I was reading about Thomas Sargent who just received the Nobel Prize for Economics. I went to an interview he had last year where he discussed a topic we dealt with yesterday. Unemployment and why employers are not eager to hire the unemployed. According to Sargent, every person holding a job earns human capital as he works. The longer on the job, the more valuable the emplyees becomes. Once the employee finds himself out of work, he begins losing capital right away. Sargent discusses how this happened in Europe and now in the US. It is the unexpected result of unemployment benefits leads to higher unemployment. A person receives more unemployment benefits on a scale of the salary he last had. So when looking for a job, he would not want to take a job that would pay less than what he was receiving from his former workplace. Without realizing it, this unemployed person is losing capital and the delay in getting a job quickly, makes him a less valuable worker. When a worker has been unemployed 2 or more years, he has lost most of his capital and the unemployment benefits which were meant as a social net have basically acted as a trap. It is especially bad for those over 50. Thomas Sargent - Nobel Prize Winner An Interview with Thomas Sargent 2011 An interesting read.