CONGRESS IS PAYING PEOPLE A LOT OF MONEY TO NOT WORK
Jun 19, 2020
4 minutes
PETER SUDERMAN
PERHAPS THE SIMPLEST and most important lesson in economics is this: Incentives matter. If you tax an activity, you make it more expensive and get less of it. If you subsidize an activity, you make it more lucrative and get more of it. It stands to reason, then, that if you respond to a pandemic by offering people more money to stay unemployed than their former employers can afford to pay them, you’ll make it less likely that people will return to those jobs, causing long-run disruptions of the labor force and worsening COVID-19’s impact on the economy.
Roughly speaking, that’s what happened with the CARES Act, the $2.2 trillion relief package passed in March as part
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