Tuesday, August 10, 2010

Why Would Someone Unemployed Turn Down a Job?

I have previously briefly outlined the economic theory explaining why providing unemployment benefits produces more unemployment. Recent news also bear this out. A Wall Street Journal article documenting how some firms are actually finding it hard to hire workers even in this recession indicated this is largely due to unemployment insurance making potential workers much more choosy:
Some workers agree that unemployment benefits make them less likely to take whatever job comes along, particularly when those jobs don't pay much. Michael Hatchell, a 52-year-old mechanic in Lumberton, N.C., says he turned down more than a dozen offers during the 59 weeks he was unemployed, because they didn't pay more than the $450 a week he was collecting in benefits. One auto-parts store, he says, offered him $7.75 an hour, which amounts to only $310 a week for 40 hours.

"I was not going to put myself in a situation where I was making that small of a wage," says Mr. Hatchell. He has since found a better-paying job at a different auto-parts dealer.
Once again we see a fundamental economic principle at work: We get more of whatever we subsidize. Subsidize unemployment and we get more unemployment.

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