Saturday, June 26, 2010

Wrong on the Economics, Wrong on the Justification....

But there's something to be said for approaching chronic unemployment in a different way.

Ben Nelson is taking some heat for his comments and voting stance on extended unemployment benefits, "At some point, it ceases to be an emergency. It’s ongoing… I think the bill should be paid for." In terms of the fact that we have very high national unemployment, an economy that's at best in a fragile state of (jobless) recovery, and the amount of money at issue is not (by federal budget terms) substantial, Nelson is wrong. But there's something else to consider.

Prior to the current recession we have had states, cities and regions of the country with long term high to very high unemployment rates. In theory, states could provide extended unemployment benefits within such areas. In practice that hasn't happened. Once unemployment benefits ran out, if they could not find work the people in those areas had to find other ways to get by. The current jobs situation is different, as historically (at least in theory) people could move from high unemployment areas to lower unemployment areas in search of work.

As a society we didn't feel much sympathy for those who couldn't get their act together, whether to learn new job skills, to relocate, or to take an unpleasant, low-paying job. Ben Nelson and those making similar statements aren't displaying a new sentiment - they're simply extending society's traditional view of long-term unemployment to a larger population of the chronically unemployed.

At the same time, those ignorethe realities of the job market in favor of a perpetual series of extensions of unemployment benefits aren't addressing the underlying issues. Yes, to the extent that the extensions help bring money into local economies and sustain local businesses, prevent evictions and keep people out of foreclosure, it may be sound public policy to extend unemployment as part of a recovery plan. But if the problem of long-term unemployment is not simply a shortage of jobs, but reflects a structural change in the job market, the extensions are a band-aid solution. It's fair to say that in an economy like this we shouldn't just cut people off, but it's also fair to question whether the chronically unemployed are likely to ever be reintegrated into the job market. Can they compete even for entry level, minimum wage jobs against people who are not just twenty or more years younger than they are, but who have grown up immersed in the technologies that are part of pretty much any modern workplace?

If you take a look at the data and find that a big part of the "chronic unemployment" problem is structural, the appropriate response is to evaluate whether you can take steps to remedy the structural problem and, if not, how to best address the plight of a population of people that are likely to remain chronically unemployed and underemployed for the duration of their working years. If you wait long enough the statistic may disappear - the unemployment rate among other groups may rise to a level that it masks the continuing problem of chronic unemployment - but that's not a solution. If your objection to Nelson's stance is that it's cruel, cutting off unemployment benefits to such a population would not be any less cruel when a lower unemployment rate hides their plight than at the present.

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