Government itself contributes to long term unemployment by providing the means not to work

An Incentive to Not Find a Job

By Aaron Cantor
Thursday, April 15, 2010

Government itself contributes to long term unemployment by providing the means not to work.

Every person has a reservation wage – a minimum wage they insist on getting before accepting a position.

Unemployment benefits and other social assistance programs only increase the afore-mentioned reservation wage, allowing that person to remain unemployed for a longer period of time.

The U.S. Senate is debating whether to extend unemployment benefits for the fourth time since the recession began in early 2008.

The bill which is being pushed by the Democrats would allow benefits to continue for 99 weeks, that is nearly 2 years, at a cost of $7 – $10 billion dollars.

The Brookings Institution’s panel on economic activity reported in March that jobless insurance extensions “correspond to between 0.7 and 1.8 percentage points of the 5.5 percentage point increase in the unemployment rate for the current recession.â€