THE economy’s grim prognosis and the undeniably tough job market have discouraged many would-be workers. While official unemployment is 6.7%, when discouraged workers (those not looking for work) and unwilling part-time workers (those who would rather be full-time) are factored in, the rate is more like 12.5%. Conditions will probably get worse. And Casey Mulligan reckons that mortgage forgiveness programmes may actually encourage workers to become discouraged.



The mortgage repayment programmes effectively become a tax on finding a new job or having an income that’s more than 38% of one's mortgage payments. Mr Mulligan understands why such policies are beneficial. The banks would rather get something out of a distressed homeowner than have to foreclose on him. But, Mr Mulligan believes having income determine eligibility could be a mistake.

Whether this will actually affect an unemployed worker’s decision to find a job would clearly depend on the size of his mortgage and his expected salary. Nonetheless, whether the tax is collected by a bank or by the government, most would agree that discouraging work is a bad idea.