Paying People Not To Work

  1. The statistical evidence on [Unemployment Insurance] is overwhelming significant. When the UI benefits maxed out at 26 weeks, there was a spike in the number re-employed right after the benefits ran out… it’s hard to dispute the fact that UI insurance does have some effect on labor supply. And that means some effect on employment, as studies show that the effects on unemployment duration even occur in areas with double digit unemployment.
  2. Many Western European countries such as France saw their natural rates of unemployment rise from around 2% in the 1960s to about 10% in the 1980s. We don’t know all the reasons, but the most plausible explanations have to do with various labor market policies….
  3. Denmark recently found that their four year maximum on UI benefits was distorting the labor market, and cut the maximum duration to 2 years. Denmark is arguably the most progressive, most civic-minded country on Earth. Were they just imagining this problem?

Comments (2)

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  1. Bruce says:

    Incentives matter.

  2. Brian says:

    Most of Europe’s labor policies are ultimately unsustainable.