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When you stop paying people who don't work, more people end up working





I first brought this up in a post last February: the untold story behind today's unemployment, and it's worth bringing up again because the data are now moving in a positive direction. So far this year there has been a reduction of over 2 million in the number of persons receiving unemployment insurance. This may go a long way to explaining why there has been an increase of 1.3 million in the number of people working this year in the private sector. I'll repeat here what I said last February, since it is still meaningful today:

The number and proportion of persons receiving unemployment insurance today is far greater than anything we've seen before. Even though this recession's highest unemployment rate of 10.1% was lower than the highest unemployment rate (10.8%) of the 1981-82 recession, the portion of the workforce receiving unemployment compensation today is 63% higher than it was at the peak of the 1982 recession. Fully 78% of those looking for a job today are receiving unemployment insurance, compared to only 38% at the height of the 81-82 recession.

Never before have we seen anything even close to today's largesse and compassion for those without a job. While not wanting to argue whether this is right or wrong, I would however argue that the aggregate desire of the unemployed to find a job today is undoubtedly much less than it was during the depths of the 81-82 recession.

And so we have here one more reason why this recovery is proceeding more slowly and painfully than we all would like to see. Not only are employers reluctant to hire because of all the legislative, political, and tax uncertainty out there, but the incentive for workers to seek out the jobs on offer is weaker than ever, especially for those jobs that don't come equipped with salaries exceeding their current exceptional benefits. Congressional compassion has its costs, and they are not just measured in terms of expenditures, but also in a slower recovery.

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