Let them eat crow

Patrick Gibbons

Source: Bureau of Labor Statistics

Once again, the Las Vegas Sun editorial board has ignored the facts in favor of political dogma. Citing Dr. Lawrence Katz, a Harvard economist, the Sun argues that we must continue the extension of unemployment benefits because there are few jobs available for each person who remains unemployed.

Yet Dr. Katz found in a 1990 report that “results indicate that a one week increase in potential benefit duration increases the average duration of the unemployment spells of UI recipients by 0.16 to 0.20 weeks.” That’s right, the Las Vegas Sun has argued for extending unemployment benefits by citing a Harvard economist who says increasing unemployment benefits increases the duration of unemployment. Dr. Katz isn’t alone, as many economists agree.

Here are some more reports reflecting his view:

1. “The probability of leaving unemployment rises dramatically just prior to when benefits lapse.”

2. “Job search increases sharply [from 20 minutes a week to 70] in the weeks prior to benefit exhaustion.”

3. “It is well established that generous unemployment benefits can increase the duration of unemployment spells and the overall level of unemployment …”

The most damaging “contrarian” report the political left can point to is a memo from Federal Reserve Bank of San Francisco that found unemployment would have dropped a very modest 0.4 points without the unemployment insurance extension. Still, that represents 600,000 laborers.

So the Las Vegas Sun is most certainly wrong on this one. Extending the unemployment benefits will likely increase unemployment and continue to increase the duration of unemployment in the U.S. The Sun editorial board is advocating a policy that will harm American workers, not help them.

The Sun simply believes that because there are few jobs, we should extend unemployment benefits. But unemployment benefits, and other government policies, may actually be killing jobs. Part of the problem now is that our government is borrowing and taxing heavily to pay for unemployment benefits – this means less capital for businesses to create jobs. Furthermore, government subsidies, bailouts, licensing, tariffs, wage regulations and stimulus packages have done nothing but shift resources from high-valued uses to lower-valued uses. Thus, at best, they have created no jobs and at worst have actually destroyed jobs (more on this at Marginal Revolution).

Finally, maybe the Las Vegas Sun editorial board can explain why they seem to think that unemployment benefits, which could be kept for up to 99 weeks in some states, have had little to no effect on increasing the average duration of unemployment to a record-shattering 35 weeks?