Paul Krugman: Supply, Demand, and Unemployment Benefits

[cal04]

Ben Casselman points out that we’ve had a sort of natural experiment in the alleged effects of unemployment benefits in reducing employment. Extended benefits were cancelled at the beginning of this year; have the long-term unemployed shown any tendency to find jobs faster? And the answer is no.

Let me parse this a bit more, and ask, how was it, exactly, that reduced benefits were supposed to encourage employment in the first place?

Making the unemployed miserable arguably increases labor supply, as workers become less choosy and more willing to take whatever job they can find. But the US labor market in 2014 isn’t constrained by supply, it’s constrained by demand: given what firms can sell, they have no need for as many hours of work as workers are willing to give.

So make the long-term unemployed more desperate; so what? They can’t do anything to increase the amount of work demanded, and in fact their reduced purchasing power reduces labor demand.


rest at link
http://krugman.blogs.nytimes.com/2014/04/15/supply-demand-and-unemployment-benefits/?_php=true&_type=blogs&smid=tw-NytimesKrugman&seid=auto&_r=0

[eShirl]

1. What a surprise, eh?

Jobs don't grow on trees.

[CTyankee]

2. my daughter is one of these. She is at a dead end in her job search.

She has used her contacts extensively, her volunteer work creatively, tried every possible avenue to a job with no luck. She is highly qualified and experienced. In normal times she would be working now at a highly compensated position. It is unbelievable the world we live in now...

[narnian60]

3. Amen to that.

Almost same story with my daughter. Lives in NYC, unemployed for 8 months, unemployment gone after December. Finally, found a great job (at lower pay though) and is back on the road to normalcy. Thank goodness we had the means to help her enough so she didn't lose her apartment. The best of luck to your daughter, CT.

[lumberjack_jeff]

4. It is frustrating how the patently obvious has become a fringey viewpoint. n/t

[Martin Eden]

5. Austerity does not create jobs.

With more Americans desperate for employment and willing to work for lower compensation, the net effect is to put labor at a disadvantage and hold down wages.

D'ya think that is the goal of the rethugs and their corporate masters in the first place?

[CTyankee]

6. I think even Paul Krugman is moving toward that assessment.

[Martin Eden]

7. Krugman has long known austerity doesn't create jobs, so I assume you're referring to ...

... the assessment that putting labor at a disadvantage is the R's goal in the first place.

[CTyankee]

8. Yes, I am. But I didn't see him say it "out loud" that he thought our ideas here on the end game

of the austerians was making working people "slave wagers."

[DireStrike]

9. Marx called it "the reserve army of labor". -nt-

[madville]

10. One reason I'm not super excited about immigration reform

What happens if you add millions of legal workers to the US labor pool over a short time span?

The big one(and why I believe some Republicans support immigration form) is to keep already low wages suppressed even further by increasing labor supply.

The demographics favor more votes for Democrats of course but I believe it will set the labor market back in this country even further.

[Taitertots]

11. Every position held by the right is backed by nothing but zombie ideas

Ideas that have no basis in economic theory or modeling; but persist because a powerful fringe ignores the body of evidence disproving them.

Their messiah (Paul Ryan) believes in a pseudo-economic philosophy (Austrian economics) that has been largely ignored since it caused the great depression.

[reformist2]

12. I feel like we're fast approaching a great awakening - that everyone should have a guaranteed income

The increasingly desperate rat race to find even a mediocre job is clearly not working anymore, if it ever did.

[Wounded Bear]

13. I've been musing about the minimum wage...

Given the Rwers penchant for blaming the victims over shit like unemployment, I'd argue to them that raising the minimum wage would encourage the unemployed to look for work.