For the Krugman lovers out there.

[Ursa Majoris]

then you're sure hiding it well. windows never break? unemployment never happens? I'm honestly having a hard time discerning what you think you are getting at here.

No, you're not.

[Ursa Majoris]

if the entire goal is to get money from the government's coffers line of credit into cash registers, then yeah I guess giving it to unemployed workers is a more direct route than giving it back to a business owner in the form of a tax break. paying them to go out and break windows is an even more direct route, with a really nice "multiplier" -- the window breakers get their paycheck and spend it, the window owners have to spend to replace their windows, which stimulates the window makers, who then hire more unemployed workers, who then go out and spend their paychecks. lots of measurable economic activity!

 

the question is, is it really creating a stronger economy? just think about it for a minute....you are arguing that the government paying people not to work creates productive jobs.

It's drivel. You, WV and Perch can theorize and pontificate all you want but the bottom line is that without those payments many more people will be on the street, claiming food stamps and all the rest, causing even more cost - another unintended consequence not that far removed from the logic you have used to oppose said payments.

[CaP'N GRuNGe]

the question is, is it really creating a stronger economy? just think about it for a minute....you are arguing that the government paying people not to work creates productive jobs.

 

I'm arguing that the government not paying unemployment benefits will further weaken the economy. It's easy to say the jobs will "magically" appear and the great free market will just create said jobs. But you reach a tipping point and that just doesn't happen. So now you cut the benefits, you cut economic activity. The business owner is selling less goods because the consumer has less money. The business owner lays off even more people who do not receive unemployment benefits. Away we go on our downward deflationary spiral.

 

Are you really arguing against this logic? Your broken window parable is a strawman argument.

[Azazello1313]

You, WV and Perch can theorize and pontificate all you want but the bottom line is that without those payments many more people will be on the street

 

that is a good reason to support extending unemployment benefits. I agree with it. what I don't agree with is the assertion that extending unemployment benefits reduces the rate of unemployment. because that is a dumb argument, the opposite of which is true.

[Azazello1313]

It's easy to say the jobs will "magically" appear and the great free market will just create said jobs.

 

yes, I am the one flogging a strawman.

 

[Ursa Majoris]

that is a good reason to support extending unemployment benefits. I agree with it. what I don't agree with is the assertion that extending unemployment benefits reduces the rate of unemployment. because that is a dumb argument, the opposite of which is true.

It's beyond question that unemployment benefits are spent and therefore generate or preserve other jobs simply because money entering the economy generates demand. Krugman wasn't arguing that the people actually in receipt of the payments would be incentivized to return to work, he was arguing that the spending of the cash would generate other jobs.

 

Sure, if the money was given directly to business there would be some jobs created but nowhere near enough - not even remotely close, simply because the cost of hiring far outstrips what gets paid per capita in unemployment benefit, never mind the fact that giving it to business directly would do nothing for demand, which is where the problem lies.

Edited March 8, 2010 by Ursa Majoris

[The Irish Doggy]

Well if the unemployed to jobs ratio was 1:5, I'd absolutely agree with Az, WV,and Perch. However, given the ratio is 5:1, I think extending those benefits is temporarily the right thing to do.

[Perchoutofwater]

Well if the unemployed to jobs ratio was 1:5, I'd absolutely agree with Az, WV,and Perch. However, given the ratio is 5:1, I think extending those benefits is temporarily the right thing to do.

 

There are still a number of jobs out there, if people want them. There are still help wanted signs in windows all over town. The problem is you have people that feel they are too good to make minimum wage or in many cases 1.5-2X minimum wage, or too good to work at certain types of jobs. You also have people that due to their own irresponsible actions can no longer be hired for certain jobs. I know it is anecdotal but remember me complaining a few weeks back about trying to find laborers that didn't have a violent history or serious drug histories in their backgrounds. Also, wouldn't enforcing our immigration laws be cheaper and do a lot more to get Americans working again?

[The Irish Doggy]

There are still a number of jobs out there, if people want them. There are still help wanted signs in windows all over town. The problem is you have people that feel they are too good to make minimum wage or in many cases 1.5-2X minimum wage, or too good to work at certain types of jobs. You also have people that due to their own irresponsible actions can no longer be hired for certain jobs. I know it is anecdotal but remember me complaining a few weeks back about trying to find laborers that didn't have a violent history or serious drug histories in their backgrounds. Also, wouldn't enforcing our immigration laws be cheaper and do a lot more to get Americans working again?

