A striking new study from the National Bureau of Economic Research concludes [that] longer-term unemployment insurance, rather than supporting a recovery, likely makes unemployment persist.
The reason is that extended unemployment benefits create upward pressure on wages. The higher wage level reduces the employer’s potential profits on any new job created, so naturally they don’t create them. With fewer jobs available, the number of unemployed who land a job also stays low. High unemployment persists.
Source: The Wall Street Journal.