers who received comparatively less generous benefits got on top of the job search more quickly and found work.

Among the three countries studied, the Netherlands has the most generous policy, providing 70% to 75% of gross earnings for a maximum of three years, depending on employment history.

Germany is in the middle, where individuals can collect at least 60% of net earnings (slightly more if there are dependent children) for up to a year.

In the United States, unemployment insurance is funded by a tax on employers. Those receiving benefits must be available and willing to work and they must prove that they're making an effort to find a job.

Job seekers typically receive up to 26 weeks of benefits at about 50% of their previous average weekly wage.

Most states cap the payments.

Last year, with monthly unemployment ranging from 2.2% to 3.9%, about 142,300 Minnesotans received a payment, totaling about $791 million. That compares to about $2.8 billion spent in 2010, near the end of the effects of the last recession. There were more than 348,700 job seekers in the state that year.

"It's important to question how much benefit unemployment insurance provides and to clearly understand what the pros and cons are of higher vs. lower levels," Wanberg said.

"I wouldn't want somebody to view this as saying, We provide too many benefits in the U.S. or we should cut them further," she added. "When you take a closer look, the mental health benefits are pretty serious."

Marsheela Outlaw, 62, lost her job on a Friday in mid-June and by Monday she had found her way to one of the state's workforce centers in Bloomington.

She quickly developed a plan: Work on her résumé, attend classes on interview skills, find a support network of other job seekers, apply for at least two jobs a week.

Last fall, she took a position with HealthEZ, and then the company laid her off within a year. Now, she's dipping into her savings to make the $519 weekly unemployment checks last.

"I just want to make sure I get a job that fits," she said, acknowledging she might have to earn less money.

"That's why I'm not jumping at anything that comes along anymore. I'm trying to get to retirement."

Tom Reese, a workforce development specialist who manages the CareerForce office in Bloomington, said many laid-off workers need help moving through the stages of grief.

The center's classes, training and one-on-one counseling aim to help people deal with stress while also getting focused on landing a new job.

Jackie Crosby • 612-673-7335