The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program.
Monday, August 30, 2010
If you pay people to be unemployed,
... you get more unemployment. Robert Barro estimates that the unemployment rate would now be at 6.8%, instead of 9.5%, if jobless benefits hadn't been extended to 99 weeks.