Notorious B.I.G. on the Unemployment Extension

Kelly Evans nails it. If you pay people not to work, they don't.

She writes in today's WSJ:

More jobless benefits, more unemployment.

A likely rise in the U.S. jobless rate is the unfortunate reality of the government's move to fund extended unemployment benefits for another 13 months.

The effect probably won't be huge, but it will be significant. And it may well hamper any recovery in investor and business confidence...The extension of jobless benefits is likely to worsen that trend for at least several months. For one, individuals not actively searching for work or willing to take available jobs may claim they are unemployed in order to receive benefits. That could artificially boost the size of the labor force, which is used to determine the unemployment rate.

Another concern, as the San Francisco Fed notes, is that the extension of jobless benefits may "reduce the intensity" with which the unemployed search for work. Longer term, this could lead to a higher level of structural unemployment in the economy as workers' skills erode...The late rapper Notorious B.I.G. probably put it best: "mo' money, mo' problems."