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unemployment

7.8% and Born Again Skeptics

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Bureau of Labor Statistics
Bureau of Labor Statistics (Photo credit: Wikipedia)

When unemployment dipped slightly from 8.1% to 7.8% some conservatives, most notably former GE CEO Jack Welch, alleged a political conspiracy on the part of the Bureau of Labor Statistics.

Interestingly, when the numbers were unfavorable to Obama, the BLS data was used to criticize the president. Now that the information is favorable to Obama, certain critics are born again skeptics when it comes to the BLS. There are, of course, legitimate grounds on which to criticize the methodology used to determine unemployment. However, it is certainly a matter of intellectual inconsistency to accept the BLS as a trustworthy source when its data matches one’s ideological view and then reject it simply because the data no longer matches one’s ideological view. After all, if the BLS data was reliable enough then, it should also be reliable enough now.

It has been contended that the BLS is “cooking the books” because of the change from 8.1% to 7.8%. However, there are three obvious counters. The first is that the lower number is consistent with the downward trend in unemployment. That is, the decrease is what one would plausibly predict from the trend. Second, the BLS is non-partisan and takes great care to present objective data. Third, the people who are attacking the BLS actually admit that they do not have evidence to show that the BLS manipulated the data. However, they do tend to make the rather odd claim that despite the lack of any evidence, they somehow “sense” that something is off. A good example of this is “Is it possible that the BLS data is being manipulated for political reasons? I certainly don’t have enough evidence to confirm my suspicions. What I can say is if it smells like a dead fish, there is always a possibility that it might actually be a dead fish. We leave it for you to decide.”

It is well worth analyzing this approach. The critics are, oddly enough, willing to admit that they have no actual evidence. From a rational standpoint, that should end the matter. However, they then claim that they somehow “sense” something is wrong with the data. On the one hand, it could be argued that they have an intuition that is accurate. Of course, such an intuition would be such that evidence could be found to confirm it. On the other hand, they could be “sensing” that something is wrong out of mere wishful thinking (that is, they do not want it to be true, so it seems untrue). They typically finish by the classic rhetorical device of leaving it to the audience to decide, thus creating the appearance that there are actually grounds for doubt that require the audience to pick between equal alternatives. However, since the critics state that they have no evidence, there are not actually equal alternatives. The evidence is overwhelming that the BLS is as trustworthy as it was previously.

Naturally, it is possible that the BLS is wrong. After all, the methodology is inductive and has some acknowledged defects. However, the main concern here  is not the method, but with the sudden and unprincipled doubt on the part of the critics of Obama. After all, if the BLS data is inaccurate, then the bad numbers would presumably be inaccurate as well. However, the critics in question were only born again as skeptics when the number was favorable.

Obviously, if Welch or someone else can present actual evidence, then that evidence should be given proper consideration. However, the rejection of the 7.8% figure seems to be a matter of political ideology and not a principled skepticism.

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How Much Can We Expect?

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Herman Cain
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While philosophers differ a bit on this matter, it is generally accepted that a moral theory has to impose reasonable requirements on people in regards to moral behavior. As such, it is a mark against a moral theory to require too much from people. This seems sensible: while some people are moral saints, a moral theory is supposed to address the mass of humanity rather than the saints. As you might imagine, thinkers are divided regarding what counts as reasonable. A similar sort of approach is often taken in regards to laws. After all, a law that expects far more than the average person can endure or provide would be an unreasonable law. In both the moral and legal realms the key question is “how much can reasonable be expected of the average person?”

A similar sort of question arises in the context of economics in regards to what we can expect of people in terms of being financially successful in the face of challenges. Recently, Republican presidential candidate Herman Cain claimed that the poor and jobless are to blame for not having a job and not being rich. Presumably Cain’s answer to this sort of question is that the poor and jobless should be expected to be employed and apparently even rich and a failure to do so is their fault and not due to other factors (like a recession). Cain has, of course, blamed the liberals for destroying jobs and this would seem to be inconsistent with his other view (namely that the unemployed are to blame for their unemployment). However, perhaps these two views can be made consistent by blaming the unemployed for being unemployed and for enabling the liberals to destroy jobs-thus making the poor excellent scapegoats.

Being sensible, I do admit that some people are unemployed and poor through their own choices and actions. There are people who, for example, prefer alcohol or drugs over employment. There are also people who never took the effort to gain the skills needed to get a job. It seems reasonable to expect that these people change their ways if they wish to be employed.

However, most people seem to be rather eager to get jobs. This is proven by the fact that when jobs open up, the responses are often overwhelming (for example, think of all the people who applied when McDonald’s recently had a major hiring event). Job fairs are always packed and people are trying all sorts of ways of getting jobs-even the media is giving unemployed people a chance to pitch themselves for jobs on the national news. Most people want to work and most people do not want to be poor. When people I know have faced unemployment, their first response is to try to get a new job. As such, the lazy fellow who wants to be poor and unemployed is not a member of the majority, but does provide a convenient straw man for certain people to bash as a representative of the majority of unemployed. The vast majority of people want to work and it seems reasonable to expect that of them.

Of course, many people cannot find jobs (especially certain minorities) despite their efforts and their qualifications. What, it is fair to ask, should be expected of such people?

Cain’s view seems to be that they should be expected to find jobs (and also become rich) and any failure to do so is their fault. But, is this a reasonable expectation?

One obvious point of concern is that thanks to the misdeeds of certain people in the financial sector, the economy is still in rough shape. While Cain is willing to say that these people had some role in the troubles, his view is that they can no longer be blamed because this is 2011 not 2008. However, the impact of 2008 (and before) clearly remains. People who cannot get jobs because of the recession would largely seem to not be at fault. Expecting people to easily find or create their own jobs under such conditions would seem to be asking more than the average person is capable of achieving. The fact that some people are able to do so does not change what can be expected of the many. To use an analogy, the fact that I have students who could do well if I taught my undergraduate classes at a graduate level does not entail that I should expect the average student to be up to that challenge.

Another point of concern is that companies have not been hiring (despite being flush with cash) and have often sent jobs overseas and/or downsized. Presumably the mass of workers cannot be held to blame for these practices. As noted above, it seems unreasonable to expect the average person to easily overcome these challenges.

A third point of concern is raised by the Republicans and Cain himself, namely that Obama and the liberals have been destroying jobs. If this is true, then it would seem that at least some of the unemployed are not too blame. Unless, of course, we want to blame the unemployed for the liberals and Obama. This, I suspect, would play well on Fox.

Not surprisingly, people like Cain will point to examples of people who arose from humble origins and became rich. Such people are, of course, often worthy of praise and serve as examples of what exceptional individuals can do (with some luck). However, our general expectations of what average people can do should not be set by the rare exceptions but by the capabilities of the average people. To use an analogy, the fact that some folks can run the marathon in close to two hours does not prove that we can expect average people to do that. Rather, we can expect average runner to run an average time.

One of the main dangers of the “blame the poor” ideology is that it can be used to “justify” reducing or eliminating social safety nets and opportunity enablers (such as student aid). After all, if the unemployed are entirely to blame for their unemployment, then it would seem to make no sense to offer unemployment benefits. If people are to blame for not being rich, then it would seem to make to sense to offer poor students Pell grants and other aid-after all, they should be rich enough to afford Harvard and, if not, it is their own fault.

Naturally, it is possible to err in the other direction and provide unneeded support. However, the greater harm would seem to stem from not assisting those truly in need than from allowing some who are not in need get a little free cheese.

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Jobs

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Seal of the President of the United States
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While things could have been worse, August was rather disappointing in terms of employment. There was no job growth that month and the unemployment rate was 9.1%. On the positive side, at least the economy did not sink even deeper into the pit.

On obvious point of concern is the cause (or causes) of this problem. Going back a bit in time, the folks who wrecked the economy with their financial misdeeds would seem to bear a considerable amount of blame. Of course, some of the damage that was done was caused by actions that, at the time, were actually expanding the economy in some ways. However, this expansion proved to be mostly “air” and not substance-that is, yet another empty bubble.

The blame for the continued unemployment woes cannot be placed entirely on past actions. After all, it seems sensible to believe that some factor or factors are keeping employment from rebounding as well as the profits for companies has rebounded.

Many folks blame Obama. Blaming the President is an old tradition and, of course, the Republicans have been busy trying to convince Americans that Obama is at fault. On the one hand, this can be seen as an unfair charge: while the President has significant powers, control over employment is not one of them. On the other hand, the President can do (or not do) things that would have some impact on employment.

It has been claimed that unemployment is staying high because corporations are burdened by taxes and regulations. As such, Michelle Bachmann has said that she would cut taxes for corporations and get rid of regulation, including the entire EPA. On this view, Obama is an obstacle because he has been unwilling to cut taxes even more and has not dismantled the EPA.

The obvious flaw in this view is that corporations are doing exceptionally well now. They are, in general, enjoying significant profits and executive  salaries and bonuses are quite fat. They are not, however,doing much hiring, even though they clearly could be doing so. At the very least, executive salaries and bonuses could be trimmed slightly and the money could be used to hire workers. For example, if a CEO received the average “compensation” of $11 million, s/he could give up $1 million and that would pay for 22 workers at $45,000. True, asking someone to give up 10% of their compensation so 22 people could have jobs might be seen as asking too much. To some, it would make far more sense to fire state employees or cut their salaries and cut programs so that the corporations can pay even less in the way of taxes. After all, those who have less should sacrifice for the good of those who have so much more. Also, some of the state workers who are fired might be hired by the corporations. Or not-perhaps the corporations would simply take the tax cuts and enjoy even larger profits by not hiring people.

To some, it would also make sense to eliminate regulation, such as environmental protection. After all, without such regulations corporations could operate with lower costs and hence make more profits. Naturally, the costs that the companies paid in regards to safety, environmental protection and so on would now be passed on to everyone else (such as the folks who breath the air and drink the water tainted by the coal industry). But, for some folks passing on the costs to those who have less so that those with more can have even more is perfectly sensible. After all, this will create jobs. Or maybe not. Corporations might simply look at their savings and decide to keep the money as profit rather than pay it out in wages. After all, they are doing quite well now and yet not hiring and thus there is no reason to think that if they just had a bit more money that they would suddenly start putting up the help wanted signs.

As such, a large part of the blame for the lack of hiring would seem to rest on the corporations. They could hire people, but chose not to. The talk about taxes and regulations is, rather clearly, a clever ploy to get what they want. While some people argue that we need to make sacrifices to lower corporate taxes and decrease regulations, it seems more reasonable to ask corporations to “sacrifice” a bit and hire people to make money for them.

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Unemployment in Florida

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MIAMI - DECEMBER 08: Florida Governor-elect R...
"Get a job."

While being unemployed is always tough, it is about to get tougher in my state of Florida. While most states provide 26 weeks of full unemployment benefits for those fired without fault, Florida will reduce that to 23 weeks. There will also be sliding scale of benefits based on the unemployment rate in the state. If unemployment reaches 5%, then the full benefits run out after 12 weeks.The main purpose of the bill is, it appears, is to reduce the unemployment tax on businesses.

Doug Holder, the House Republican who sponsored the bill, argued that the bill would not be harmful to the unemployed. His reasoning is that since the average unemployed person finds a job in 17.7 weeks, the unemployed will have a “cushion” between 17.7 and 23 weeks.

While this has a certain appeal, it is important to take into account the hazards of reasoning from averages. While averages can be useful, they can also be rather misleading-as the old joke about the average depth of a river attests. Knowing that a river has an average depth of three feet, for example, does not entail that a person can simply wade across it.

Likewise, knowing that the average unemployment length is 17.7 weeks does not automatically entail that most people will find jobs at the 17.7 week mark. Assuming that the number is accurate and that it is a mean (there are numerous types of averages), there is still a reasonable concern that the benefits could run out before a significant number of people are able to find a job (just as a person wading across a river with an average depth of three feet might find herself swimming).

