Thursday, September 8, 2011

It's True: People Sit on Their Butts Collecting Unemployment Checks, Instead of Looking for Work

A new study out by Macroadvisers reports:
 The presence of extended UI benefits alters the incentives to search for work...

UI benefits lower the net benefit to accepting employment and raise the incentive to continue to search for work and to decline employment offers that are less than ideal. This leads to longer durations of unemployment...
The report also states that others may lie and say they are looking for work, when they are not, so that they may continue to receive unemployment checks:
Recipients of UI benefits may be counted in the labor force as unemployed and looking for work even if they do not currently intend to accept a job offer. 
The report then states that:
We estimate that the behavioral channels are currently boosting the reported labor force by roughly 1 million...

The report does not state how MA reached this number, my suspicion is that it is much higher---and that it is pretty much anyone whose marginal revenue product per hour is above the minimum wage.

Bottom line: Markets clear. Except for short-term transitional unemployment, you wouldn't have any, if minimum wage laws were eliminated and you didn't pay people not to work.


  1. A good friend of mine lost his job in May 2009, and he began collecting unemployment. He was single, 26, he owned his car, and was able to sub-lease his Chicago apartment quickly. He then embarked on a 6-month road trip across the US, basically vacationing and visiting friends, while collecting unemployment the whole time. When he arrived in California, he also went to Guatemala for several weeks on vacation with a friend. In early 2010, he went to Europe for 4 months, backpacking, camping, and living in hostels, still collecting unemployment. That summer, he went to India and Nepal for over a month, just to explore. At this point he had been unemployed for over a year, had not really applied for any jobs, and was collecting unemployment. He finally started looking for a job in Chicago in the fall of 2010. He eventually had to accept an entry-level position, making significantly less money than he did in 2009, but he says he has no regrets!

  2. Only fools work for a living...Fools and Slaves.

    My friend in Germany earns 5K Euros a month and he calculated he has 1250 Euros in buying power after all taxes. Gasoline is near $7 a gallon...300% gas tax.

  3. If employers treated employees better they would be quicker to look for another job. But many employers do not treat their people well. If employers would give people a little flexibility with time off then it would not be so crappy to be employed.

    I am glad the person described by Robert Wiliams got some time off to enjoy his life. He may die next year so the time off may have been the only enjoyable time of his adult life. If most employers allowed employees 5 or 6 weeks off per year (even at lower pay than when working) that person would have had more incentive to find another job immediately.

    Immoral practices by employers does more to prolong collecting unemployment than the availability of the free money.

  4. @ Anonymous at 6:55 PM above:

    Employers can treat their employees as harshly as they want - it's their right. Employers have a right to make as much money from the labor of their employees as they possibly can. If the employees don't like it they can quit and go elsewhere. It's a free country. It's the employer who took the risk to start a business - too bad for the employees if they don't have a life and have to work like dogs until the day they die - they never took the risk to get out of the rut. It's the American way.

  5. Genesis 3:19
    By the sweat of your brow will you have food to eat until you return to the ground from which you were made.

    The lord does not care one whit if you enjoy your life. You want to eat? You work. No vacation. No mercy, just unrelenting cruelty - it is the way of the universe. Look around.

  6. Anonymous @ 6:55

    People like you are depressing. It's very simple. If employees wanted longer vacation time, they would negotiate for that in exchange for lower pay. If standard vacation time is two weeks instead of six, it's because employees have chosen higher pay rates instead.

    How on earth is giving somebody what they want immoral?