But Now You Know

The search for truth in human action

Unemployment Benefits INCREASE Unemployment


The recent increases in unemployment benefits, rather than helping fight unemployment, have actually increased unemployment dramatically 

 

The recent increases in unemployment benefits, rather than helping fight unemployment, have actually increased unemployment dramatically

Subsidies Cause Surplus

If you wanted to have too many apples, you could simply get the government to pay billions of dollars to apple growers. You can do this with almost anything; it’s called a subsidy.

Aside from the many problems intentional subsidies always cause, there are many “unintentional” subsidies. Perhaps the worst of these is the unemployment subsidy.

When you give people money for each apple you grow, more people choose to grow apples, and apple growers choose to make more. It creates an imbalance, producing more apples than the society really finds worthwhile.

When you give people money based on how unemployed they are, you likewise cause more people to be unemployed, and people to be unemployed longer. I don’t even need to go into how that creates an imbalance, as (unlike apples) more unemployment is obviously, universally, bad.

Some people, mostly those who have little real-life experience (like a Kennedy or Bush family member) might say “But nobody would CHOOSE to stay unemployed, just for benefits”.

Second, they’re wrong…but I’ll get back to that.

First

FIRST, it doesn’t matter if nobody does it on purpose. When the Fed raises interest rates just 0.25%, fewer people buy houses. Not one human being actually says “I am not buying this house, because the Fed raised rates by a fraction of one percent”.  It isn’t even raising home loan rates (it has no control over those), just the rate at which it lends to banks. Yet the trickle-down effect is fewer homes bought, in part because home loan rates creep up a tiny bit.

The same is true of unemployment. There is a trickle-down impact, over the span of 300,000,000 people, where some stay unemployed longer, and more BECOME unemployed, because unemployment is subsidized. As even a tiny increase in home loan interest rates invisibly pushes a few people over to the side of not buying a house, an increase in unemployment subsidy pushes a few people over into being unemployed.

Over the span of hundreds of millions of people, that is dramatic, in both cases.

And now we can get back to “second”:

Second

The ivory tower “nobody would choose to stay unemployed” people are wrong.

People DO choose not to work because they know they have an unemployment buffer.

They choose not to work as hard or otherwise volunteer to be the one laid off, choose not search as hard, pass up jobs they would otherwise take, and even actively stay unemployed, because of the unemployment benefits.

We who have real-life experience probably ALL, right now, know people who are doing this. Many of you, in fact, probably have done it. I am a consultant, so I don’t get unemployment benefits, but I’m sure it would influence me if I did.

I certainly have friends who actively cite the unemployment benefits as allowing them to take their time working. I even know someone who says they are glad the benefits have been extended, as they will be able to go for a year without looking for a job, now.

Sure, most states have some sort of fake attempt to require people to look for and take jobs. But there’s no way to actually make this work. It would cost more than unemployment benefits provide, to actually verify all the claims people make on their “looked for a job” forms. And any cheaper means of proving it would be draconian against all the people who were honest.

The Unemployment Subsidy

So yes, that’s exactly what the Liberals’ unemployment extension has done:

Increase unemployment, by subsidizing it.

We will have higher unemployment rates, and suffer this depression longer, because of the benefit increases. Yet another example of government’s coercive “help” making the problems they attack worse, instead of better.

Advertisements

April 3, 2009 Posted by | Economy, Family, Politics, Society | , , , , , , , , | 7 Comments

   

%d bloggers like this: