Unemployment, Kindness, and Policy

976 - Unemployment

As a general rule, I am very sympathetic to liberal arguments about protection of the poor and vulnerable, especially from a Christian perspective. That is why, for example, I am pro-life. For me the really tricky question is never, “Should we care about the poor?” We should. And in some cases, as with Utah’s revolutionary approach to homelessness, the policy and our ideals fall into perfect, sweet alignment. Utah has started just giving homes to the homeless (literally) and has found that not only is it more human, but it’s also cheaper. For maximum enjoyment, you can watch The Daily Show cover it.

Unfortunately, however, things don’t always work out this way. Take the example of unemployment insurance. Nothing seems more reasonable than extending unemployment insurance during a recession, right? Except that conservatives argue it actually causes people to remain unemployed longer. This is bad for the country, and it’s also bad for the people who remain unemployed. So, if conservative are right on the empirical question, it seems like we’ve got a situation where good policy and ideals (or at least sentiment) do not align. So, are they? New research suggests they are:

We measure the effect of unemployment benefit duration on employment… We find that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.0161 log points. In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.

So, unemployment benefits were cut in 2014, and as a result 1.8 million new jobs were created (or, I supposed, filled) and of those a full 1 million were people who would not have re-entered the labor force if their benefits had not lapsed.

This is where policy gets hard, and it’s questions like this that make me the most frustrated with polarization in politics. Balancing the desire to help in the short-run with the desire to have healthy systemic incentives is the kind of work that can best be accomplished in an atmosphere of mutual good will. Issues like this are issues where compromise works and solutions should strive to be non-partisan.

7 thoughts on “Unemployment, Kindness, and Policy”

  1. Isn’t there a finite math method using graphs to pin point where the best results can be obtained? Of course, that also requires that one has all the accurate information which in many cases is skewed for political reasons.

  2. I’ve not read the paper you’re referring to. I’m hoping it has a better basis for it’s claims, cause from the abstract it seems to be begging for a “correlation is not causation”. Did it really just look at a single change and assume that the jobs were the result?

  3. Did it really just look at a single change and assume that the jobs were the result?

    Nope, it took a much more nuanced approach than that. Just from the abstract of the linked paper (which is available from the National Bureau of Economic Research):

    Federal benefit extensions that ranged from 0 to 47 weeks across U.S. states at the beginning of December 2013 were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across U.S. states and we exploit a policy discontinuity at state borders.

    This is not mere correlation.

  4. Apart from issues of methodology and confounding causes, the matter is rather complicated from a policy view. As best I understand it, the observed effect (at least the argument) is that the cut in unemployment benefits changed the bargaining position of employers and potential employees, resulting in more jobs, but lower paying jobs, and also more people leaving the workforce altogether. So what is it we’re trying to achieve?

  5. Chris-

    So what is it we’re trying to achieve?

    My post wasn’t primarily about policy. There are much smarter people than I. It was about how we talk about policy. I want people to understand that there are trade-offs to most policy discussions, whereas the prevailing popular view is that increasing minimum wage is a no-brainer. It’s not. I’m skeptical that it’s of any use at all, compared to alternatives like the EITC.

    But, again, what to do policy-wise wasn’t my primary focus in this post. Just calling for people to be a little less ideological was my goal.

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