Casey Mulligan's Grapes

November 29, 2011
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.
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]
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. 
 

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 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)

Maybe Mulligan is right. Ezra Klein, looking for the good old days before the safety net, dusted off his copy of The Grapes of Wrath and found this passage.  It starts with the orange handbill that drew the Joads to California.


Pea Pickers Wanted in California. 
Good Wages All Season. 800 Pickers Wanted.

When they get to California, the Joad family cannot find work and are at first puzzled.  They ask a young man leaving the Hooverville that they are entering.

He looked in amazement at Tom. “Lookin’ for work?” he said. “So you’re lookin’ for work. What ya think ever’body else is lookin’ for? Di’monds? What you think I wore my ass down to the nub look’n for?”

Tom said, “Back home some fellas come through with han’bills -- orange ones. Says they need lots a people out here to work the crops.”

The young man laughed. “They say they’s three hundred thousan’ us folks here, an’ I bet ever’ dam’ fam’ly seen them han’bills.”

“Yeah, but if they don’ need folks, what’d they go to the trouble puttin’ them things out for?”

“Look,” the young man said. “S’pose you got a job at work, an’ there’s jus’ one fella wants the job. You got to pay ‘im what he asts. But s’pose they’s a hundred men.” He put down his tool. His eyes hardened and his voice sharpened. “S’pose they’s a hundred men wants that job. S’pose them men got kids, an’ them kids is hungry. S’pose a lousy dime’ll buy a box a mush for them kids. S’pose a nickel’ll buy at leas’ somepin for them kids. An’ you got a hundred men. Jus’ offer ‘em a nickel – why, they’ll kill each other fightin’ for that nickel.”

Klein adds, “Economists would bloodlessly describe this arrangement between workers and employers as ‘an equilibrium.’” Unemployment benefits – “paying people not to work” as the Wall Street Journal called it – disrupts this equilibrium. 

As we now know, the Joads and the US  were lucky. Imagine how much worse unemployment would have been in the 1930s if the US had suffered from today’s job-killing government handouts.

8 comments:

Bob S. said...

Jay,

It can be both.

There is a point where taking a job, especially a really low paying job, is less practical benefit then drawing 99 weeks of unemployment.

That is pretty easy to understand.

Yes, many companies laid off workers. Many companies folded.

Maybe you can answer this....at what point in our history did it become our right to be able to continue as if we were never got laid off.

We see some consolidation of households but not millions of unemployed people and their families moving in with someone still working.

We some some decrease in luxuries but not to the level I would expect of millions of unemployed.

I still see many unemployed people with cell phones, with two (or more) cars & often those cars aren't fully paid for, cable/satellite systems, internet connections, etc.

Aren't the benefits -- originally designed to keep people from starving -- a little too generous when it allows them to continue their life practically uninterrupted?

PCM said...

It *can* be both. But it's not. Even if some people don't take a job while unemployment is coming in... so what? Right now there aren't jobs for everybody. So one person not taking a job doesn't really affect the big picture.

Before reading the other I comment, I was going to post saying, "does anybody believe what he (Mulligan) writes. Does Mulligan himself believe it? I think it's all about something else, facts be damned."

I think Bob makes that case pretty well. It's about a new image for American society that involves no (or little) government. No (or little) safety net. No (or few) liberals.

When times are bad, blame the welfare state. When times are good, who needs one? It's not about the economy, it's about the welfare state. It must be destroyed! (of course.. then what? since I don't think the welfare state is a big deal in the US one way or the other. But I'm sure other boogiemen will appear.)

I think unemployment insurance is precisely about keeping your life together (and even paying the mortgage) while trying to get a similar job.

Evicting somebody from a house so the house can sit vacant makes no economic sense (much less moral sense). Especially if a few hundred bucks can make the difference.

And of course part of the reason unemployment benefits are so politically popular is that they benefit the middle class (or those that used to be). Of course it's a bit of a handout. It's supposed to be a handout. I just wish there were a few more handouts for poor people, too!

I'd be happy to do away with unemployment benefits if we just had normal benefits. So everybody had a decent home and food and healthcare and school. Other countries manage. We choose not to. It's a moral issue. Not an economic one.

Kind of related, notice now you don't here much these days about the horrible Swedish and Danish social-welfare models? Because their economies are actually doing OK! Could it be that a generous welfare state promotes stability and education and that is good for people, families, and the economy in general? I don't know. Maybe.

When Scandinavian economies go south, conservatives are quick to blame the welfare. So why not give the same credit now?

Jay Livingston said...

Bob: The post was not about “rights” or whether benefits are “too” generous. These are value questions. Some people think that being more punitive to the jobless is morally right. No doubt, these people also share Mulligan’s belief in the efficacy of such a policy – that if the jobless suffer sufficient deprivation, they will find work.

The post was questioning whether the level of benefits explains changes in the overall unemployment rate. Mulligan claimed that changes in benefits in 2007, changes towards “generosity,” accounted for millions of people choosing unemployment. The post expressed my skepticism of that view. PCM apparently shares my skepticism as he sees the Scandinavian countries as having more generosity and less unemployment.

