Incentives Not to Work?

[Klaatu]

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.
source
http://online.wsj.com/article/SB10001424052702303828304575180243952375172.html

Personally, I have been laid off of my (former) factory job many times, yet I was always glad to go back to work...
The longer I was out, the more eager I was to get my job back - and be able to pay the bills!

What a crock. This is yet another example of how conservatives and libertarians trip over themselves to present
their own bogus "facts" and dubious opinions. It's as if they are blaming the unemployed for BEING unemployed.

Their capitalistic foolhardiness created a recession, and then they blame the victim of it "for being too lazy to work..."

[x371322]

It's as if they are blaming the unemployed for BEING unemployed.

What else is new? A few days ago I was arguing with a some guy on another forum, who happens to be an "objectivist" about health care, and he was justifying health insurance companies denying coverage for pre-existing conditions in the interest of profit. He basically said poor people are poor out of their own lack of motivation, and don't deserve health care if they can't afford it. I'm ashamed to share a country with such people.

[Uppercut]

I'm ashamed to share a country with such people.

I hear ya. My school is majority conservative, and I'm the only Marxist. Every health care debate I would get into, they always start going off about how universal health care is "unconstitutional" and that health care in general is unnecessary. Conservatives simply use the same, dimwitted arguments over and over again, and are too dogmatic to understand anything besides their own individualistic viewpoint.

But what else can you expect when you have at least three conservative/libertarian teachers, and a Limbaugh lover as a nurse? The students adopt it, as well.

[Psy]

What else is new? A few days ago I was arguing with a some guy on another forum, who happens to be an "objectivist" about health care, and he was justifying health insurance companies denying coverage for pre-existing conditions in the interest of profit. He basically said poor people are poor out of their own lack of motivation, and don't deserve health care if they can't afford it. I'm ashamed to share a country with such people.

These are tend to be the same people that don't really want to work and dream of making money by simply being capitalists. Of course objectivists state that the proletariat do not produce any value, it comes from the capitalists "creativity".

[Chambered Word]

Why sit around all day on welfare when I could be sitting around all day as an executive? Also this report smells of bullshit.

[Klaatu]

Aren't some of these "experts" in the Obama Administration Republicans?

Of course, just about anything coming out of The Cato Institute must be viewed with extreme suspicion; they have an army of spin-doctors and other clever marketers working day and night to churn out right-wing propaganda (and they find fault with the old Soviet "propaganda;" they do the same thing!) :hammersickle:

[9]

What a crock. This is yet another example of how conservatives and libertarians trip over themselves to present
their own bogus "facts" and dubious opinions. It's as if they are blaming the unemployed for BEING unemployed.
(Emphasis mine)

Incidentally, Larry Summers is not a "conservative" or a "libertarian" (as the terms are understood in American politics), but rather, is a registered Democrat.


Aren't some of these "experts" in the Obama Administration Republicans?

Not at all; they are typical Democrats, acting typically.

[Elfcat]

Sometimes I wonder why no one has made a bumper sticker saying: "Remember, every person on welfare is one more person who won't take your job for less pay."

[BAM]

What is so ridiculous about these periodic attacks on the unemployed is first of all that those pointing the finger believe that the economy will achieve true full employment in the fist place. Second they seem to forget that as a country approaches "full employment", as in the 1960s, its workforce becomes more militant, demanding higher wages, etc.

Unemployment is very useful for capitalist society to keep wages in the rest of the economy down, as well to as create divisions amongst workers. In times of recession high unemployment means that people are likely to accept lower wages/fewer benefits than before, thereby increasing the gains going to capital. Lastly, a reserve army is needed for the boom, so that production can be ramped up as quickly as possible.

Also, on Larry Summers, the guy is a completely obnoxious. When he was Chief Economist of the World Bank he signed an infamous memo stating that toxic waste should be taken from the developed world and dumped in the third world. Part of his reasoning went like this: "I've always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City." (When rumbled, he claimed it was "satirical".)

So, it's not surprising he comes out with reactionary crap like in OP.

