It’s of course a mystery as to why it happens, but if you pay people not to work, they don’t work! From schiffgold.com:
Both Janet Yellen and Joe Biden insisted “enhanced” unemployment benefits weren’t incentivizing people not to work. The numbers prove them wrong.
In a podcast, Peter Schiff said the notion that generous unemployment benefits weren’t motivating people to remain unemployed was absurd.
Only government economists could fail to understand this obvious relationship. There is a preference for leisure over work. People would prefer to have leisure than work. The only reason they give up their leisure to work is because they need the money. Because otherwise, they can’t pay their bills. They can’t pay the rent. They can’t put food on the table. So, even though they would prefer leisure, they have to work. Well, if the government says, ‘No, you don’t have to work. You can have the leisure that you prefer and we’ll replace your lost income. In fact, we will actually give you more money to take a vacation than what you would earn if you gave up that vacation and went back to work.’ How can anybody not realize that there is a link here between these lucrative payments not to work and so many people choosing not to work?”
And the numbers prove him correct.
The labor market has been out of whack for months. With the US government handing out enhanced unemployment checks, we ended up in a bizarre situation with high unemployment even as job openings hit record levels. Recently, some states have rolled back those unemployment benefits, and unsurprisingly, unemployment has dropped more quickly in those states than in those that retained the enhanced benefits.