ÜDS-2011-Autumn-16

ÖSYM • osym
Oct. 9, 2011 1 min

To fully understand unemployment, one must consider the causes of recorded long-term unemployment, that is, the government assistance programs. For one thing, government assistance increases the measure of unemployment by prompting people who are not working to claim that they are looking for work even when they are not. The work registration requirement for welfare recipients, for example, compels people who otherwise would not be considered part of the labour force to register as if they were a part of it. This requirement effectively increases the measure of unemployment in the labour force even though these people are better described “noemployed” – that is, not actively looking for work. Similarly, unemployment insurance induces people to say they are job hunting in order to collect benefit. These programs also contribute to long-term unemployment by providing an incentive, and the means, not to work. Each unemployed person has a “reservation wage” – the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase the wage, causing an unemployed person to remain unemployed longer.


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