Stormtrooper: Here is my identification.
Obi-Wan: [with a small wave of his hand] We don't need to see your identification. Stormtrooper: You don't need to see my identification.
Obi-Wan: These unemployment benefits will stimulate economic activity and create jobs. Stormtrooper: These unemployment benefits will stimulate economic activity and create jobs. Obi-Wan: You need feel no pressure to find a job.
Stormtrooper: I need feel no pressure to find a job.
Obi-Wan: We’ll extend them for a few more weeks.
Stormtrooper: You’ll extend them for a few more weeks.
http://www.imdb.com/title/tt0076759/quotes?qt0440731
No, no, that’s not George Lucas’ newest hatchet job on one of his classic movies. That’s just how it seems policymakers try to convince people of something that just isn’t true.
This week, the Wall Street Journal ran a story on the cover entitled “Long Recession Ignites Debate on Jobless Benefits” (http://online.wsj.com/article/SB10001424052748704334604575338691913994892.html). Contrary to what some believe, this is a legitimate debate.
There are indeed some out there, like the internet programmer in New York, who abuse the system, passing up jobs because they do not pay what the applicants are accustomed to. People like him surely engender no sympathy from people like the forklift driver in Indiana. Few tears would be shed by the latter because, after landing another job that paid 10% more than the one he was laid off from, the former quit it because his “miserable career” depressed him.
While not even the government sympathizes enough with someone like that to extend benefits, the more intriguing story is that of the former forklift driver. The story provides two such reasons: his wife still has a job, making roughly what he use to; and, if you look closely at the picture of him, there is an ashtray beside him on the couch.
Although it is optimal, even desirable for everyone who wants a job to have one, it doesn’t always work out that way, especially in an economic climate like that of today. Misfortune strikes and one spouse loses a job. According to the U.S. Bureau of Labor Statistics, 2-earner families decreased from 51.4% in 2008 to 48.5% last year. The apparent course of action, therefore, would be to adjust the lifestyle to be able to live on one salary (it could be argued that it is prudent to adopt such a lifestyle anyway).
Most people agree with the propriety of temporary unemployment benefits, like the 26 weeks that used to be the norm. It is a small price to pay for prosperous dynamic economy brought about by a relatively free market, free trade and a flexible workforce. After a while, however, adjustments need to be made, perhaps psychologically as much as anything.
Now, assuming that ashtray does not serve simply to hold the couch down, it appears that he smokes. A pack of cigarettes have averaged about $5 for about a year now. The fact that the ashtray made it into a picture means it is probably conservative to assume he smokes a pack-a-day. Thus, there goes about $150 per month in smokes.
Assume, in this case, that numerous studies apply and he drinks. Let’s say he downs 3 beers every day. Here in Texas, a case of regular, domestic runs around $15-$20. For the sake of argument, let’s assume that the price is roughly equal in Indiana. That’s $60-$80 per month.
Between cigarettes and beer, that’s at least $200 per month. Never mind the subsequent health care costs for someone with such a lifestyle.
Is it any wonder there has been pushback to extending unemployment benefits any further?
Sunday, July 11, 2010
Tuesday, July 06, 2010
Unemployment Benefits Do Not Create Jobs
Last year I wrote an article in our company’s biannual newsletter detailing what I thought was necessary for our industry, natural gas, to recover from the plunge in it’s the price. In it I said “…relying on input demand for the production of inelastic goods (stuff we buy largely regardless of price i.e. food & energy) to return the industry to sunnier times is akin to expecting rip-roaring profit growth in the grocery industry to fuel robust growth in GDP.” Now it seems some prominent people are indirectly trying to make that case about GDP growth.
After an extension of unemployment benefits ran into some stiff headwinds last week, House Speaker Nancy Pelosi reminded us that they “inject demand into the economy.” She went further and informed us of a new advantage: it “creates jobs faster than almost any other initiative you can name.” Huh? It’s debatable whether or not unemployment benefits are even a job preserver, much less a job creator.
It is technically true that they do support demand, but demand for what? Given that benefits average a little more than 1/3 of the average weekly wage nationally, demand is most likely relegated to the most essential, necessary goods, such as groceries, probably the most indispensable goods we buy.
Even in the absence of such assistance, don’t most people, especially parents, find a way to provide for such necessities, be it drawing on savings, taking whatever work can be found, seeking private charity (family or church) or even selling assets? If someone can’t find a job after 26 weeks, the range of time when most benefits originate from taxes on businesses, it’s probably time to evaluate his/her/their current living expenses i.e. rent/mortgage, TV, phones, etc.
Regardless of the source of funds, we will always eat and clean ourselves. Therefore, the purchase of groceries rarely fluctuates. It is true that when a society becomes richer the makeup of its diet changes, incorporating more meat for example, an entrée that is a luxury in many parts of the world. We also might buy more brand-name foods. This might explain why we spent 17% more on groceries in 2007, the last year of solid economic growth before the recession, than last year.
Still, in those beefier, even steak-ier, Charmin-using times, groceries accounted for less than 10% of GDP. In 2009, that figure was 5 ½ %. Last year’s figures arguably represent the minimum amount of basic food we need to get by. This is why we are unlikely to ever see a headline that reads “Grocery Stores’ Profit Lead the Way in 3rd Quarter GDP Surge”.
Whatever jobs that may have been shed at Del Monte that were not subsequently absorbed by generic fruit & vegetable canners are unlikely to return due to an extension of unemployment insurance.
After an extension of unemployment benefits ran into some stiff headwinds last week, House Speaker Nancy Pelosi reminded us that they “inject demand into the economy.” She went further and informed us of a new advantage: it “creates jobs faster than almost any other initiative you can name.” Huh? It’s debatable whether or not unemployment benefits are even a job preserver, much less a job creator.
It is technically true that they do support demand, but demand for what? Given that benefits average a little more than 1/3 of the average weekly wage nationally, demand is most likely relegated to the most essential, necessary goods, such as groceries, probably the most indispensable goods we buy.
Even in the absence of such assistance, don’t most people, especially parents, find a way to provide for such necessities, be it drawing on savings, taking whatever work can be found, seeking private charity (family or church) or even selling assets? If someone can’t find a job after 26 weeks, the range of time when most benefits originate from taxes on businesses, it’s probably time to evaluate his/her/their current living expenses i.e. rent/mortgage, TV, phones, etc.
Regardless of the source of funds, we will always eat and clean ourselves. Therefore, the purchase of groceries rarely fluctuates. It is true that when a society becomes richer the makeup of its diet changes, incorporating more meat for example, an entrée that is a luxury in many parts of the world. We also might buy more brand-name foods. This might explain why we spent 17% more on groceries in 2007, the last year of solid economic growth before the recession, than last year.
Still, in those beefier, even steak-ier, Charmin-using times, groceries accounted for less than 10% of GDP. In 2009, that figure was 5 ½ %. Last year’s figures arguably represent the minimum amount of basic food we need to get by. This is why we are unlikely to ever see a headline that reads “Grocery Stores’ Profit Lead the Way in 3rd Quarter GDP Surge”.
Whatever jobs that may have been shed at Del Monte that were not subsequently absorbed by generic fruit & vegetable canners are unlikely to return due to an extension of unemployment insurance.
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