Back in 2010, I applauded Paul Krugman for acknowledging that government unemployment benefits can encourage joblessness.
And I even cited Krugman in this 2012 debate on the topic.
We’re debating this issue again today, but it’s an even bigger problem because politicians in Washington have added a special bonus payment for people who stay unemployed.
So we’re naturally finding that people are more reluctant to work, which is a rational choice for many of them since they’re getting more money for sitting on their butts.
So if Krugman recognized back in 2009 that regular-sized unemployment benefits lead to more joblessness, he must be even more worried about today’s super-sized unemployment benefits.
But there’s a catch. Krugman made his sensible observations on this issue in a textbook when he was still an academic economist, back when he felt some professional obligation to be rational and pay attention to the academic evidence and empirical research.
Today, he’s an ideologue and polemicist. So we get nonsense like this column in the New York Times.
…the Bureau of Labor Statistics announced that the U.S. economy added only 266,000 jobs in April, far short of consensus expectations that we’d gain around a million new jobs. Was this evidence that the economy really is being held back because we’re “paying people not to work”? No. For one thing, you should never make much of one month’s numbers, especially in an economy still distorted by the pandemic. …Also, if unemployment benefits were holding job growth back, you’d expect the worst performance in low-wage industries, where benefits are large relative to wages. …on the face of it the data don’t support an unemployment-benefits story. So what actually happened? We don’t know. Maybe it was a statistical aberration.
For what it’s worth, I prefer the sober-minded analysis available in editorials from the Wall Street Journal.
Such as this one.
Employers nationwide have complained for months that Washington’s $300-a-week bonus has made it harder to find willing workers. Yet Mr. Biden brushed aside the complaints, saying he and his staff “don’t see much evidence” that the payments are a “major factor.” …The perverse incentive of the bonus is clear, and the evidence goes beyond the anecdotes from tens of thousands of employers. …Bank of America economist Joseph Song notes that any worker earning less than $32,000 annually would get a raise by going on unemployment… The President intended his remarks to depict his Administration as the driver of job growth instead of its main hindrance. It was a tall order. But the bright side is that his urgent appearance showed that more Americans are figuring out that when the government pays people not to work, millions choose not to.
The good news is that some governors are opting out.
Here are some excerpts from a report in the Washington Post.
An unexpected slowdown in hiring nationwide has prompted some Republican governors to start slashing jobless benefits in their states, hoping that the loss of generous federal aid might force more people to try to return to work. …Arkansas on Friday became the latest to announce plans to cancel the extra benefits, joining Montana and South Carolina earlier in the week… Indiana Gov. Eric Holcomb signaled to local reporters that the state could soon follow suit, while Arizona Gov. Doug Ducey is considering the same.
I’m tempted to comment about the Post‘s usual bias (saying GOP governors want to “slash” when they’re simply proposing to return to regular-sized benefits).
But let’s stick to the topic.
Here’s another interview on the issue, but it’s about the current fight rather than the Obama-era fight.
I’m especially concerned, as I noted in the interview, that bad government policy may erode the work ethic.
I’ll close with a comment about the fight we had during the Obama years. Back then, the battle revolved around extended unemployment benefits rather than turbo-charged benefits.
Republicans eventually prevailed in blocking the extended benefits. So what happened? As you might expect, there was an increase in employment.
P.S. I imagine 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.
P.P.S. Senator Rand Paul and I wrote about this issue back in 2014.
P.P.P.S. For some unintentional humor, Nancy Pelosi actually argued that the economy is stronger when people are paid not to work.
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Image credit: Washington Area Spark | CC BY-NC 2.0.
