Nobel Prize in Economics Awarded for Theory on Why Unemployment Remains So High
By: Allen Jezouit, @BerkshireCountyBusiness On: 06:28AM / Tuesday October 12, 2010
The WSJ reported today that three academic economists have been awarded the Nobel Prize in Economics for their research into the phenomenon of high unemployment even though there is a rise in job openings (Trio Share Economics Prize, WSJ, October 12, 2010). They hypothesized that high unemployment benefits which result in the unemployed spending more time looking is actually better for the economy because it means they find jobs which are a better fit for their skills.
Huh? That is probably the most counter-intuitive conclusion I've ever heard in my entire life. One has to wonder if they actually looked at any survey data of unemployed folks. Two data points are not statistically significant, but I know two people who were recently laid off who are eligible to collect the max in MA ($629/week) for something like 70 weeks. Neither have any plans to look for jobs for at least 6 months. One is an avid skier who is going to hit the slopes all winter before starting to look in the spring. The other is relocating to Texas and will start looking once they're settled. Both are looking at their unemployment benefits like an opportunity to take an extended paid vacation.
I've been doing some work trying to hire new staff for a local financial services firm. It is amazing to me how difficult it is to find qualified people who actually want to work these days. When people hear they are actually going to have to show some effort in order to earn a decent living (compensation is roughly 50% base, 50% commission with total compensation potential in the $60-$90k range), they are scared away. Part of my role is the initial telephone screening interview. I've had people tell me they've been unemployed for months who hear the job description and say, "Not interested." We had one kid take the job and quit after only 4 days. The employer couldn't be any more candid with people - telling them right up front, "Expect to work 45-50 hours per week, expect to dial the phone 50+ times per day if you are going to be successful." Kid quit after 4 ... FOUR ... days! He's got a finance degree from MCLA, graduated in May'09, and has been working retail part-time as a cashier ever since. What did he think he was going to get for his first finance job? CFO of a F500 company?
Don't get me wrong. I know how tough it is to have a job you hate. It sucks. It is so tough to get out of bed in the AM if you hate your job. However, if the alternative was going hungry and homeless, people wouldn't be so picky. As a society, we simply can't afford a system that allows people to be picky. We need a system that allows people to eke by for a few weeks until they can find a full-time job doing something that pays half way decent and a part time job that makes up the difference.
Things have changed. Look at home prices. We all wish we could sell our home for what we bought it for, but if you bought a home in 1999-2006, that probably won't happen for years to come. Ditto re: income and lifestyle. If you lost your job during the Great Recession, chances are you will struggle to find a single job that replaces or increases the income. You may need to add a second job in order to approach the same lifestyle. That's just reality.
Seems to me, there are jobs out there. It's the effort that's lacking.
iBerkshires.com welcomes critical, respectful dialogue. Name-calling, personal attacks, libel, slander or foul language is not allowed. All comments are reviewed before posting and will be deleted or edited as necessary.
You may know 2 people who have the luxury of not seeking work immediately after a layoff. That must be really great for them. As we all know, that $629/week (pre-tax annual income of $32,000) is certainly enough to pay for endless vacations. Actually, no ... that's barely enough to afford rent, utilities, car payments, student loans, health insurance, and food. In fact, for a family of 4 that's less than 50% over the federal poverty threshold.
Seems to me, that you probably make significantly more than $32,000 a year. Seems to me further that statements like "if the alternative was going hungry and homeless, people wouldn't be so picky" are both heartless and, frankly, pointless.
Yes, certainly, if one must choose between a job that he does not want, which does not match his skill set or education level, and which will not support his monthly financial obligations, or STARVING, one should choose the job.
But that's hardly any kind of basis for resurrecting the economy in the richest country in the world.
You also state that "as a society, we simply can't afford a system that allows people to be picky" but this is just a bald assertion. In what way can we as a society not afford this?
Why is that you get to decide how a professional person (perhaps with a family to support and one, two, maybe three college degrees, along with years or decades of experience) proceeds after a layoff? Perhaps a "full-time job doing something that pays half way decent and a part time job that makes up the difference" is not best for "our society." Perhaps we'd be better off leaving those judgments to the individuals invovled, instead of people speaking from soapboxes.
I know dozens, if not hundreds, of people for whom the loss of a job in the past 2 years has been a life-changing experience, in the sense that their career aspirations and financial expectations have been essentially destroyed. Most were very hard-working, driven people with lofty expectations and sterling resumes. I don't think what they lack is effort.
But I am quite sure that what you lack is empathy.
When I read the headline of this post, I thought the writer would provide an analysis or at least reasonable summary of the economists' research. Instead, he provides little more than anecdotes and personal experience, reasoning that because people don't want to work for HIM, they must not want to work- and that because he knows a couple of people who are well-off enough to go skiing and the like, that must apply to the rest of us.
My spouse and I recently were unemployed at the same time, and it was far from a "vacation." In fact, we had to relocate to another state for jobs that paid much less, living on savings and relying on unemployment to pay for rent, groceries, health insurance, student loans, utilities, travel expenses and our other bills. (By the way, we've both worked since we were teenagers, never collected unemployment before, and put ourselves through grad school for professional degrees). Being unemployed is demoralizing, frightening, and shatters your hope for a better future. Believe me, we will not be buying a home or starting a family anytime soon. Patching together part-time jobs does not instill a sense of security or make us willing to take on a mortgage or even a second car.
Seems like you're advocating a race to the bottom for workers. (No advantage to you, I'm sure.)
According to me there are two aspects for unemployment 1. person skill does not match with industry/employers requirement.
2. i have reached a final stage of maslow's hirearchy of needs and hence money status is not important for me.
3. my solution to the above problem is based on following observations:
1. I have seen many rich foreigners in India they enjoy working free of cost or for small money.
2. I have seen many Indian's doing excellent job in foreign countries for small money.
My solution is :
1. every year export 1 million indians abroad and import same number of persons from those countries equal to no of indians gone to that respective country, so that there will be no population burden to any country.
then both will be employed
2. we are now talking of one nation and one world.