Unemployment benefits lead to higher wages but lower private employment rates.
The article compares the effects of increasing unemployment benefits versus direct government employment policies when faced with a decrease in employment. The study shows that raising unemployment benefits can lead to a smaller increase in real wages compared to direct government employment. Additionally, unemployment benefits have a smaller negative impact on private employment than direct government employment. The strength of the union's reaction and supply side effects play a role in determining the effects on real wages and employment.