We already knew intuitively that the federal Emergency Unemployment Compensation program kept roofs over the heads of many jobless Americans who otherwise would have lost their homes. Now a new study by Joanne W. Hsu, David A. Matsa, and Brian T. Melzer at the National Bureau of Economic Research has quantified that rescue. They have concluded that 1.4 million home foreclosures didn't happen because the federal government provided compensation checks to people out of work for six months or more. The program was initiated in 2008 and renewed 11 times, but allowed to expire by congressional Republicans in December.
Bryce Covert reports:
Given that different states have different amounts they’ll pay out in unemployment benefits—in 2011 it ranged from $6,000 in Mississippi to $28,000 in Massachusetts—the researchers looked at what impact more generous benefits had on mortgage delinquency. They found that for every $1,000 extra in maximum benefits, the likelihood that an unemployed worker’s mortgage would go into delinquency declines by 25 basis points. Getting benefits for a longer period has a similar effect, as each additional week decreases the chance of delinquency by 34 basis points. “Based on this variety of tests, we conclude that the estimated effect of UI generosity is causal,” they write, meaning that bigger checks reduce the chances of going into delinquency directly.These data will not, of course, persuade Republicans in Congress that Americans subsisting on unemployment compensation aren't just lazing around watching cable movies every day instead of seeking a job. The fact that, even with an improving labor market, there are two people for every job opening has zero impact on the wrongheaded views of these elected representatives.They also found that the effect isn’t just a temporary forestalling of an inevitable foreclosure, but that it has a lasting impact on keeping people in their homes. “The effect seems to be long term,” they write, “as UI [unemployment insurance] benefits not only mitigate loan delinquency, but also reduce homeowner relocations and evictions.” Each additional $1,000 in benefits reduces the chance of an unemployed person’s mortgage going into default by 2.4 to 11 basis points. “We find that UI helps not only to postpone delinquency but also to keep laid off homeowners in their homes,” they conclude.Extrapolating out from their findings, the authors estimate that the expansions in the unemployment benefits program during the recession prevented about 1.4 million foreclosures.