Event 1:
If the government passes a law allowing states to pay unlimited unemployment benefits to all unemployed for an unlimited amount of time, it will influence workers’ lives, as well as firms’ operation a lot. Firstly, this incentive will affect worker’s incentive to produce. It does not stimulate production and hence employment. Although unemployment benefits are set lower than earnings, the gap between them is narrowed by the costs of work. By the way, due to this event, the opportunity cost of the unemployed worker’s rejoining the labor force will increase. In other words, the event will actually reduce employment. In this situation the distribution of income and resources seems fair, thus society focuses on equity. However, it loses efficiency. Without productivity which is rewarded, the society will not be able to remain fair for a long time. Thus, the opportunity cost of equity in this condition is efficiency. Instead of paying unlimited unemployment benefits for an unlimited amount of time, the government should better invest in programs which will support employment, and in business development which will increase the number of workplaces. These opportunities are traded off in case of passing the law allowing states to pay unlimited unemployment …