Posted by Jay Livingston
Bloomberg reports (here) that the November increase in hiring – 120,000 jobs – will probably not affect the unemployment rate, which will remain at 9%.
Casey Mulligan, at the New York Times Economix blog, knows why unemployment is high: the safety net.
Government assistance programs have not only supported more people but become more generous, thanks to changes in benefit rules since 2007.In February 2008, the official unemployment rate was 4.8% – about 7.4 million people. By October 2009, the rate had more than doubled to 10.1% or more than 15 million unemployed people.
Of course, most people work hard despite a generous safety net, and 140 million people are still working today. But in a labor force as big as ours, it takes only a small fraction of people who react to a generous safety net by working less to create millions of unemployed. [emphasis added]
Mulligan assures us that that in that 20-month period, “millions” of those newly-unemployed people decided that they preferred to live off government benefits rather than work.
I had thought that the sharp increase in unemployment was caused by the crash set off by the bursting of the housing bubble, with its inflated house prices and dubious financial schemes based on those prices. Companies were laying off workers or going out of business entirely. People didn’t lose their desire to work, they lost their jobs.
But what do I know? Mulligan is an economist at the prestigious University of Chicago, and presumably he has insight into the life-decisions of poor people. Still, I’m a bit puzzled because the official unemployment rate counts only those people who are looking for a job. So apparently they have chosen to live off government benefits and are lying when they say they are looking for work. I guess you just can’t trust these people who aren’t working.
Mulligan’s solution to the unemployment, consistent with his view of its cause, is to cut these overly generous benefits.
I suspect that employment cannot return to pre-recession levels until safety-net generosity does, too.He’s talking mostly about the magnanimous $330 a week unemployment check, but he may also have in mind other programs like TAFN, food stamps, and the rest.
(more after the break – or what should be a break if this new version of Blogger is working correctly)