Bob S. said...

@PCM,

So one person not taking a job doesn't really affect the big picture.

Except when that person starts the ball rolling on a movement.

Or provides the example for millions.

Yes, one person makes a difference.

Because that one person here and there adds up to some pretty serious numbers.


I think unemployment insurance is precisely about keeping your life together (and even paying the mortgage) while trying to get a similar job.

Really?

I thought the safety net was about keeping people from starving or dying from lack of medical care.

NOT making sure someone's life doesn't change a whit.

I was on reduced hours for 9 months in 2009 -- 80% pay - want to make up the difference out of your pocket so that I can get back to what it was?

My wife was off work or worked reduced hours for 6 months in 2010/2011 -- rough to work 40 hours a week with breast cancer -- are you going to pay out of your pocket her lost wages?

I'd be happy to do away with unemployment benefits if we just had normal benefits. So everybody had a decent home and food and healthcare and school

At one point if you lost your job and couldn't afford your house payment you moved in with a relative.

Now days it seems people don't even want to turn off the cable if they've been out of work for 2 years.

We aren't talking about a safety net -- it is a flipping hammock.


If you want to help people -- why aren't you?

Find people and pay their medical, pay their mortgage.

We choose not to. It's a moral issue.

You are right about that -- but it seems you want to vote money out of other people's wallets instead of stepping up.

Are you donating everything above that it takes to barely clothe, feed and shelter your family to other people?

Bob S. said...

Jay,

The post was questioning whether the level of benefits explains changes in the overall unemployment rate

I understand that and was trying to explain why I believe that YES the level of benefits - in part explains the changes in the unemployment rate.

When the benefits are so generous, people are less likely to take a job -- any job-- to put food on the table, to make the mortgage payment.

Look at how many farm jobs go to illegal immigrants. Look at how many service jobs are open.

Look at the long term unemployment and those who have given up looking for a job.

If we as a society wasn't so generous -- how would they survive without a job?


The benefits are only part of the issue of course. The other part is the culture of "Everyone is a winner" or "Everyone deserves something for nothing" -- the entitlement mentality fostered by the left for decades.

How many people believe they aren't responsible for not getting a job?
That it is the economy's fault -- even as jobs go unfilled.
That it is discrimination that they didn't get hired, even though the company hired someone of the same race, creed, color, sexual orientation.

At what point do we say, hey -- you've been unemployed long enough. Take a job, ANY job?

Bob S. said...

here is an example

http://nation.foxnews.com/homelessness/2011/12/01/homeless-lady-15-kids-somebody-needs-pay-all-my-children

"Someone needs to pay for all my children"

How generous are the benefits provided to this woman that she can have 15 children?

PCM said...

Bob, you know it's silly to decide national policy based on one woman who is hardly a shining example of responsible adulthood.

On the flip side, admittedly, we shouldn't have a bad policy simply because one deserving person benefits.

Clearly we have different opinions about the purpose of welfare. Reasonable people can differ.

But I really don't know if reasonable can believe that unemployment in the US is primarily caused by generous welfare benefits.

As to me helping people. I do what I can. But I'm just one person. Me helping one or two doesn't solve the problem. Plus, I'm a busy guy. I don't have the time or desire to dedicate my life to helping those in need. Similarly, I like paved roads but don't have the time or desire to pave them myself. That's why we have government!

And I'm willing to pay higher taxes for that help.

Bob S. said...

PCM,

I understand we shouldn't base policy on one example -- heck that is why I called her an example

Her attitude illustrates the mentality of many of the people receiving government benefits.


But I really don't know if reasonable can believe that unemployment in the US is primarily caused by generous welfare benefits.


Nice strawman you built there. Gonna torch it yourself?

I never said that unemployment was primarily caused by generous benefits.

Is unemployment made worse by the generous benefits?

I think in some cases yes.
And it isn't just unemployment insurance payments we are talking about.

As to me helping people. I do what I can. But I'm just one person.

And I'm just one person but you seem to have no trouble wanting to decrease my wealth or income by voting money out of my pocket, do you?

Me helping one or two doesn't solve the problem.

But if you set the example, maybe more people who believed like you do would follow it.

How about opening your home up to others. Do you live alone? Apartment or house?

How many unemployed people could you have sleeping at your place? How many could you feed?

Multiply that by the millions who share your belief and the issue of people needing generous government benefits decreases, doesn't it?

imilarly, I like paved roads but don't have the time or desire to pave them myself. That's why we have government!

And I think that providing the infrastructure for commerce and transportation is the function of government.

If you want to redistribute wealth, go ahead. Do it on your own.

Dont use the government to do it.

I find your attitude to be typical -- I don't have enough money for me - but those filthy rich (defined as they making much more then you) do.

So instead of doing all you can, you do what is comfortable.

Why should I be forced to finance your morals when you are unwilling to sacrifice to live them?