Government economic meddling doesn't help.
University of Chicago economist Casey Mulligan explains how
government gets in the way:
Labor market distortions are a collection of factors
that hold back employment, even when employees are creating a
lot of value.
These distortions include difficulties in job search, income
taxes, minimum-wage laws and incentives that are eroded by
means-tested government benefits (determining whether
someone should receive benefits based on things like the
person's income). These factors can be difficult to quantify
individually, but we know from the poor employment results that
at least some of them are important.
Labor market distortions have gotten progressively worse during
this recession. The federal minimum wage, for example, was
increased once
shortly before the recession began, a second time in the summer
of 2008, and yet again this summer. The housing collapse has
also had multiple harmful effects, such as impeding families
who might want to move out of some of the hardest-hit regions
toward areas where the economy is doing better.
These types of factors can make a bad labor market much worse.
Some distortions may at least stabilize in coming months, but he
adds:
Congress appears poised to
further erode incentives to earn income as an accidental
byproduct of its plans reforming health care. Nor do consumers
seem to be spending in anticipation of a grand employment
recovery.
Rather a helping hand we have the unhelpful foot of government,
giving job-seekers an unpleasant kick in the rear.
About the Author
Doug Bandow is a Senior Fellow at the Cato Institute and the Senior Fellow in International Religious Persecution at the Institute on Religion and Public Policy. A former Special Assistant to President Ronald Reagan, he is author of Beyond Good Intentions: A Biblical View of Politics (Crossway).
