Taking a Mulligan on the Economy

December 27, 2008
Posted by Jay Livingston

I often use unemployment when I’m trying to explain the difference between social facts and individual facts. To explain why an individual doesn’t have a job, use individual facts – lack of education, bad work habits, etc. But when the unemployment rate rises by a few tenths of a percent, when hundreds of thousands of people who were working a few months ago are now jobless, we think not about individual characteristics but about “the economy.”

Mills uses this example in The Sociological Imagination, and it’s an easy one for intro sociology students to grasp. But maybe Mills and I are wrong.

Are Employers Unwilling to Hire,

or Are Some Workers Unwilling to Work?

By Casey B. Mulligan

Casey B. Mulligan is an economist at the University of Chicago.

The recent decrease in employment may be due less to employers’ unwillingness to hire more workers and more to workers’ unwillingness to work. . . .

Of course, people have not suddenly become lazy, but the experiment gives similar results to the actual situation in which some employees face financial incentives that encourage them not to work and some employers face financial incentives not to create jobs. [Emphasis added.]

Mulligan must be right. After all, the New York Times is publishing this (on Dec. 24, a Christmas gift to workers), and Mulligan is a professor of economics at Chicago. He must know.

Back in October, the Times published another Mulligan piece saying that “the economy doesn’t really need saving. It’s stronger than we think. . . . If you are not employed by the financial industry (94 percent of you are not), don’t worry. The current unemployment rate of 6.1 percent is not alarming.”

The unemployment rate for November was up to 6.7%, also not alarming, I suppose – just another half million people responding to those incentives not to work.

I always thought that the unemployment rate measured only people who were looking for work. Those who had given up and dropped out of the labor force were not officially “unemployed.” So I’m not sure what Mulligan means by “incentives that encourage them not to work.” Whatever. In any case, in the past year, the number of the officially unemployed in the US has risen by nearly 3 million, bringing the total to 10 million.

That's a lot of people with no incentive to work. But I’m sticking with Mulligan. Not to worry. No cause for alarm. It’s not the economy, stupid.


Anonymous said...

What "experiment" is Mulligan referring to? And what are these "incentives" encouraging workers not to work? I wouldn't be surprised that on further investigation, the latter turns out to be right-wing hot air and the former is some useless mathematical model these "clever" economists have mistaken for the real world.

Jay Livingston said...

It's a thought experiment, not a real one, as far as I can tell. ("Suppose, just for the moment, that people were less willing to work . . .") I imagine it would be very difficult to create a real experiment in which "willingness to work" is manipulated as an independent variable.