[RadioRaheem84]

The attack on poor is sickening.

A.) The AFDC, the old welfare program, only cost the taxpayers a little over 500 Billion dollars from 1964-1996 before it was hacked to pieces by the Clinton Administration and turned in the TANF.

http://aspe.hhs.gov/hsp/AFDC/baseline/4spending.pdf

B.) For the 2010 fiscal year, the president's base budget of the Department of Defense rose to $533.8 billion. Adding spending on "overseas contingency operations" brings the sum to $663.8 billion. Most of that money will be siphoned off to large multi-nationals that feed on the public trough.

http://www.whitehouse.gov/omb/budget/fy2010/assets/summary.pdf

C.) Even the Libertarian CATO Institute has said that corporate welfare costs ranges from 50-90 Billion dollars a year! Their stats say that if they were to be eliminated altogether than the taxpayers would save 400 Billion dollars over the next half decade. So in in five years, the US government has given more money to rich people in corporate subsidies, tax breaks, grants and loans than anything given to the poor for 40 years!

http://www.cato.org/pubs/handbook/hb105-9.html


The attacks on the poor are unfounded and based on trivial matters like welfare recipients using their money to buy booze and smokes, as if someone can live off tobacco and Jack Daniels! What the fuck is wrong with them using a bit of that welfare money to buy food and a pack of smokes now and then? They love to moralize the actions of the poor but do not wag one fucking moralistic finger and the billions corporations siphon off the public trough!

Going by their generalizations, how the hell does a welfare recipient buying cigarettes and booze with welfare money somehow lower my purchasing power? Yet, companies moving over seas and pitting international workforces against each other does! Using debt finance to supplant my shitty real wage purchasing power does more damage to a real productive economy than a poor person on welfare (which his or her taxes likewise go into the system to support social programs). The whole premise of these neo-liberal fucks is to maintain unemployment (a reserve army of labor) and move away from the idea of full employment. Then they lower wages and hack our rights, and get pissed when people get on welfare, when the unemployment numbers rise!

[Ligeia]

I think the reason why they blame unemployed people for being unemployed is to destroy class solidarity and at the same time enforcing their neoliberal ideology as the right one. Basically, blurring the lines which could lead to the conclusion that capitalist are the ones dispossesing people for their own purposes.
So if anything economically bad happens people will blame only themselves. Nobody will be sorry nor will anybody stand up for someone who's created their misfortune, nor will they connect this to themselves or anybody else.
Nobody will try to think about causalities in their environment, in the system.

It's all about creating an ideology which serves the purpose to disposses and subjugate the working class while they don't resist it and maybe even affirm or enforce this, creating a climate of resignation and fear.

[The Idler]

We Don't Want Full Employment, We Want Full Lives! - Ken Knabb (1998)

(http://www.theoryandpractice.org.uk/library/we-dont-want-full-employment-we-want-full-lives-ken-knabb-1998)

[Klaatu]

...as a country approaches "full employment", as in the 1960s, its workforce becomes more militant, demanding higher wages, etc.

Unemployment is very useful for capitalist society to keep wages in the rest of the economy down, as well to as create divisions amongst workers. In times of recession high unemployment means that people are likely to accept lower wages/fewer benefits than before, thereby increasing the gains going to capital. Lastly, a reserve army is needed for the boom, so that production can be ramped up as quickly as possible.

This is true. Goods and service prices go up in times of scarcity (labor can be thought of as a service) so it is in the capitalists' best interest to keep unemployment high, in order to keep wages low. This makes perfect sense.

The solution is for the government to fill the gaps and provide employment for those without jobs (if only temporarily) to keep wages (reasonably) high.

Thanks again.

[volkish]

This is ridiculous, and when Republicans and Democrats make this argument the best thing you can do is call them on it and point out how silly there ideas are and how they never work.

[Jimmie Higgins]

(Emphasis mine)

Incidentally, Larry Summers is not a "conservative" or a "libertarian" (as the terms are understood in American politics), but rather, is a registered Democrat.

Not at all; they are typical Democrats, acting typically.

