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RssLonger unemployment Insurance = Bad economic Policy
While I was contemplating the rationale of Nancy Polisi’s statement about job creating through food stamps and extending unemployment insurance, I saw what today’s Nobel prize winners had to say about the job market and the model of job creation. Peter A. Diamond, one of Obama’s own nominees for the Federal Reserve Board (and one of three recipients of the award) – through his decades of research, I think would contradict with the policies that the government is inclined to implement – which is, even though unemployment insurance helps in a short term and offers unemployed some time to match their appropriate job skills, long term joblessness, unemployment insurance yields unmotivated workforce with less incentive to go out look for jobs and more importantly create jobs for the others.
“One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times,” Academy said about their work.
“One of the key things we found is that it is important to make sure that people do not stay unemployed too long so they don’t lose their feel for the labor force,” Pissarides told reporters in London. “The ways of dealing with this need not be expensive training — it could be as simple as providing work experience.”
Its back to the basics – Government generated incentives like unemployment insurance produce unmotivated workforce, discourages entrepreneurship. What government needs and must do is to create incentives for entrepreneurs to create jobs – that means less regulations for boot-strapped start-ups, higher tax breaks for small businesses with less than 500 employees, revamping SBA and its roles and giving incentives for institutional investors, venture capitalists to invest in green and social ventures.
Entrepreneur Update
Extending Bush’s tax cut is extremely important for small businesses
Time magazine’s take on today’s nobel winners – What Today’s Nobel Says About the US Unemployment Crisis
Read more: http://curiouscapitalist.blogs.time.com/2010/10/11/what-todays-nobel-says-about-the-us-unemployment-crisis/#ixzz126QcjC33
This will probably expedite Diamond’s nomination at the senate