Liberal Economost Paul Krugman on unemployment benefits
By Lachlan Markay
As Congress ramps up its negotiations over the fiscal cliff and impending tax hikes, left-wing groups have taken to the Hill to lobby lawmakers for an extension in unemployment benefits, despite evidence that such an extension could prolong the country’s years-long joblessness spell… Opposition to an extension of unemployment benefits centers on a simple truth: if you pay people to do something, they generally do more of it. Remove that financial incentive, and one’s willingness to cope with even painful circumstances will be reduced.
But don’t take conservatives’ word for it. “Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect,” explained Nobel Laureate and New York Times columnist Paul Krugman in his 2009 textbook, Macroeconomics.
“In other countries, particularly in Europe, benefits are more generous and last longer,” Krugman added. “The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of ‘Eurosclerosis,’ the persistent high unemployment that affects a number of European countries.”
(Krugman would, only a year later, dub the notion that UE benefits prolong joblessness, reiterated by Sen. Jon Kyl (R-AZ), “a bizarre point of view.” But then an academic study has found Krugman to be the nation’s most partisan economist.)
Even the White House’s top economic advisor has noted the drawbacks of prolonged unemployment benefits. Alan Krueger, chairman of the White House Council of Economic Advisors, co-authored a 2002 study in the Handbook of Public Economics that found that those benefits “tend to increase the length of time employees spend out of work.”