Larbor Force Participation Rate Lowest Since 1978.

Recent employment numbers indicate that the unemployment rate has dropped from 7.0% to 6.7%. Is this because we undergoing a genuine economic recovery, and businesses are hiring personnel en masse once again? Fat chance. The unemployment rate has dropped because the civilian labor force has shrunk in size from 155.3 million to 154.9 million. The unemployment rate is decreasing because numerous out-of-work individuals have given up looking for work altogether; these people are not counted as “unemployed” because they are not looking for employment.

The Labor Force Participation Rate has recently clocked in 62.8%, the lowest levels seen since 1978.

The timing is prescient. The Senate recently approved a bill which will further extend unemployment welfare checks to 1.3 million for an additional three months, after having already received said checks for six months prior. This only accounts for Federal benefits; certain states boast unemployment benefits that can last out to 73 weeks.

This bill is not yet funded. Congress must vote to authorize $6.5 billion in order to fund the extension. The funding will pass through the Senate easily. It may face some resistance in the Republican-controlled House of Representatives. I predict it will pass, albeit with some theatrics. It’s an election year. It is very possible (even probable, I would say) that enough Republicans will side with Democrats to pass this. If Congress authorizes it, Obama will happily sign it.

This is a major issue. The government is paying workers to not work. Unemployment benefits compete with low-paying jobs for personnel; most people will choose $300 per week on unemployment, rather than work for $300 per week. $300 per week is not a lot of money, but not working at all and receiving $300 per week sure beats working hard somewhere for the same amount, or even just a little over.

With unemployment benefits extended and available, we can make a sound prediction that an increasing number individuals will opt for unemployment rather than a job they consider low-paying. A basic economic law is this: “When the price is lower, more will be demanded.” Presently, the price of being unemployed is lowering, because the government is subsidizing unemployment. Therefore, unemployment is increasing; it is not being “demanded” in the classical sense, but because the price is lowering, more individuals are opting for unemployment, rather than employment.

One of the worst problems associated with this (never mentioned in the media) is that these workers are losing a great deal of subjective value with each passing week that they remain unemployed. For one, workers get flat-out rusty after sitting out of the work force for months. Many people are wont to lose a working mentality and slip into a lazier demeanor. Not everyone is subject to this, but I believe most are. If you’ve ever taken a semester off from college, you know what I’m talking about.

Tied into that notion is the fact that most businesses do not like hiring workers who have been out-of-work for a long period of time. You may think that is unfair, but it is irrelevant. When a person has been unemployed for six or more months, it signals to a potential employer that this applicant may have gotten lazy. Employers do not like lazy. They want someone who is hungry for work. They want someone who is totally averse to unemployment. This is the kind of employee they can count on to appreciate the job and work hard. This tells the employer that this is a worker who does not like to be unemployed. Someone who was OK with living on unemployment as opposed to a low-paying job does not appear hungry for work by any stretch. This tells the potential employer that this worker may be a risk; after all, the worker can rely on unemployment to be there should they lose their job again. Who’s to say that this worker won’t put forth minimal effort, or even just quit to go back on the dole?

Congress is prolonging this slow decline in the lives of millions of workers. They are actively promoting the unemployed lifestyle. In the short-term, extending unemployment benefits may seem to some like a downright necessity; but in the long-term, the impacts will prove devastating for generations to come.

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