Stimulating Iowa’s economy with unemployment benefits

As these funds cycle through the economy, thousands of jobs are produced or saved, and economic activity benefits Iowans.

Andrew Cannon, research associate
Andrew Cannon

American Recovery and Reinvestment Act (ARRA) put millions of dollars into the hands of Iowans who needed money most —Iowa’s recently unemployed. It encouraged states to update their unemployment insurance eligibility (of which Iowa was the first), enabling part-time and low-wage workers to qualify for unemployment insurance (UI).

Unemployed Iowans benefited from ARRA in two key ways: they received an additional $25 per week and they had their eligibility for receiving UI extended significantly. Rather than having just 26 weeks of UI, ARRA extended workers’ eligibility for UI by 47 weeks, to 73 weeks total.

As a result of these two measures, the Iowa economy will have an additional $314.8 million ($82.6 million for the additional $25 in weekly payments and $232.2 million for the extension of benefits) injected into its economy in 2009 and 2010.

As the only source of income for many unemployed workers, UI benefits are spent quickly and locally. Apart from helping the unemployed meet basic needs, UI benefits also help the local economy, maintaining or even increasing the demand for goods and services. Providers of these goods and services end up using these funds to pay their workers’ wages, who in turn, spend their wages on their basic needs. The multiplier effect of the increase and extension of UI benefits, as well as other workforce- related provisions of ARRA produced almost $501.7 million in direct and indirect effects in 2009, and will produce over $314.6 million this year.

ARRA-UI jobs graph 2009-10
Source: David Swenson

As this money cycles through the economy, we estimate over 3,700 Iowa jobs were produced or saved last year, and over 2,200 this year, solely as a result of the UI measures of ARRA.

Clearly, UI benefits are no match for a steady job with a decent wage and benefits. But for the thousands of Iowans who have found themselves without such a job, ARRA has been a lifeline. Moreover, it has helped keep many other Iowans who, but for the stimulus, might have found themselves unemployed, too.

Posted by Andrew Cannon, Research Associate

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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