Monday, May 10, 2010

Unemployment Benefits Create Unemployment

When we go through the chapter on employment in macroeconomics, we cover this phenomenon. If you pay people to be unemployed, unemployment increases. I'm not sure all of my students believe it, but have a look at what is currently happening in Detroit.

In a state with the nation's highest jobless rate, landscaping companies are finding some job applicants are rejecting work offers so they can continue collecting unemployment benefits.

It is unclear whether this trend is affecting other seasonal industries. But the fact that some seasonal landscaping workers choose to stay home and collect a check from the state, rather than work outside for a full week and spend money for gas, taxes and other expenses, raises questions about whether extended unemployment benefits give the jobless an incentive to avoid work.

Members of the Michigan Nursery and Landscape Association "have told me that they have a lot of people applying but that when they actually talk to them, it turns out that they're on unemployment and not looking for work," said Amy Frankmann, the group's executive director

Congress isn't being compassionate by extending unemployment benefits, Congress is delaying the recovery.



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