The Duh Factor: Paying People Not To Work Keeps Them Out Of Work
The Obama administration has accidentally hired an economist who's spoken some economic sense. The WSJ ran an editorial on Alan Krueger, the new chief economist of The White House (chairman of the Council of Economic Advisers), and jobless benefits:
As early as next week the President is expected to call for another extension of unemployment insurance benefits, which are currently available for 99 weeks, or nearly two years. Here is what Mr. Krueger wrote in a study with Bruce D. Meyer for the National Bureau of Economic Research Working Paper series in 2002:"This chapter examines the labor supply effects of social insurance programs. . . . The empirical work on unemployment insurance (UI) and workers' compensation (WC) insurance finds that the programs tend to increase the length of time employees spend out of work."
The authors found that the incentive effects of unemployment insurance on recipients to delay finding a job are not insignificant and that "the estimates of the elasticities of lost work time that incorporate both the incidence and duration of claims are close to 1.0 for unemployment insurance."
For people who didn't attend Princeton, this means that paying people not to work increases the incentive not to work and thus tends to encourage longer periods of joblessness. This sounds closer to what critics of endless jobless benefits have been saying than to the White House policy line.
As a self-employed person who has nothing but her own savings to rely on, it is absolutely shocking to me that we give 99 weeks of unemployment payouts to people.
Cato's Dan Mitchell on Kruger's appointment:
"The Obama administration has accidentally hired an economist who's spoken some economic sense."
Oh, I'm sure they'll correct that mistake.
Old RPM Daddy at August 30, 2011 4:50 AM
What I want to know is what happened to all the jobs he was suppossed to be creating?
Sabrina at August 30, 2011 7:30 AM
Well, ya know, I was grateful that I could collect while I looked for another job, so I could keep a roof over our heads and my kids fed. But I was out of work for almost 2 years before I found another job, at half my old salary, with no bennies. I'm not bitching, just saying that it was nice to be able to pay my bills and not be scrabbling to pay the rent or buy food. It was NOT easy, finding another job; I'm not as bad off as some people, because I refused to use my credit card to buy groceries, thus plunging myself into further debt, but I sincerely hope that you understand that collecting unemployment is no picnic. I made more on unemployment monthly than I do at my current job. It sucks out here Amy. It truly does. It's going to take me at least 2 more years to get back to the place I was financially 3 years ago.
Flynne at August 30, 2011 7:48 AM
I am unemployed for the first time in 35 years. I am an IT worker who was displaced by the company shifting my job to Indians. We let 50-150 thousand Indians into this country every year because of "worker shortages". There is no worker shortage in IT, just a cheap labor shortage. As long as congress keeps the H1B program intact, I will have no qualms about getting some of my tax dollars back as God knows I was paying more than enough when fully employed.
ronc at August 30, 2011 9:43 AM
I am mostly self-employed too.
I wonder about unemployment for 99 weeks, and lifetime pensions and healthcare for uniformed federal employees who put in just 20 years of service.
At the local level, many police and fire employees get pensions after just 25 years, or can easily claim disability.
Crickey-Almighty, I will probably end up working for 50-60 years, three times as long as these lazy pensioners who get paid to do nothing. Paid by taxpayers like me, that is.
What incentive does a guy getting a pensions and healthcare coverage have to really work hard?
BOTU at August 30, 2011 9:59 AM
The H1B visa cap for 2011 was about 65,000 in 2011, of which about half are Indians. This is for ALL H1B visas, not just IT.
Joe at August 30, 2011 10:05 AM
A buddy of mine just got his salary cut in half for the crime of taking a week's vacation, his first vacation in three years. They actually warned him not to use his vacation time! He's a guy who works 6 days a week, about 10 hours a day and brings work home. It's a brutal economy out there.
Eric at August 30, 2011 10:17 AM
Eric: Vacation is a perk, not a right. It sucks that he got his pay cut, but in this economy, I'm not sure what he thought was going to happen. I'm sure he works hard, but he's competing against millions of others who also work hard.
I just can't muster that much sympathy for him.
