Question

Reducing unemployment Will cash bonuses speed the return to work of unemployed people? A state department of labor notes that last year $68\%$of people who filed claims for unemployment insurance found a new job within $15$weeks. As an experiment, this year the state offers $\$500$to people filing unemployment claims if they find a job within $15$weeks. The percent who do so increases to $77\%$. What flaw in the design of this experiment makes it impossible to say whether the bonus really caused the increase? Explain.

Short answer

People will leave their jobs and get their bonus intentionally as unemployment is correlated with lurking variables.

Step-by-step solution

Given Information

$68\%$of people who filed claims for unemployment insurance found a new job within $15$weeks.

The percentage increases to $77\%$as the state offers $500 to people filing unemployment claims if they find a job within $15$weeks.

Explanation

As economy's state will change every year, other factor could not be defined by them. The job qualifications could vary for businesses. Recruiting expenses can also range over a year. In certain circumstances, it may be easy or difficult to find a job. Hence, unemployment can be correlated to lurking variables.