Dan Mitchell: Subsidizing unemployment means more joblessness

 

Why do we constantly extend unemployment benefits when we know that subsidizing unemployment means more joblessness?

Government Benefits Encourage Unemployment

November 29, 2012 by Dan Mitchell

It’s not something I should admit since I work at a think tank, which is based on the idea that substantive analysis can impact public policy, but I sometimes think humor and anecdotes are very effective in helping people understand issues.

On the topic of unemployment insurance, for instance, I wouldn’t be surprised to learn that this Michael Ramirez cartoon and this Wizard-of-Id parody have been effective in helping folks grasp the unintended consequences of excessive government benefits.

And I bet this story from Michigan and this example from Ohio will ring a bell with many people because they have some relative or buddy who also has used government benefits as an excuse to stay unemployed.

So when I went on Fox to discuss the issue, I mentioned that I had a couple of friends who goofed off instead of looking for work because they got unemployment benefits…

.

But since I am a think-tank policy wonk, I also explain that even left-wing economists such as Paul Krugman and Larry Summers agree that subsidizing unemployment means more joblessness. The academic research on this topic is virtually unanimous.

Keep in mind, by the way, that the negative impact of unemployment benefits is just the tip of the welfare-state iceberg. Professor Casey Mulligan has some very good work about the negative impact of redistribution programs, and this chart shows how dependency programs create very high implicit marginal tax rates for the less fortunate.

P.S. My opponent got screwed in terms of airtime, something that I can sympathize with since I’m often the one getting the short end of the stick, even when appearing on overseas television. This previous debate on unemployment insurance, by contrast, was very balanced.

P.P.S. If you want an example of unintentional humor, you can watch Nancy Pelosi asserting that paying people not to work is an effective means of creating jobs.

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