Robert at August 30, 2011 10:23 AM
Wow, anyone in IT who doesn't have some narrow speciality and who is out of work more than six months is an idiot. Move and be humble about your salary.
* * *
Someone is told not to take vacation and does and get's punished. How tiny can I make my violin. (Besides, I simply don't believe your friend. He didn't get his salary cut for taking vacation; he probably got his salary cut because his employer has no money. Moreover, if he doesn't like it, get another job. There really are jobs out there for white collar workers. You may need to movie, but stop whining and do something.)
Jason at August 30, 2011 10:25 AM
Jason\Robert- I've known this guy for 15 years. He has an excellent reputation and work ethic. I disagree that vacation time is just a perk. Are lunch breaks and bathroom breaks a perk as well?
The company he now works for bought out the company (an auto dealership) he worked for, and they instituted draconian work standards on the middle management.
Eric at August 30, 2011 10:37 AM
Jason, get your facts straight, I am very good at what I do, but my area has been specifically targetted by Indians, who quite honestly are not worth the pittance they work for. And BTW, many are here illegally too. BTW, I have also applied to home improvement stirred for any position available, as I am bored to tears and quite honestly sick of IT. Oh Jason, my speciality is REP systems, not hardware support.
ronc at August 30, 2011 10:41 AM
Jason sounds like he is about 12. In California, if you have a stated vacation policy, it is tightly protected. Reasonable efforts must be made to allow this time to be used. Unless there was no possible backfill, thus guy has a labor law case.
ronc at August 30, 2011 10:46 AM
ronc, get off your lazy ass, head out to the rest of the US and get a fucking job and quit whining. If you have ANY technical knowledge, you can find another job IF you are willing to relocate.
As for the guy with salary cut in half. Fine. Sue. Or find another job. This is so fucking retarded. You people are acting like helpless whiny victims.
Jason at August 30, 2011 10:53 AM
Lazy? What bug bit your ass today. Ya, I will pack up my home of 20 years, leave my wife and kids, and just relocate. What an infantile comment, I guarantee this lazy ass was working and paying faces before the better part of you slid down your mothers ass. Ever work two jobs and go to school to support a family there Jason? God help us if you are voting because you are clearly not in touch with reality
ronc at August 30, 2011 11:09 AM
Yes, ronc, that's what you do. You head out into the grand US of A and interview and find a place to stay and move. I'm close to retirement and have lived the school of hard knocks and done what it takes to support a family and get educated. What I didn't do is sit around whining how I couldn't find work.
What's more important; your house of 20 years or working and supporting your family? Make your decision. Nobody said leave your wife and kids, they can move too, though you may need to be apart for a short while.
(And yes, I've packed everything important, thrown away or donated the rest and moved thousands of miles with my family in tow. Almost did the same thing five years ago, but got my current job at the last possible moment. Considering where I would have moved, it would have been very difficult. We would have lived like paupers. But I would have been working and feeding and housing my family.)
Jason at August 30, 2011 11:20 AM
Ronc - sincere question:
How do you square your support of the Tea Party platform with your acknowledgement here that safety net programs like unemployment are valuable? I am assuming you are supportive of the Tea Party, if you aren't just correct me.
Anecdotes don't equal data, but all the people I know on unemployment right now claim to be very conservative/small government etc, but remain on unemployment as long as they can. (Examples: One is working but having the employer pay under the table so his benefits don't get reduced and the other has a BS disability claim that he has no intention of addressing.)
Sam at August 30, 2011 1:28 PM
Sam, I only support the tea party because they are not dems or elephants. I have paid into sui/sdi my whole adult life, I have no issue with accepting the payments now. Been paying in for 35 years. The minute I find a job, I will again pay into it. You people wanna bitch about something it should be that arnie allows new dads to suck on the teat. I took one day off, unpaid when every one of my kids were born.
ronc at August 30, 2011 3:49 PM
Eric: bathroom breaks...yes, because you have no choice. People MUST shot. People MUST eat. Even the harshest 19th century factory or mine owner conceded that.
But nobody dies for want of vacation.
Your friend works for a company that was bought out by another company, and it is this new organization that has these harsh policies right? Well genius, what is this telling you! That companies that are tight fisted in tough times overpower companies that are not!