 

 

I absolutely agree that there are many people who will suck from the government teet so long as the money flows. I've seen it too. I recall these unemployment benefit limits were designed to curtail such behavior. However, anecdotally as well, I know many people who are just not finding any jobs right now no matter how many they apply for. I don't see an easy way of distinguishing the two groups, so I choose the more optimistic view that it is right to help the decent people who are trying to find work and would work if it was available.

[Jimmy Neutron]

There are still a number of jobs out there, if people want them. There are still help wanted signs in windows all over town. The problem is you have people that feel they are too good to make minimum wage or in many cases 1.5-2X minimum wage, or too good to work at certain types of jobs. You also have people that due to their own irresponsible actions can no longer be hired for certain jobs. I know it is anecdotal but remember me complaining a few weeks back about trying to find laborers that didn't have a violent history or serious drug histories in their backgrounds.

 

Certainly true, but I'm afraid low paying jobs are the wave of the future. The further away we get from a manufacturing and commodity economy, the worse off we'll be.

 

A friend of mine recentrly returned from a trip to China and India. His summary of what he saw there was, "Look out, we're about to be steamrolled."

[Ursa Majoris]

There are still a number of jobs out there, if people want them. There are still help wanted signs in windows all over town. The problem is you have people that feel they are too good to make minimum wage or in many cases 1.5-2X minimum wage, or too good to work at certain types of jobs. You also have people that due to their own irresponsible actions can no longer be hired for certain jobs. I know it is anecdotal but remember me complaining a few weeks back about trying to find laborers that didn't have a violent history or serious drug histories in their backgrounds. Also, wouldn't enforcing our immigration laws be cheaper and do a lot more to get Americans working again?

You're also assuming unemployment is spread equally but it isn't. There might be hiring signs in one place but the people needing the jobs are elsewhere. Sure they can move but the housing market is a hugh block to that right now.

[Azazello1313]

Well if the unemployed to jobs ratio was 1:5, I'd absolutely agree with Az, WV,and Perch. However, given the ratio is 5:1, I think extending those benefits is temporarily the right thing to do.

 

as I've already said, I agree that extending unemployment benefits is the right thing to do. I just don't buy the argument that doing so ultimately creates more jobs. it's justifiable more from a safety-net perspective, IMO.

 

ursa said it's all about demand. well, yeah. and when you're talking about jobs, you're talking particularly about the demand for labor. what's the most fundamental way to increase demand for labor? well, it's for the cost of labor to go down. extending unemployment benefits, while probably the right thing to do, pushes in the opposite direction. but how can you make the cost of labor go down? it's tough because wages are usually "sticky", meaning they don't usually come down. but one thing you could do is some sort of payroll tax holiday. or at least temporarily reduce the minimum wage. the current "jobs" bill being tossed around seems to be a step in the right direction. but then there's stuff like the looming health insurance mandate, which would really raise the cost of labor. and there is stuff like this:

The Obama administration is planning to use the government’s enormous buying power to prod private companies to improve wages and benefits for millions of workers, according to White House officials and several interest groups briefed on the plan.

 

Because nearly one in four workers is employed by companies that have contracts with the federal government, administration officials see the plan as a way to shape social policy and ###### more families into the middle class.

sounds good on the surface, right? hey, more money and a larger middle class, great! but read the commentary here.

 

edit to add: why on earth is the word "lift" being filtered into "#####"?

Edited March 9, 2010 by Azazello1313

[Ursa Majoris]

ursa said it's all about demand. well, yeah. and when you're talking about jobs, you're talking particularly about the demand for labor. what's the most fundamental way to increase demand for labor? well, it's for the cost of labor to go down.

I don't think so. Demand for labor is pushed hardest by demand for goods and services. It's also impractical to expect wages to fall unless costs of living fall too. There are already millions of people with reduced income and the longer that goes on, the weaker demand will be for anything beyond life support.

[bpwallace49]

as I've already said, I agree that extending unemployment benefits is the right thing to do. I just don't buy the argument that doing so ultimately creates more jobs. it's justifiable more from a safety-net perspective, IMO.

 

It is the undefineable sector of "maybe it wont LOSE any more jobs" rather than job creation. I agree with you and do not see how unemploymnet benefits can possibly be used to create jobs, or how an argument could be made supporting that theory.

 

However the goods and services that people receiving benefits pay money for keep certain sectors still "busy" and hopefully not contracting their businesses . . .

[Ursa Majoris]

Good news on the job front (relatively good news anyway)

 

WASHINGTON – Job openings rose sharply earlier this year, a sign that employers might be preparing to step up hiring.

 

The number of openings in January rose about 7.6 percent, to 2.7 million, compared with December, the Labor Department said. And the job openings rate climbed to 2.1 percent, the highest in nearly a year. That rate measures available jobs as a percentage of total employment.

