McArdle on unemployment benefits

“In a game of musical chairs, there’s no cost to letting the music play longer; you’re still going to end up with the same number of people sitting on the floor.”

I suppose this is probably wishful thinking, but it seems to me I’m seeing more and more conservatives and libertarians getting fed up with contemporary Republican nonsense.  I missed it when it came out, but Megan McArdle’s post on extending unemployment benefits provides a strong example.

During a normal economy most unemployment is frictional.  There are people who need to get new jobs.  They need to find those new jobs; some of them need to accept that their old jobs or industries are no longer good growth prospects, and either retrain, or brace themselves to accept a lower salary.  Generous unemployment benefits–particularly generous and lengthy unemployment benefits–can interfere with this process by encouraging people to hold out for an unrealistically great job (or simply take a little taxpayer-financed vacation), rather than accepting what’s offered.  So it makes sense to keep them relatively lean, and short; unemployment benefits should not be a good alternative to work.

But these are not the circumstances in which we now find ourselves.  Job markets have collapsed in many areas.  We’re not simply trying to move people into the ample supply of new jobs faster; there is no ample supply of new jobs.  Rather, we’re shuffling a limited number of job openings between a much larger number of people.  In a game of musical chairs, there’s no cost to letting the music play longer; you’re still going to end up with the same number of people sitting on the floor.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

8 thoughts on “McArdle on unemployment benefits”

  1. I see Mark is playing the old "our policies have failed so completely to encourage job creation, we should continue our policy of encouraging unemployment" game. I'm guessing we're going to hear that a lot over the next two years.

  2. McArdle's right, on both counts: that there is no great supply of new jobs, at least in many areas (I write from DC, where we have unemployment less than the SF Bay Area had in the boom years) and that in decent times, or for folks with decent prospects in bad times "Generous unemployment benefits–particularly generous and lengthy unemployment benefits–can interfere with this process by encouraging people to hold out for an unrealistically great job (or simply take a little taxpayer-financed vacation), rather than accepting what’s offered. So it makes sense to keep them relatively lean, and short; unemployment benefits should not be a good alternative to work."

    Anecdotes are not data, I know that. Still: I have a connection who is a skilled service provider in the formerly-vibrant-but-now-nearly-moribund Gal Friday sector. She has just held out for seventeen months before finding her perfect job. And she did – swell job, hope she can last in this one til retirement, everything she wanted. Gentle suggestions that she might settle for lesser work and keep looking for the ideal, during her unemployment, were met with some variant of "You want me giving out hot samples at CostCo?!" And getting unemployment money during that period kept her going. And I am old enough to remember the surfers around Venice and Santa Monica who would get a job, work a few months, get themselves fired, go on unemployment til it ran out, get another job, work a few months, get themselves fired… lather, rinse, repeat.

    So I favor extension, but am absolutely with McA on "unemployment benefits should not be a good alternative to work"

  3. Megan McArdle is an idiot. Anyone who thinks that any unemployment insurance will begin to replace a regular wage is simply too stupid to be considered. There has never been unemployment insurance that would result in people taking a vacation Geeze – having been unemployed, I find such statements assinine. Unemployment insurance won't cover rent and food how does one get a "vacation" on the taxpayers – and of course, unemployment insurance isn't generally paid for by the "taxpayers" but by the employer who counts it as part of the compensation for the employee.Given what I've read from this woman previously (esp comments re: Elizabeth Warren), I have to wonder why anyone would consider what she has to say.

    Brad Davis, Ph.D.

  4. Megan was a highly paid consultant with an MBA, washed out in the Dot Com crash, lost her first boyfriend from high school in 9-11, worked at the site as a relief coordinator, damaged her lungs doing it (she's asthmatic already). And she is medically uninsurable according to her due to autoimmune disorders.

    Her libertarian sympathies are the result of growing up in probably the most leftist place in America other than Berkeley CA (Upper West Side NYC) (although she attended one of America's top private schools on a scholarship, and went to U Penn for Undergrad and Chicago for MBA) and then working for a liberal charity (name escapes me) whose basic raison d'etre is to raise money from people with sympathies ie basically a contributions shop.

    She was an early pioneer of internet politico-economic blogging, along with the likes of Atrios, Kevin Drum, Jonathan Micah Marshall etc.

    So between that and U Chicago MBA economics, she's become a libertarian. I don't agree with her, yet as a human being, I think her heart is in the right place. She does care about people. And she writes some good analytic pieces– she has a better understanding of economics than most journos.

    Many of the commentators on her site are odious.

    valuethinker

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