Unemployment Compensation: A Contrarian View
Contrarian -- almost wasn't worth saying. Anything you see here will be contrarian.
Like BP -- everyone's whipping boy. And, maybe they deserve it, but for my money they deserve a trial by jury first. Obama is not their judge, jury and executioner and his overt extortion attempt for $20 billion was, let's say, "unbecoming."
Bill Bonner, a guy a like, (one of the few), is also a contrarian on the relentless extension of unemployment benefits and rather than summarize his take, here it is unexpurgated:
And as for failing to extend unemployment benefits, was that really a bad thing?
“Where you stand depends on where you sit,” goes the expression. If you’re sitting in an unemployment office, you’re likely to be in favor of more benefits. If you’re paying taxes, struggling to make ends meet, you might resent having to pay more for others who don’t work.
Krugman points out that it’s not their fault. Unemployment compensation doesn’t really reduce people’s desire to find work – not when there are 5 applicants for every job. Still, adjustments need to be made...and not having any money coming in the door is bound to be a motivator to make them.
The real reason people are unemployed is that the price of labor is too high. We’re in a period of price and debt destruction. Output prices are going down. So, labor prices should be going down too.
But labor prices are ‘sticky’...they don’t go down easily. Especially when there is unemployment compensation to keep them stuck. Unemployment compensation just interferes with the correction, delaying the necessary adaptations.
Like it or not, he's right. Unemployment is like our national debt -- we keep on issuing it, hoping against hope that we can dodge the bullet of one day having to default or inflate our way out of it -- either way stiffing our creditors. Until we realize that our wages have to go down to take into account being beaten to a pulp by the rest of the world who can now manufacture most of the same things we make a lot cheaper, we're just buying time and at some point we'll have to pay our debt.
Until then, you can go wild and call me names. Thank you.
Like BP -- everyone's whipping boy. And, maybe they deserve it, but for my money they deserve a trial by jury first. Obama is not their judge, jury and executioner and his overt extortion attempt for $20 billion was, let's say, "unbecoming."
Bill Bonner, a guy a like, (one of the few), is also a contrarian on the relentless extension of unemployment benefits and rather than summarize his take, here it is unexpurgated:
And as for failing to extend unemployment benefits, was that really a bad thing?
“Where you stand depends on where you sit,” goes the expression. If you’re sitting in an unemployment office, you’re likely to be in favor of more benefits. If you’re paying taxes, struggling to make ends meet, you might resent having to pay more for others who don’t work.
Krugman points out that it’s not their fault. Unemployment compensation doesn’t really reduce people’s desire to find work – not when there are 5 applicants for every job. Still, adjustments need to be made...and not having any money coming in the door is bound to be a motivator to make them.
The real reason people are unemployed is that the price of labor is too high. We’re in a period of price and debt destruction. Output prices are going down. So, labor prices should be going down too.
But labor prices are ‘sticky’...they don’t go down easily. Especially when there is unemployment compensation to keep them stuck. Unemployment compensation just interferes with the correction, delaying the necessary adaptations.
Like it or not, he's right. Unemployment is like our national debt -- we keep on issuing it, hoping against hope that we can dodge the bullet of one day having to default or inflate our way out of it -- either way stiffing our creditors. Until we realize that our wages have to go down to take into account being beaten to a pulp by the rest of the world who can now manufacture most of the same things we make a lot cheaper, we're just buying time and at some point we'll have to pay our debt.
Until then, you can go wild and call me names. Thank you.
posted by Jim Karger at 6:34 PM
5 Comments:
So, I've sat on both sides of this issue; for my money, and it is my money I'm mainly concerned with, I find that given all the comings and goings of those 'in office', and the world turning on its axis nearly twenty-four hours each day, the best bet is still to be employed; regardless of the crap '70's wages I'm struggling with. There's self-worth in grinding it out. That's worth (to me~) more than the difference I would be pulling in if I had sat around waiting for things to correct so I could maintain the lifestyle I so deserve on YOUR dime . . .
The reality is, there are many people who have skills and genuinely want to work, but need assistance during a recession. There are also many (primarily lower-skilled workers at the low end of the wage scale), who will find a way to get by, and milk the benefits as long as they are available.
I work in the Workforce System, and there is no effective way to differentiate between these two groups and punish the abusers. So we swing back and forth on the issue. We must remember, CONGRESS makes the rules on our social safety net, and bureaucrats in HHS, DOL, USDA, etc, "enforce" the rules that allow so much abuse of the system to occur.
As always Jim, you are spot on. Unfortunately, Unions have a choke-hold on our labor costs, and they are not going to give up their power by letting wages be lowered. It needs to happen though, but I'm afraid that won't be the case for years to come.
mostly I agreed with your argument. Manufacturing job cost were too high in this country and consequently manufacturing jobs moved to more fertile landscapes (i.e., cheaper labor). However, certainly service jobs (which I suspect represents the largest percentage of the unemployed) are not overpriced unless you call minimum wage too high. It would be interesting to know just how the unemployment figures break down as to professional and service jobs. As you know for over a decade our economy has mainly depended on service type jobs and less on manufacturing (the exception being the field of technology). So, I agree on the premise that labor costs were too high for manufacutring jobs and should be reduced. However, I still believe that most people who are unemployed want to work and need the unemployment insurance that provides a small cushion until the economy improves. It is simply the compassionate thing to do and to insist on "pay as you go" as the Republicans insist on (although they didn't mind fighting two wars "on the credit) is simply foolish. It is the rich saying to the poor go f----- yourself. Where in the world did I get all these democratic (little d) ideals...I'll never know just is.
mostly I agreed with your argument. Manufacturing job cost were too high in this country and consequently manufacturing jobs moved to more fertile landscapes (i.e., cheaper labor). However, certainly service jobs (which I suspect represents the largest percentage of the unemployed) are not overpriced unless you call minimum wage too high. It would be interesting to know just how the unemployment figures break down as to professional and service jobs. As you know for over a decade our economy has mainly depended on service type jobs and less on manufacturing (the exception being the field of technology). So, I agree on the premise that labor costs were too high for manufacutring jobs and should be reduced. However, I still believe that most people who are unemployed want to work and need the unemployment insurance that provides a small cushion until the economy improves. It is simply the compassionate thing to do and to insist on "pay as you go" as the Republicans insist on (although they didn't mind fighting two wars "on the credit) is simply foolish. It is the rich saying to the poor go f----- yourself. Where in the world did I get all these democratic (little d) ideals...I'll never know just is.
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