As the economy recovers, public policy faces an inevitable dilemma. How do we wean the economy from support?This comes to the head with federal support for unemployment insurance -- 0 per week, set to expire at the end of July. The unemployment rate will still be high in July. Congress seems to have largely given ...
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This comes to the head with federal support for unemployment insurance -- $600 per week, set to expire at the end of July. The unemployment rate will still be high in July. Congress seems to have largely given up, in public, of thinking clearly about the economic purpose of policies, and now the discussion is entirely in terms of who deserves additional "help," often in moral terms -- "people" vs "corporations," various regions, sizes of business, "communities," and so on. How can we reduce "help" while unemployment surely ravages the land?
On the other hand, for many workers right now, unemployment benefits pay more than working. Unemployment pays more than going back to their old job as it opens, and it pays more than taking one of the many new jobs that are available now -- Amazon, Wal-Mart are hiring, and there is surely going to be demand for contact tracers, temperature takers, building disinfecters, social distance monitors, and so on.
So, the age old question of economic policy emerges. How do we balance help -- insurance -- with incentives -- the need to get people back to work ASAP when jobs are available?
Lost in the policy discussion, let us not forget the hard fact of life. Work is not fun. People in the real world (not economics bloggers!) don't work because it's fulfilling or enjoyable. They work because they need the money and the health insurance. Work is a necessary evil for our economy to produce the things we all need and want to consume. People don't take lower paying jobs willingly, no matter how much society needs you, right now, to stop binging Netflix and go spend 8 hours wiping down carts at the local Safeway.
With that, here are some clever ideas.
1) Pay anyway. If you take a job, you can keep the unemployment benefit, at least for a period of time. Or, better, you can get a nice cash check, $1200 (two weeks of federal, another stimulus check) or even $2400 (a month). In return, you can't get unemployment again for, say, 4 or 6 months.
2) Community service. If you stay on unemployment past July 31, you have to do (say) 20 hours a week of community service. What will they do? Well, I've been reading Stephanie Kelton's book (review coming), and she has a proposal for a federal jobs program. Apparently, she thinks there was an immense amount of good work that governments and communities needed done before the pandemic, WPA style. There is much more now -- trace contacts, disinfect playgrounds, take temperatures in public buildings, you name it. Workers could be rented out to monitor temperatures in front of struggling businesses. So, put Kelton and company -- Bernie Sanders, AOC -- in charge of the community service part.
I offer this latter suggestion only half-jokingly. Obviously there is a political divide on what to do about unemployment. If the government is already paying people, there isn't much damage to letting the left try out its jobs program. If like me you're a little cynical about government jobs programs, well, we'll find out, and we'll save money to boot as the prospect of working for local government might just scare a lot of people back to work. And I love an offer they can't refuse. Imagine the Trump Administration calling the left's bluff on this one -- how can they say no?
(A response to a commenter: It doesn't matter for this purpose if there is any value to the work. I'm looking for a disincentive to stay on unemployment when there are jobs available, that will be politically palatable.)
3) Jobs board. Sweden has (had?) an interesting system that combined a carrot with a stick. Generous unemployment, but a national job registry and you had to take a job offer. I doubt the bureaucratic competence of the US, especially in the month or so we have to get it going, but something similar could happen. To get Federal unemployment top-up after July 31, you have to fill out a one page form with work experience that reads like a job application. Employers can search and offer you a job. If you get the job offer, you take it or lose unemployment.
4) Just who? Obviously it's time to restrict just a little bit who gets generous unemployment. If your old company is still in business and wants to hire you back, the gig is up. If it's hiring at all, even lesser job categories, you have to apply. If there are more than X job vacancies in your county, the extra unemployment insurance dries up.
A currently popular idea is temporarily cutting or eliminating payroll taxes. This is a nice inducement to work, but even I am a little behavioralist and I wonder just how many people who earn $20 an hour are really clear on how much extra they will get by returning to their old jobs if there is a payroll tax reduction. My $2400 check seems like a more salient incentive.