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Wednesday, April 16, 2014

'Supply, Demand, and Unemployment Benefits'

When in need of a quick post, Paul Krugman is always a good source:

Supply, Demand, and Unemployment Benefits: Ben Casselman points out that we’ve had a sort of natural experiment in the alleged effects of unemployment benefits in reducing employment. Extended benefits were cancelled at the beginning of this year; have the long-term unemployed shown any tendency to find jobs faster? And the answer is no.
Let me ... ask, how was it, exactly, that reduced benefits were supposed to encourage employment in the first place?
Making the unemployed miserable arguably increases labor supply, as workers become ... more willing to take whatever job they can find. But the US labor market in 2014 isn’t constrained by supply, it’s constrained by demand: ...firms ... have no need for as many hours of work as workers are willing to give.
So make the long-term unemployed more desperate; so what? They can’t do anything to increase the amount of work demanded, and in fact their reduced purchasing power reduces labor demand.
You might imagine that the long-term unemployed, through their desperation, might take jobs away from existing workers — but ... there’s no evidence that this is happening. ...

    Posted by on Wednesday, April 16, 2014 at 10:42 AM in Economics, Politics, Social Insurance, Unemployment | Permalink  Comments (22)

          


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