 

There are now about 5.5 unemployed people, on average, competing for each opening. That's still far more than the 1.7 people who were competing for each opening when the recession began. But it's down from just over 6 people per opening in December 2009.

 

The gradually brightening jobs picture corresponds to what many job search Web sites are reporting.

[Dr. Sacrebleu]

2 things.

1) you can say that excessive unemployment benefits lead to unemployment in Europe, and beleive that employment benefits are necessary now in the US without being contradictory. The day Krugman advocates for 2 year unemployment benefits like we get in France for the US then you will have your gotcha moment.

2) I really hate that "there are plenty of jobs out there, you are just to proud to work at McDonald's" argument. If you owe 60 000 dollars in student loans, and have an education and CV that opens doors to 100 000 dollar jobs. It makes more sense for you, and by the way for the economy, to not take the McJob that keeps you from getting a far far better and productive job.

[Azazello1313]

2 things.

1) you can say that excessive unemployment benefits lead to unemployment in Europe, and beleive that employment benefits are necessary now in the US without being contradictory. The day Krugman advocates for 2 year unemployment benefits like we get in France for the US then you will have your gotcha moment.

 

as far as the first sentence, I agree completely. as far as the second sentence, well, if that is the measure, at 99 weeks in some cases, we are getting pretty close to that gotcha moment.

 

2) I really hate that "there are plenty of jobs out there, you are just to proud to work at McDonald's" argument. If you owe 60 000 dollars in student loans, and have an education and CV that opens doors to 100 000 dollar jobs. It makes more sense for you, and by the way for the economy, to not take the McJob that keeps you from getting a far far better and productive job.

 

well, it makes sense to wait it out if you can collect unemployment benefits based on your former salary. it would make more sense to take whatever job you can get if you didn't have those benefits coming. the economic incentives, rightly or wrongly, point you toward not working.

[Dr. Sacrebleu]

as far as the first sentence, I agree completely. as far as the second sentence, well, if that is the measure, at 99 weeks in some cases, we are getting pretty close to that gotcha moment.

 

 

 

well, it makes sense to wait it out if you can collect unemployment benefits based on your former salary. it would make more sense to take whatever job you can get if you didn't have those benefits coming. the economic incentives, rightly or wrongly, point you toward not working.

 

i was surprised that there were some 99 week collectors, and indeed that is closer to that gotcha moment. Though the article does not mention the frequency of these 99 week benefits, and does state that the average unemployment figure is 29 weeks.

As to your second point, there are two distinct debates, one which is the one you adress and the main point of this thread that unemployment benefits may encourage unemployment, the other is perch's "why don't you get a Mcjob?" argument, which I was poitning out does not always make sense.

[Perchoutofwater]

the other is perch's "why don't you get a Mcjob?" argument, which I was poitning out does not always make sense.

 

Then why not restructure unemployment so that it does make sense for a short term job. Rather than give 99 weeks of unemployment, give 20 weeks of unemployment, and then 40 weeks of 1/2 unemployment while you worka Mcjob, or something like that.

[wiegie]

Then why not restructure unemployment so that it does make sense for a short term job. Rather than give 99 weeks of unemployment, give 20 weeks of unemployment, and then 40 weeks of 1/2 unemployment while you worka Mcjob, or something like that.

A somewhat related option is used in some European countries where the government basically steps in when firms are about to layoff workers and says "If instead of laying them off, keep them on but pay them lower wages." Then the government makes up the difference to the workers between their old wage and their new lower wage.

 

I don't know the exact details of how all of this works (and it seems fraught with all sorts of potential loopholes and bad incentives), but this is the gist of how it works.

[Azazello1313]

A somewhat related option is used in some European countries where the government basically steps in when firms are about to layoff workers and says "If instead of laying them off, keep them on but pay them lower wages." Then the government makes up the difference to the workers between their old wage and their new lower wage.

 

I don't know the exact details of how all of this works (and it seems fraught with all sorts of potential loopholes and bad incentives), but this is the gist of how it works.

 

yeah no kidding.

 

it seems like it might be a good idea for governments (federal maybe, but particularly state and local) to have some sort of temporary hiring agency in place connected with the unemployment division, that would have a bunch of projects ready to go...projects that would be requests submitted by different agencies or whatever, that just sort of sit in the queue until the gov't temp agency can staff them. as it is, a recession comes and a bunch of people are out of work, and the government decides to take a swing at the pinata and provide money for lots of public works projects. ok, seems like an OK idea in some ways, but there is so much bureaucracy and graft trying to go through the right agency and the right contractor that you end up spending several hundred thousand dollars for each short-term "job" you've created, and most of the money ends up in some agency's coffers or in the pockets of someone who's politically connected. most of it's just pissed into the wind, basically. but if the labor departments were set up to deal with this sort of contingency beforehand, it could work a lot more efficiently. maybe even make participation compulsory somehow for receiving unemployment. and we, as taxpayers, would certainly get more out of it -- both in terms of "stimulus", and return on investment -- than simply doling out more and more in unemployment benefits.

