Plans for Extended Unemployment Benefits, Wage Subsidies Risk Creating a Zombie Economy

“Nevertheless, if we can't expect much of the pre-pandemic economic activity to return, that dramatically weakens the case for propping up businesses as Jayapal and Hawley want to do, or paying workers to stay jobless like the HEROES Act does. Both policies stymie markets' ability to adjust to COVID-19 while shifting resources from those parts of the economy that can be productive during a pandemic to those that can't. If there's no demand for air travel, we'd be better off seeing baggage handlers shift to being warehouse workers or grocery delivery drivers. We want cooks and cashiers to move to restaurants that can figure out a way to stay profitable without dining service.

That doesn't mean the government can't provide relief. Even if we allow those readjustments to happen, we'll still probably have a less productive economy for a while, and the negative effects of that will be concentrated on people who aren't in a position to adapt. So there's a reasonable case for cash transfers targeting the poorest Americans. But they shouldn't be conditioned on staying at their current jobs, and—unlike unemployment benefits—they shouldn't be conditioned on staying out of the labor force altogether.

The innovation-breeding creative destruction of free markets is important during good economic times. In a pandemic, it's essential.”

Plans for Extended Unemployment Benefits, Wage Subsidies Risk Creating a Zombie Economy

 

Which is why is really isn’t worth even discussing. It will never pass.