Tags: Steve Malzberg Show | Kurt Mitman | unemployment benefits | economy

Economics Prof: Extending Jobless Benefits 'Shrinks the Pie'

By Bill Hoffmann   |   Thursday, 29 Jan 2015 03:34 PM

Sixty percent of the jobs created in the U.S. last year came from the expiration of unemployment benefits — but not because those on government subsidies weren't looking for work, says Kurt Mitman, assistant professor of economic studies at Stockholm University.

"It's really not about … [people] being lazy and not going out and looking for work — it's really about firms creating jobs and opening up vacancies," Mitman said Thursday on "The Steve Malzberg Show" on Newsmax TV.

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"The idea is when you extend [unemployment] benefits for a long time, you decrease the size of the pie that a firm and a worker can share when they come together and create a job."

Mitman said when benefits are extended, what really happens is that "the pie is shrinking."

"Firms know that if the pie is smaller they're not going to put forth the cost and the effort to open up jobs and that leads to higher unemployment," he said.

"So it's not so much that people are lazy and not out there searching. It's that the pie is getting smaller and because of that, firms just aren't creating jobs."

Mitman, who co-wrote a piece on his findings for The National Bureau of Economic Research, added:

"The idea is that when these benefits got cut, firms knew then that they could make more profits and so they created all these jobs and that encouraged people who weren't even looking to all of a sudden start looking again."

Mitman said he is encouraged by last year's job expansion.

"The fact that we've had so many people getting back to work in this past year is great and the fact that we have other things going on in the world that make our economy more competitive is good," Mitman said.

But, he added: "We should be cautious that a lot of the growth we saw in 2014 was in fact a result of cutting the benefits and so there could be still other underlying fundamentals...."

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Sixty percent of the jobs created in the U.S. last year came from the expiration of unemployment benefits — but not because those on government subsidies weren't looking for work, says Kurt Mitman, assistant professor of economic studies at Stockholm University.
Kurt Mitman, unemployment benefits, economy
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2015-34-29
 

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