[Azazello1313]

has nothing to do with the unemployment discussion in this thread, but if you want to watch krugman get ripped to shreds, just read this (including the links at the bottom)

[Perchoutofwater]

Incentives Not to Work

Larry Summers v. Senate Democrats on jobless benefits.

 

"The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a 'reservation wage'—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase [the] reservation wage, causing an unemployed person to remain unemployed longer."

 

Any guess who wrote that? Milton Friedman, perhaps. Simon Legree? Sorry.

 

Full credit goes to Lawrence H. Summers, the current White House economic adviser, who wrote those sensible words in his chapter on "Unemployment" in the Concise Encyclopedia of Economics, first published in 1999.

 

Mr. Summers should give a tutorial to the U.S. Senate, which is debating whether to extend unemployment benefits for the fourth time since the recession began in early 2008. The bill pushed by Democrats would extend jobless payments to 99 weeks, or nearly two full years, at a cost of between $7 billion and $10 billion. As Mr. Summers suggests, rarely has there been a clearer case of false policy compassion.

 

Mr. Summers is merely reflecting what numerous economic studies have shown. Alan Reynolds of the Cato Institute has found that the average unemployment episode rose from 10 weeks before the recession to 19 weeks after Congress twice previously extended jobless benefits—to 79 from 26 weeks. Even as initial unemployment claims have fallen in recent months, the length of unemployment has risen. Mr. Reynolds estimates that the extensions of unemployment insurance and other federal policies have raised the official jobless rate by nearly two percentage points.

 

Or consider the Brookings Institution, whose panel on economic activity reported this March that jobless insurance extensions "correspond to between 0.7 and 1.8 percentage points of the 5.5 percentage point increase in the unemployment rate witnessed in the current recession."

 

Or perhaps the Senate should listen to another Obama Administration economist, Alan Krueger of the Treasury Department, who concluded in a 2008 study that "job search increases sharply in the weeks prior to benefit exhaustion." In other words, many unemployed workers don't start seriously looking for a job until they are about to lose their benefits.

 

And, sure enough, the share of unemployed workers who don't have a job for more than 26 weeks has steadily increased, reaching a record 44.1% in March. The average spell of unemployment is now 31 weeks, even though the economy is once again creating more new jobs than it is losing. Democrats are slowly converting unemployment insurance into a welfare program.

 

Despite all of this evidence, Democrats seem to think that extending jobless benefits for another 20 weeks is a big political winner. Iowa Senator Tom Harkin recently roared, "Is there any compassion at all left with Republicans for people whose checks are going to run out?" New York's Chuck Schumer calls Republicans "inhumane."

 

But do these Senators really think it's compassionate to give people an additional incentive to stay out of the job market, losing crucial skills and contacts? And how politically smart is it for Democrats to embrace policies that keep the jobless rate higher than it would otherwise be? How many Democrats share Mr. Harkin's apparent desire to defend a jobless rate near 9% (today it is 9.7%) in the fall election campaign.

 

We should add that Republicans would rather not fight on these incentive grounds and are instead opposing the new benefits only because Democrats refuse to pay for them and want to add to the deficit. In other words, the GOP is merely asking Democrats to live up to their own "pay as you go" fiscal promises, since the total bill for these jobless benefits has now hit nearly $90 billion.

 

If Republicans were really cynical, they'd let the new benefits pass and run against the higher jobless rate in the fall. In any case, no one should be surprised that when you subsidize people for not working, more people will choose not to work.

 

WSJ

[bpwallace49]

Great article. There should be a safety net, but what the threshold is remains the sticking point.

[Jackass]

Is unemployment a disincentive for some people to look for work? I'm sure it is, but for many they wouldn't be finding a job anyway. So just like anything, some will game the system but that shouldn't mean noone should get unemployment insurance. And for a lot of people in a pay bracket higher than middle class, unemployment is a pittance compared to what they were making previously.

 

A lot of those stats in the above article were pretty weak. Of course, it's harder to find a job now than it was before the recession. And the "economy is creating more jobs than it's losing" is incredibly meaningless when the unemployment rate is close to 10% and underemployed employment rate (or whatever people call it) is somewhere around 16 or 17%.

Edited April 15, 2010 by Jackass