John C. Goodman

Another jobs report came out yesterday and, like so many others before it, the news was disappointing. Our economy is actually growing more slowly this year than it grew last year — somewhere in the 2% range. Normally after a steep decline, the economy would be roaring back at a 5% to 6% clip.

The official unemployment rate is 7.9%, one-tenth of a point higher than last month's number. But the true rate is almost twice that level. Many people who want a full-time job are working part-time instead. And much of the modest increase in economic activity is the result of people who have jobs working more hours rather than new workers being hired.

All told, we are experiencing the slowest recovery since the Great Depression.

So what's wrong?

Public policy is wrong. Especially new policies that have been enacted during the Obama administration. These policies have the effect of discouraging people from accepting work and discouraging employers from offering it.

A new book by University of Chicago economist Casey Mulligan explains what has been happening on the supply side. In a nutshell, we are paying people not to work:

[I]n the matter of a few quarters of 2008 and 2009, new federal and state laws greatly enhanced the help given to the poor and unemployed — from expansion of food-stamp eligibility to enlargement of food-stamp benefits to payment of unemployment bonuses — sharply eroding (and, in some cases, fully eliminating) the incentives for workers to seek and retain jobs, and for employers to create jobs or avoid layoffs.

Mulligan gives the example of a two earner couple — each earning $600 a week. After the wife gets laid off she obtains a new job offer, paying $500 a week. But after deducting taxes and work related expenses her take home pay would be $257. Since untaxed unemployment benefits total $289, clearly she is better off not working.

Mulligan notes that it was the collapse of the housing market that set off the financial crisis that led to the Great Recession. But our problems are not confined to housing. They are system wide. For every one job lost in construction, five others were lost is other sectors. One thing that affects all sectors, however, is overly generous incentives not to work.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."