Yup:


There are children who are working in textile businesses in Asia who would be prostitutes on the streets if they did not have those jobs.



Now is the time for us to strike. We must strengthen our foothold in Asia, to ensure no nation overtakes us.


I've always thought that underpopulated countries in Africa are vastly underpolluted.This one was in reference to his "modest proposal"-like idea of creating new revenues for the 3rd world by selling rights for first world countries to dump their toxic waste and pollution in the third world.

He also made a speech while President of Harvard where he explained away sexism and gender inequality in higher education by suggesting that it was because of innate differences between the sexes.

If this guy was in the Bush administration, he'd be as popular as Rumsfeld with most Americans. Unfortunately because he's a Democrat, I guess he is considered a lesser evil:rolleyes:.

[Endomorphian]

What a crock. This is yet another example of how conservatives and libertarians trip over themselves to present I don't know about statistical comparisons, but a few of my friends and acquaintances who are legally independent benefit from welfare, food stamps, etc. with no intention of pursuing a job for at least another two years. These are middle-class young adults (~18-24) whose parents provide all they need (bar health care). Granted welfare runs out in a few months if one doesn't acquire some job or continuous work training program, but it's disturbing to say the least. I don't see why people have to polarize the issue into a case of either or. Assistance for the unemployed is not wrong, and those who rip off the government or charities should be effectively dealt with - either by re-innovation, removal, or prosecution in the case of liars. Workers want their money to help, not hinder, employment.

[Sperm-Doll Setsuna]

I don't know about statistical comparisons, but a few of my friends and acquaintances who are legally independent benefit from welfare, food stamps, etc. with no intention of pursuing a job for at least another two years. These are middle-class young adults (~18-24) whose parents provide all they need (bar health care). Granted welfare runs out in a few months if one doesn't acquire some job or continuous work training program, but it's disturbing to say the least. I don't see why people have to polarize the issue into a case of either or. Assistance for the unemployed is not wrong, and those who rip off the government or charities should be effectively dealt with - either by re-innovation, removal, or prosecution in the case of liars. Workers want their money to help, not hinder, employment.

Why is it disturbing? Maybe they don't know what to do and are confused. There is no virtue in employment simply for the sake of employment. If they don't live alone (all but health care by their parents-), why are they getting welfare in the first place, and why are they on food stamps? Your argument is strikingly similar to what some would use to complain about taxation in general. Secondly, the problem is not quite what you make it out to be--

If all employment available feature so bad conditions that simply being on welfare in perpetuity are preferable, then clearly, that is the problem, not the welfare system. If there is so little dignity in the work that simply being in the perpetual nothingness of unemployment, well, it is not any employment that should be encouraged.

[Endomorphian]

There is no virtue in employment simply for the sake of employment.

I disagree; a disposable income and even some unrelated work experience is better than scamming public security to the point you bargain off your EBT balance.

One problem I've seen on RevLeft is a tendency to confuse laziness with fatigue, and then proceeding to defend this bizarre hybrid. Laziness is rightly stigmitized for being needlessly detrimintal towards others' welfare. In this case, the working class and the parents who are paying their bills for no return or no reason.

Purely theoretical and analogous here, but if a very caring relative is in need of help cooking and one is too 'inconvenienced' by a video game to help, that's laziness. If that same observer is suffering from depression and can't get out of bed, it's fatigue. These friends of mine definitely fall into the former category.


If all employment available feature so bad conditions that simply being on welfare in perpetuity are preferable, then clearly, that is the problem, not the welfare system. If there is so little dignity in the work that simply being in the perpetual nothingness of unemployment, well, it is not any employment that should be encouraged.

Obviously work under capitalism is systematically mundane and taxing, but that's the reality all workers deal with in their daily routines. Workers foot the bill for public services. They're (usually) fine with that, as long as it's not abused. When there is no upheaval to speak of, refusal to even seek out employment constitutes vulgar lifestylism at best. Laziness is not to be cherished even by leftists. A lazy socialist is an internet warrior who won't get out and fight for a workers' revolution.