Sunday 19 September 2021

2. Give people free money; would they avoid work?

Actually, it is the other way  round: take away the free money; will people find work instead?

Here is the issue. In the US, unemployed people were getting up to $300 a week in addition to the regular unemployment benefits. Half of the states eliminated the support over the summer, while the other kept it.

Question: if you give people extra money when they are unemployed, will they dissuade them from working? Or, alternatively, would withdrawing the benefits induce people to get a job?

No brainer, right? This is what conservative policymakers in the US argued. If you give people money when they are unemployed, they will stay unemployed. Take away the money, and they will be forced to find jobs.

Reality: here is a citation from the Wal Street Journal ( States That Cut Unemployment Benefits Saw Limited Impact on Job Growth; WSJ Sep 1, 2021):

"States that ended enhanced federal unemployment benefits early have so far seen about the same job growth as states that continued offering the pandemic-related extra aid, according to a Wall Street Journal analysis and economists.

Several rounds of federal pandemic aid boosted the amount of unemployment payments, most recently by $300 a week, and extended them for as long as 18 months. The extra benefits are set to expire nationwide next week. But 25 states ended the financial enhancement over the summer, and most of them also moved to end other pandemic-specific unemployment programs such as benefits for gig and self-employed workers.

Nonfarm payrolls rose 1.33% in July from April in the 25 states that ended the benefits and 1.37% in the other 25 states and the District of Columbia, the Journal analysis of Labor Department data showed."

Maybe the average person is not a lazy bum, and they would like to find a job regardless of the amount of money they get when unemployed.

A possible explanation: child-care responsibilities and general concerns about safety and health with the pandemic still continuing.”


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