Steve Chapman

What's different this time? "The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost certainly the culprit," writes Harvard economist Robert Barro in The Wall Street Journal. The extension provides the longest coverage ever.

Economists disagree on how much jobless assistance aggravates the problem it is supposed to ameliorate. But a study this year by the liberal Brookings Institution estimated that without the additional benefits, the unemployment rate would be at least 0.7 percentage points lower than it is -- the equivalent of a million jobs.

The extension makes it feasible for some unemployed workers to put off looking for work longer than they otherwise could -- which is why workers without coverage usually find new jobs quicker than workers with coverage. Often, the benefits just postpone the inevitable, depriving the economy of labor without yielding better jobs for those looking.

Then there is the increase in the federal minimum wage that took place last year. In the teeth of the downturn, the government required companies to boost their pay floor to $7.25 an hour, an increase of 70 cents. The intention may have been humane, but the effect was like tossing a struggling swimmer an anchor.

For Washington to dictate higher pay is bound to destroy jobs in the best of times. But the very worst moment to raise the minimum wage is during a period of economic stagnation combined with deflation, as we had last year.

When inflation screeches to a halt, many workers will be compelled to accept lower pay than they once would have taken. (Many already have.) A higher minimum wage prevents some from doing that.

Paying people not to work, barring them from taking wages they would be willing to accept, and penalizing companies that hire them? It's an ingenious formula for destroying jobs, and it seems to be working.


Steve Chapman

Steve Chapman is a columnist and editorial writer for the Chicago Tribune.
 

 
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