A Limit to Compassion
By Nina Easton Monday, Jan. 25, 2010
Read more: http://www.time.com/time/magazine/article/0,9171,1953704,00.html#ixzz0f6o3bLcv
Have a heart. It's what Democrats like to think they do best. So President Obama's reaction to the economic crisis has been a predictable spending of trillions to soften the blow. But compassion can have consequences that aren't so compassionate — a nettlesome economic truth that now needs to be applied as Congress plans to extend unemployment benefits for the fifth time since the dark fog of recession settled in.
Continually easing the pain of jobless Americans, it turns out, can contribute to high jobless rates by warping incentives to look for work. "The consensus estimates show that unemployment benefits do prolong unemployment spells by quite a bit," says University of Chicago economist Bruce Meyer, who has produced academic studies on the issue dating back to the recession of the early 1980s. (See 10 ways your job will change.)
We've seen federal benevolence backfire before in this economy. Last February the White House — determined to rescue homeowners from foreclosure as the housing market crashed — launched its $75 billion Making Home Affordable program. The program not only failed to reverse a rise in foreclosures but also caused many homeowners to crash their credit ratings or throw monthly payments into homes they would ultimately lose anyway. Economists, meanwhile, say government efforts to keep people in homes they can't afford are painfully prolonging the nation's housing crisis — which doesn't help anyone.
Unemployment benefits keep money in the pockets of workers who are out of a job through no fault of their own. It's a safety net — with broad support in both parties — that also boosts the broader economy by keeping consumer dollars in circulation. In normal economic times, workers typically receive, depending on the state, up to 26 weeks of benefits, with the possibility of a 13-week extension. Following extensions passed under Presidents George W. Bush and Barack Obama, jobless benefits can now run as long as 99 weeks — nearly two years. During the 1982-83 recession, the longest time a person could collect benefits was about 55 weeks.(See how Americans are spending now.)
Before its holiday break, the House voted to continue extensions as part of its $154 billion second stimulus package, and the Senate is set to consider that. On Jan. 10 presidential economic adviser Christina Romer suggested that there was a "need to do more." With unemployment hanging at a stubborn 10% and the release of another troubling jobs report last week, why not do more for the jobless?
Because there's evidence that the extensions are only prolonging joblessness. Today's unemployment rate remains high not because of mass layoffs — most of which happened early last year — but mainly because more people are remaining unemployed for longer periods. In academic parlance, the "exit rate" from the unemployment pool is only around 21%, compared with 34% during the last harsh recession, in 1982. (See pictures of retailers which have gone out of business.)
Ah, you say, that's because there are no jobs to be found. With an estimated six people applying for every job available, there's plenty of merit to that argument. "Still, the unemployment rate rose from 8.6% in March 2009 to 10% now even as the job-vacancy rate held steady," says Steven Davis, a leading labor economist at the University of Chicago's School of Business.
Unemployment benefits are hardly cushy: depending on the state, they pay half of a moderate-income person's salary and less than half the salary of higher earners. And a troubled housing market makes it hard to sell your house — or qualify for a loan to buy a new one — so that you can relocate for a new job. (See which businesses are bucking the recession.)
But here's the catch: past studies by academics such as Meyer and Harvard's Lawrence Katz show that people are most likely to find a job just as their unemployment benefits run out. Many people use that thin cushion to wait until the last minute to act. They pass up lower-paying, less desirable jobs, or they avoid moving to take a job. Adds Davis: "Surveys show people are very pessimistic about this labor market and their job prospects, and they think it's not worth the effort to look. The generosity of benefits makes it easier to take that view."
As we all know, the longer people stay unemployed, the harder it is for them to find a job. It becomes a vicious circle that keeps at least some from moving back into the workforce and recovering lost financial security. No politician, especially a Democrat, wants to be accused of being heartless, but Obama might take a lesson from President Bill Clinton, who tightened welfare rules — and pushed millions out of a destructive cycle of poverty. Unlike the '90s, these are especially difficult economic times, and no one should underestimate the severity of American job losses or the fact that millions of jobs in sectors like manufacturing have disappeared for good. But politicians should be wary of how the public policy they enact could be reinforcing that misery.
http://www.time.com/time/magazine/article/0,9171,1953704,00.html
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发表于 2010-2-10 13:46:16
发表于 2010-2-11 15:03:15
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