Mankiw on Unemployment Insurance

http://www.futureofcapitalism.com/2010/12/mankiw-on-unemployment-insurance

Harvard economics professor and former Bush administration official Greg Mankiw has a post up about whether to extend unemployment insurance:

when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?....

I should note, by the way, that economists who strongly favor the extension of UI benefits, such as those who signed this letter, also tend to favor more income redistribution in general. I suspect, therefore, that the foundation of their support comes not from having weighed the specific pros and cons of UI per se, but rather from a more general desire to "spread the wealth around." That issue is, as I tell my students, more a matter of political philosophy than it is of economics.

One of Professor Mankiw's objections — that extending unemployment insurance "reduces the job search efforts of the unemployed" — could be addressed in part by turning unemployment into something more like a health savings account, where if an individual gets a job before the benefits expire the individual gets to somehow keep the unused portion of the benefits in an account that can grow for the next time around.

by Ira Stoll  |  Dec 4, 2010 at 10:32 pm Related Topics:  Education, Income Inequality receive the latest by email: subscribe to the free futureofcapitalism.com mailing list