Friday, December 31, 2010

Unemployment Lingers On

Another day, another few thousands of jobs lost. Austrians generally say that job losses are temporary and that an economy should always rebound to full employment, but why hasn't this happened? Well, if there is something stopping you from investing, then you're going to be less willing to invest.

We have a tax cut that's set to expire in 2 years, monetary inflation (which will eventually be realized), new regulations, etc. It's tough for anyone to try to create new jobs with all of this going on. The fact is, people will only create a job when they expect future profits from it. Cutting into future profits and adding to present costs will only lead to less investment.

And never underestimate the power of unemployment benefits and other welfare benefits. These are making unemployment more attractive than they should be, leading to higher unemployment. I'm not saying that this is the ultimate cause of the unemployment problem, but there is no doubt that it is a significant contributor.

Let's hope that government wises up and frees us all from burdensome regulations and taxation. But who am I kidding? They love it.