And the, 'vacations are not a right'...guy, they're not. There is no federal or state mandate to provide them or protect them. And your buddy might have worked hard, but he sure as he'll didn't work smart. Taking vacation when you are told NOT to, is stupid. Like shitting on the bosses desk, it might have been satisfying at the time, but welcome to consequenceville, population HIM.
Robert at August 30, 2011 5:36 PM
Ron, if you can't find a job in IT you aren't looking the way you should.
You may have a move, but you'll have a job. I can't help but think of 'Who moved my cheese?'
Robert at August 30, 2011 5:40 PM
"ut I was out of work for almost 2 years before I found another job, at half my old salary, with no bennies. I'm not bitching, just saying that it was nice to be able to pay my bills and not be scrabbling to pay the rent or buy food. It was NOT easy, finding another job"
It can be difficult to trust and have faith in the 'big scary' free market, but here's the thing, if it weren't for all these programs (well, and all the other government overspending and over-regulation) there would actually be far more (real) jobs in the first place, so it wouldn't have been as hard to find a job. "We need these programs because it's hard to find jobs, and it's hard to find jobs partly because of programs like this."
Lobster at August 30, 2011 7:18 PM
You know what would fix most of the worlds problems as far as starvation, employment and war goes? A nice deadly pandemic.
With nearly half the worlds population dead there would b more tahn enough food land and work of the surviviors.
If any of you work at the CDC do the right thing, infect yourslef with have dozen nasty things and then take a couple of international flights
lujlp at August 30, 2011 9:14 PM
From the article:
The UAW jobs bank proved this conclusion, already obvious enough, decades ago.
Vacation is not a perk, it is in lieu of salary.
Jeff Guinn at August 30, 2011 9:19 PM
And ronc, you've just pointed out why you don't have a job, without even realizing it.
You've suggested that it is infantile to pick up and move somewhere else. And its infantile because you should leave your house of 20 years and uproot your wife and kids.
Well, I have to go with Jason on this one. Its not infantile to leave a place that is short on jobs.
Your problem is that you want a job on YOUR terms.
Guy...that ain't happening now is it? There are a lot of IT professionals out there, and no shortage in your state. You're holding on to empty air and acting like there is something there. Whether you were in a place for one month or twenty years...if there is no job for you, get the fuck up, get the fuck out, and get somewhere else.
You're the one not in touch with reality, you want the market to respond to your needs, but nobody cares about your needs but you. Look beyond your little field where you're settled, and you'll find work. I guarantee if I looked up your specialty on Monster.com or one of the other multitude of sites, I could find no shortage of jobs fitting your specialty in no time.
Welcome to the new economy, and as you should be aware, it is the only reality. Jason is right, you are wrong.
Robert at August 31, 2011 1:08 AM
BOTU,
Quick question.... how come you always beat on the military, but you never bother to mention Senators/Representatives/Presidents, who, after serving just one term, get lifetime benefits?
The number of military personnel who stay in for 20+ years is minimal, and they are expected to die if necessary. Politicians have no such requirement, yet get even better perks.
Put your ass on the line, and then come talk to those who, for 20+ years were expected to die when asked.
Steve at August 31, 2011 8:07 AM
"For people who didn't attend Princeton, this means that paying people not to work increases the incentive not to work and thus tends to encourage longer periods of joblessness. "
When concerning the average behavior of large groups, Skinner rules.
Cousin Dave at August 31, 2011 6:14 PM
The new head of the Bay Area Rapid Transit agency (BART) will receive lifetime medical and pension benefits after only two years on the job. This is on top of a salary over $300,000 per year.
The BART board hired a woman whose tenure as the head of Seattle's DOT was marked with cronyism, plummeting employee morale, and outright incompetence.
When one of the board members (the only one who voted against her) was interviewed by the local news, he said he asked what her priorities would be if she got the job, she couldn't answer him.
Another board member dismissed dissent about their choice of agency head as an attack on "this highly credentialed woman."
Conan the Grammarian at September 1, 2011 12:22 PM
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