Thursday, March 25, 2010

Why do we have long term unemployment?

As discussed in Financial Times:
But the surge in long-term unemployment is by no means unique to minorities. The median duration of joblessness in the US labour force as a whole has risen at an even faster rate – from 8.8 weeks in February 2007 to 19.6 weeks last month.
Mainly the inability of government benefits to become efficient in a wage sense, the Dead Zone has been increasing as we provide more permanent bail outs to individuals in the Dead Zone.

Liberal economists who do not understand entropy and economic precision, will look the package of benefits provided to the Dead Zone, and call that income. But they fail to understand the lack of precision that results from government payouts; the number of wage slots decrease as the economy simplifies to accommodate government activities.

Each time a worker passes from the Dead Zone to positive income, the quantization jump is very large and the marginal tax hard to overcome. We become Europeanized.

This problem relates to the yield curve jump in my last post. To perform all the tasks set out by Congress, the market is expecting a jump in precision of government goods. It never happens, and we get a double dip as the economy adapts to another imprecise program from Congress.

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