I’ve written periodically about the perverse incentives of the unemployment insurance system. Simply stated, there will be fewer jobs if the government subsidizes joblessness, and I even showed that this is a consensus position by citing the academic writings of left-leaning economists such as Larry Summers and Paul Krugman.
The San Francisco Federal Reserve also has produced research measuring the negative impact of unemployment insurance on the job market.
Now we have some additional academic research on the topic, and the results once again show that the unemployment insurance program causes a significant increase in unemployment.
The Emergency Unemployment Compensation program created in the summer of 2008 provided for unprecedented extensions in the duration of unemployment insurance (UI) benefits. Combined with persistent high unemployment and historically long durations of unemployment during the 2008 and 2009 recession, this extension of UI has prompted renewed interest in the impact of UI benefits on job search, the duration of unemployment, and the unemployment rate. …This paper uses multiple regression analysis to estimate the impact of extended UI benefits on the unemployment rate after controlling for the severity of the recent recession. The extension of UI is found to have a positive and significant impact on the national unemployment rate… The UI benefit extensions that have occurred between the summer of 2008 and the end of 2010 are estimated to have had a cumulative effect of raising the unemployment rate by .77 to 1.54 percentage points.
If you’re trying to educate a statist friend or colleague about the relationship between unemployment insurance and joblessness, this research should help. But you may also want to share this real-world story. And here’s another powerful anecdote.
Last but not least, this cartoon does a very effective job of showing the consequences of paying people not to work.
Every person they make dependent on the Govt means more votes for them.
Reblogged this on News You May Have Missed and commented:
Every person they make dependent on the Govt means more votes for them.
Probably for the same reason that they haven’t figured out that financing fatherless families makes more of them also.
I think that they thnk that doing this sort of activity generates more voters who will vote for them, while they do it under the radar or else under the guise of “helping” so that it does not cost them too many votes
Yep, just met someone who is on unemployment and not even looking for work…not need!
[...] not to work is beyond me. But now there is evidence of just how strong that incentive is: via Dan Mitchell The extension of UI [unemployment insurance] is found to have a positive and significant impact on [...]
Team Obama’s estimate of jobs and wealth created is based on the horribly mistaken idea that “money moving around” is what creates wealth, instead of being a result of increased production and trade. Worse, the government believes in Keynesian economics, that government spending increases wealth by 1.5+ times the amount spent.
The only problem is to find recipients who will re-spend all of the money, rather than save part of it. Keynes thought that savings took away from the good effect of spending. The savings rate was supposed to weaken the spending and re-spending effect on wealth.
Team Obama has discovered to its delight that payments to the unemployed are entirely spent in a short time. So, this type of payment is supposedly the ideal means to create wealth through government spending.
If the 1935 economist Keynes were correct, then all would be glorious. Unfortunately, he was a crackpot. The Keynsian multiplier is a mistake, counting transactions as if the entire value of each transaction creates wealth instead of merely valuing or identifying wealth.
If there were a multiplier such as the 1.5 multiplier claimed by Team Obama, then we could Counterfeit Our Way to Wealth.
Government spending doesn’t multiply anything. Government takes resources from taxpayers and applies them to government projects. We get a bridge or some paperwork; that is it.
The Myth of the Economic Multiplier
[...] Why Won’t Washington Understand that Paying People to Be Unemployed Means More Unemployment? [...]
[...] Guess what else is creeping up, along with high gas prices? Unemployment! Yay! Also, I’ve written before about the insanity of Unemployment Insurance for 99 weeks… thankfully someone agrees with me. [...]
[...] And I’ve cited some good research on the topic from the San Francisco Federal Reserve Bank, as well as other studies by academic economists. [...]
[...] And I’ve cited some good research on the topic from the San Francisco Federal Reserve Bank, as well as other studies by academic economists. [...]
[...] And I’ve cited some good research on the topic from the San Francisco Federal Reserve Bank, as well as other studies by academic economists. [...]
[...] in that passage is upside down. Yes, they have more subsidies for joblessness, but that’s one of the reasons they have higher unemployment (as even Paul Krugman and Larry Summers have [...]
[...] in that passage is upside down. Yes, they have more subsidies for joblessness, but that’s one of the reasons they have higher unemployment (as even Paul Krugman and Larry Summers have [...]
[...] in that passage is upside down. Yes, they have more subsidies for joblessness, but that’s one of the reasons they have higher unemployment (as even Paul Krugman and Larry Summers have [...]