Friday, March 4, 2011

Even the Fed Admits Unemployment Payments Prolong Unemployment

Melinda Pitts, research economist and associate policy adviser at the Atlanta Fed, writes:
More convincing is the argument pointing to the impact of extended unemployment insurance benefits. Research from the most recent recession and recovery—for example, see Valetta and Kuang and Aaronson et al.—suggests extended benefits have added to the unemployment rates, with estimates ranging from 0.4 percentage points to 1.7 percentage points. If that's the case, then President Lockhart says these extended benefits may be acting "as a disincentive to accept an offered job, especially if the job pays less than the one lost."

If you pay people not to work, some will not work.

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