Here are Casey B. Mulligan’s estimates of the impact of emergency unemployment compensation ending in December 2013:
[T]he fact that earning income on a job results in both additional taxes and withheld federal benefits. The higher the tax rate, the less is the incentive to work.
And things are about to get worse:
Even if the emergency program is allowed to expire on Jan. 1, it will be replaced by an even larger program — the Affordable Care Act — assisting the unemployed and others, including premium subsidies for health insurance.
Most people have jobs that provide health insurance and will be ineligible for premium subsidies for as long as they work. But as soon as they are fired, quit, retire or otherwise leave the payroll, they will be eligible for monthly assistance to pay for their health insurance premiums and out-of-pocket expenses.
For households between 100 and 400 percent of the poverty line ― that’s about half of households ― the new assistance will average about $110 a week, tax free (unlike unemployment benefits, which are taxable). Moreover, the premium assistance is not limited to 26 weeks; it can last for decades.