The Anti-Stimulus Economists Agree: Unemployment Benefits Hurt Employment Rates

Photo Credit: APUnemployment insurance and other forms of government benefits act as a disincentive to work, economists across the political spectrum agree.

Three different economic experts testified before the House Oversight and Government Reform Committee’s Subcommittee on Economic Growth, Job Creation, and Regulatory Affairs on Thursday afternoon during a heated and contentious hearing. All said that government benefits that kick in during unemployment decrease the economic incentive to pursue work, although they disagreed about the extent of the benefits’ effect.

“The focus of today’s hearing is on the unintended consequences that too often stem from well-intentioned policies,” said Subcommittee Chairman Jim Jordan (R., Ohio) in his opening statement for the hearing, “Unintended Consequences: Is Government Effectively Addressing the Unemployment Crisis?”

Casey Mulligan, an economics professor at the University of Chicago and author of a recent book on the effect that safety net programs have had on employment, argued that the government’s expansion of assistance programs in the wake of the recession actually has made it financially harmful to return to work in some cases.

He called the loss of benefits caused by employment the “job acceptance penalty,” and noted that a high penalty—100 percent of profit in some cases—is associated with low employment rates.

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