The Cliffs of Unemployment, Robert Reich and BleachersFollow

If we simply hand someone the same amount of money in the form of unemployment (or any government benefit), we get the same consumption from it, but *not* the production. The labor he would have done isn't done. The GDP is thus going to be lower than it would have been if he'd been working. Thus, even if we can debate the degree to which unemployment prevents people from being employed, we can't debate the fact that wages generate GDP growth, while benefits do not.


Well, we can't debate it because it's obviously false and there isn't really an argument. I should have just assumed prior to this, but apparently you don't understand what GDP is. Can you explain why it is you think government spending doesn't contribute to GDP growth? Because it does. Should be obvious if you even sort of vaguely understand what GDP measures in terms of production. Should being the key word there, I guess.

First off, contrary to popular belief, this forum isn't my number one priority. I was busy watching my team help out your team, so nyah!



I wouldn't say it's about the labor market's ability to absorb them though. There are many factors which go into whether a position opens up and is filled. And one of those factors is the opportunity cost I spoke of before.



Correct. And I believe that they would be. Let's not forget that we're not talking about eliminating unemployment benefits entirely, but eliminating the extension of those benefits (to 99 weeks I believe?). Given that there clearly are jobs being created and people who are filling those jobs, we can assume (as I already pointed out in this thread) that the issue isn't a matter of no jobs existing for those on the extended list to obtain, but that those on the list are choosing to stay on unemployment rather than take a job.

And, as I also stated at least 2 or 3 times already, the reason they might make that decision is because of the opportunity cost reflected in the benefits themselves. If I know that I can receive $X/month in benefits for the next 2 years, I'm only going to take a job that is sufficiently greater than $X/month in pay. Not "equal too", but "greater than". What this means is that there might be a bunch of jobs paying $X+$500/month out there, but unless I think my time is only worth $500/month (the difference between what I earn not working versus what I'd earn working), I'm not going to take those jobs.

The real question is only a matter of whether there are sufficient jobs which pay just a bit more than unemployment does versus those which would represent a loss of income compared to unemployment benefits to make the total aggregate number of income dollars less than, equal to, or greater than, the total we're paying to that group in unemployment. I believe that the actual number is at least equal than, and quite possibly greater than the unemployment value.

You're free to disagree, of course.



False. I think there's a lot of evidence in our current economy to suggest that there are quite a few jobs available which those who might be dumped off the list could take and which would pay equal to or more than what they're currently receiving. The problem is that while those on short term unemployment will tend to jump back onto a job as quickly as possible so as to maintain their current income, once you've been on unemployment for more than say 6 months, you've adjusted your living level to that of the benefits. The drive to gain a job isn't as great. That job has to pay quite a bit more than unemployment to tease you out of sitting on your couch and collecting the benefits.



Or we can look at recent short term unemployment numbers and note that it's a lot easier for people to find replacement jobs at or near their previous wage today than it was say 2-3 years ago. Which suggests that there are plenty of jobs for those currently in the extended unemployment benefit range that will pay equal to or greater than their current benefit rate. They just aren't taking them because of that opportunity cost. Tell them that their benefits will end in a month, and they will almost all be employed within a month, and almost all of them for more money than they're currently getting. And I believe that if we add the total amount up, we'll find that total dollars channeled through that group of people via employment will end out being roughly equal and probably a bit higher than what we're currently paying them in unemployment.

It's just not in their interest to get those jobs until the difference for their labor is the full amount of the wage the jobs pay. Currently, that difference is the wage minus the unemployment benefit. We're literally creating long term unemployment because we're paying people to stay on unemployment for longer.


There's also a secondary employment aspect to this that is going unmentioned. Employers know that this wage factor is in effect. As a result, they are less likely to create jobs that pay in the range in question. There's an overhead cost involved in creating a job, and employers are just as in tune with the numbers as anyone else. I honestly believe that the current job creation rate is lower than it should be, and at least part of that is because of the existence of the extended unemployment benefits period. The supply side of the economy has largely recovered. Hell. It recovered 3 years ago. So why have jobs only slowly and painfully returned?


It's not, as you stated it, simply the labor market being unable to absorb the number of people on unemployment. That's just too simple and avoids any attempt at determining "why". We should be creating jobs like gangbusters, and should have been for the last 3 years. We haven't. And, as I stated much earlier in this thread, that has more to do with increased cost/risk heaped onto job creation over the last 4+ years than with some inherent inability of the market to hire. Businesses want to expand. They want to hire to do that. That desire is being muted by increases employment costs, fears of higher taxes, and fears of (ironically) creating more jobs than there are people willing to fill them.


Your position more or less rests on the assumption that limited consumption is limiting the amount of dollars the market has to hire people (not enough profits to justify the number of people working). But that is clearly *not* the case, right? Profits are up. Investment returns are up. Domestic businesses are literally awash with money right now. Clearly, the problem with our employment rate is not a lack of potential consumption. If that was the case businesses simply wouldn't have the dollars to expand and hire. Which is not the case. Clearly also, increased consumption isn't going to do anything to help our employment until those other factors preventing the creation of jobs are overcome.


So, even if I am wrong (I don't think so, but I'm willing to examine the possibility), I'm still right. Even if we do reduce the total amount of consumption dollars by dumping those people off the unemployment roles, the loss from that is not going to hurt our economy, but the gains from any percentage of those people being employed and thus adding to the production side of the equation will help the economy. As production increases, existing consumption will still be sufficient to realize that production into economic gains, and the economy will grow. As that happens, the risk calculation for job creation shifts in favor of more jobs, meaning that we can then hire more of those people for higher aggregate wages. Eventually, even if I'm wrong in the short term assessment, the long term trend will be more people working, more production, more wage dollars, leading to more consumption, which all equals more economic growth, lower unemployment, and actual economic recovery.


Waiting to eliminate that extended unemployment period until the job market recovers entirely will only mean it'll take much longer for the job market to recover entirely. You're hurting more people than you're helping with this.

Edited, Dec 13th 2013 5:39pm by gbaji

I thought you wanted to debate a position? Now its meaningless to provide evidence to support your position, when a dozen posts back you were attempting to call smash out for not providing any details to support his position...

Are you bipolar?

Oh sorry I must have misunderstood what argument meant in Gbajiland. Different Economics, different reality, and different vocabulary. It sounds like truly wonderful place.



Look I found Gbaji!

Edited, Dec 13th 2013 11:35pm by rdmcandie

The problem is that in the real world (as aside from on paper), it doesn't actually work. Because with inflation

Just how fucking stupid are you, exactly? Inflation? I mean I know you made this horrible gaffe and exposed yourself as not understanding economic concepts I literally learned about in 7th grade, but you're now going to claim that inflation, which has been historically flat at levels rarely seen in history in the midst of massive government spending is going to increase if we increase that spending by .001%? What happened the last five years then, you moron?

Let it go, idiot. It's possible that there may have been one or two newcomers who weren't aware of how hopelessly outclassed you are, why continue to affirm it endlessly?

Veritas Omnia Vincit, *****.

Shots fired at the ECB.

Injustice ain't cheap, take it from me.