December 9, 2012
Depressions are measured in terms of unemployment, monetary velocity, bankruptcies, and the like.
But perhaps they should be measured on the Mohs Scale.
These are hard times, we say. Its not easy for some folks to find work. But the hardness isnt quite so hard as you might think. The real trouble is, the times are too soft.
According to Casey Mulligan, author of The Redistribution Recession, theres no great difficulty in explaining the length of the current depression, nor in explaining why the poor have participated so unevenly in what recovery has occurred. The system is rigged against them.
By being rigged for them.
The welfare state has vastly expanded to serve the pocket books of the unemployed. [P]eople don't suffer as much when they are not employed as they would have if they would have experienced this [economic downturn] ten years ago or five years ago or fifteen years ago. And when its less painful to be without a job there will be more people who are without a job.
In other words, by the simple laws of economics (which boils down to the commonplace observation that people want to get as much for as little as they can), the more you give folks not to work, the less they tend to work. And it turns out that all sorts of programs have been increased in recent times. Unemployment insurance duration has increased, food stamp benefits have been increased, and then theres the stuff that hasnt even been on my radar:
They gave breaks to people whose homes are under water . . . mortgage breaks. But only if their incomes were low. . . . If you spent part of the year or even all the year unemployed, you'd get some help on your mortgage, but if you continued to work like you were before the recession, forget about getting any of that help. Another major one is they paid for the health insurance, 65 percent of the health insurance, for people who were laid off from their jobs. So, that's a big type of relief. It never gets cited when they talk about the average unemployment benefit. But you could have 65 percent of your health insurance paid for. You'd have to pay the other 35 percent. And 2-2.5 billion people took advantage of that expansion.
Of course, a lot of policy mavens dont want to confront this. But there are no plausible arguments against economic laws influencing employment — as Mulligan makes clear in his recent interview with economist Russ Roberts: