Wednesday, October 15, 2014

If you pay people who are unemployed, ...

... you get more unemployment.  From the St Louis Fed:

Longer benefits may reduce unemployed workers’ job search efforts, decreasing their likelihood of becoming reemployed.

BOTTOM LINE:  Every recession since 1950 has included an emergency response from Congress to increase unemployment benefits.  The good news is that the perverse incentives of the program seem small, increasing unemployment rate only a small fraction.


  1. Congress has a duty to represent the people that have elected them to their positions. During the most recent recession unemployment reached a peak of 9.5% according to the US Bureau of Labor Statistics in June 2009 when the recession was declared to be over. The recession forced many into unemployment and without the assistance of unemployment benefits the economy would be worst off than it could have been.

    The longer the benefits last the less likely you will have people looking for employment. They are in essence receiving a paycheck for doing nothing. Depending on each individuals situation this could be a paycheck equivalent to what they left the job market at. Individuals decrease their likelihood of becoming employed because they lose skills and become out of touch with current trends and technology. It isn't surprising that their likelihood of becoming reemployed decreases the longer they are away from the workforce.

    (2012). The recession of 2007–2009. The Bureau of Labor Statistics. Retrieved from

  2. I respectfully disagree. I have had the displeasure of being unemployed for three years. I may have the similar mentality that unemployment or welfare benefits keeps others from getting a job, but now I no longer believe that. This is a scapegoat mentality.

    Before the fall of the economy, I had a bachelor's degree and a job at a prestigious company for nearly ten years. To me, those were my three aces for landing a new job when I made the decision to relocate to a new area. WRONG! It did not get me a job. All interviewers were stuck on why did I leave my prestigious job!!!!!

    As more time went on, the more I couldn't seem to land a job. After one year, starting to get desperate, I started applying for lower level positions, still couldnt get a job. Then it was official in 2008, that the economy went down. I was relieved that the reason that I could not get a job was because of the economy.

    Now, even more desperate, I began to apply for minimum wage jobs and still could not get them. I no longer included my education and my job history and I still could not get a job. I applied to over 3000 positions within three years. It took me three years to get a minimum wage job finally in 2010. I lost all my 401k and savings in doing so.
    In addition, I never received unemployment at all because I QUIT my job to relocate to another state. I did not get fired, but yet, it appears employers still believe that they are ultimate crime scene investigators and believed there must be something wrong with me. Yes, I loved my previous job, and sometimes I regret my decision financially, but I had to relocate for my family. Family is more important to me than any job or any amount of money in this world. It is sad that employers cannot see past that.

    So, I respectfully disagree that people do not want to work. People do want to work. People want to work and they cannot get the jobs. It is a scapegoat mentality when the media tries to blame the victims for lack of jobs in the economy.

  3. Veronica, I feel like you are looking at this strictly from an emotional viewpoint and not looking at the economic lesson that is undeniable in this case. If your view was valid, unemployment would need to pay zero in order to maintain the natural economic balance of supply of talent and demand for workers. However, increasing unemployment, there is less incentive for people to work. This is because the value of a job is no longer what the original salary of the job is. The value of the job to the worker now becomes the salary minus what they could have earned while on unemployment. True, for many people there is still enough incentive that they want to earn the surplus that exists between the two. However, for others, they may find that the income they earn on unemployment is enough to justify the cost of not working. Your statement “people want to work and they cannot get the jobs” needs economic balancing. People may want to work, but they cannot find the jobs that they feel provide a tradeoff acceptable to them. (Minimum wage itself can’t even be the lowest wage from an economic standpoint because it itself is government regulation that interferes with the natural market). From the employer end, if they aren't hiring, that means that they haven’t found an employee who they feel is worth having versus not having an additional employee.

  4. In my view been unemployed is one of the biggest challenge for anyone, if we are not able to overcome this than we are always going to have a huge struggle and that is where I feel Forex trading is such a classic business to be doing, it has all the top conditions especially with OctaFX broker with their low spread of 0.2 pips, high leverage up to 1.500 and even epic trading platform like cTrader, it’s all just too good for anyone.