The fact that the benefits slide with the employment rate is also a point of concern. After all, even if the unemployment rate is 5%, this does not entail that it will be considerably easier to find a job for the 5% who are unemployed.

In addition to reducing the duration of benefits, the bill is also aimed at making it easier for businesses to challenge claims from workers they have fired and also making it harder for the unemployed by imposing stricter job search requirements on the jobless.

While it is reasonable to ensure that the jobless do not exploit the system, it is equally important to ensure that businesses do not exploit the system. After all, if businesses can save money by seeing to it that people they fire do not receive unemployment, they have an incentive to make this happen. By making it easier to do this, this bill would certainly seem to encourage such behavior.

For those who say that businesses would not do such a thing, the argument for both the easier (for business) and the stricter standards (for the unemployed) is that there are jobless people who seek to exploit the system. To assume that only the jobless are exploiters and the business people are far more virtuous would certainly be a failure to understand reality. As such, if protection is needed against the misdeeds of the jobless, it would also seem to be needed against the misdeeds of business people.

It is a common, and unjustified, assumption that people are eager to remain jobless so as to milk the system. While there are no doubt some people who do this, the overwhelming majority of people want to work. For example, when McDonald’s was hiring recently, the turnout for even the lower-end jobs was overwhelming. There are, of course, some people who are happy to rake in public money while doing little good in return. These people are, of course, politicians.

As noted above, the main purpose of the bill seems to be to reduce the unemployment tax.  This is presumably calculated to encourage business. Holder makes this clear: “The most important thing for us in Florida to do is to send a message to the business community and let them know we’re open for business.” Clearly this is more important than ensuring that the unemployed are not abandoned before they can find employment.

To be fair to Holder and folks in business, if the cutting of benefits leads to a higher overall employment rate that offsets the lost benefits, then this would be a good idea. It is clearly preferable to have someone working rather than on the public dole. That said, it is reasonable to be concerned that the tax cut will not have enough impact on the unemployment rate. After all, the economy has been rather good for big business and yet this has had little impact on unemployment. It would thus be hardly surprising if businesses merely pocketed their tax savings rather than using it to create new jobs.

While the details might be devilish to work out, I would suggest that business get an unemployment tax reduction based on their hiring and firing rates. Businesses that create and retain jobs should be rewarded for this by having to pay less unemployment tax. After all, by creating and keeping jobs they are keeping people off the dole and also creating taxable income. Businesses that cut jobs should, in contrast, pay more unemployment tax. However, I suspect that the politicians who are very friendly with business folks would not favor a law that actually linked employment to tax cuts. After all, the agenda of Rick Scott and his ilk seem to be to transfer as much wealth as possible from those who have little to those who have the most.

If I did not have a meaningful job, I would seriously consider trying my hand at politics.

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Unemployment Benefits

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U.S. Job Seekers Exceed Openings by Record Ratio
Image by Renegade98 via Flickr

While it seems sensible to most to extend unemployment benefits, there has been some serious debate about this matter.

One stock argument for not extending the duration of the benefits is the cost. For fiscal conservatives, this does make sense. After all, this will cost the taxpayers more money than it would if the benefits were not extended.

On stock reply is that the money can be raised by taking out more loans rather than by raising taxes now. While there is something to be said for solving today’s problems by creating tomorrow’s, creating more debt seems to be a sub-optimal solution to the problem.

Laying aside the problem of where the money will come from, there is also the important question of whether extending the benefits is a good idea.

One argument in favor of extending the benefits is that the state has an obligation to serve the good of the people and protect them from harm. Being  unemployed is clearly a threat to the well being of a citizen and, as such, it would seem to make sense for the state to provide security in this area. Of course, there is considerable debate about what sorts of harms the state should be in the business of addressing.

It can also be argued that we have a moral obligation to aid the unemployed based on moral obligations to other citizens and our fellow human beings. In many cases a person’s unemployment is no real fault of his own and hence he can be seen as victim of a man made disaster. Just as we would not begrudge survivors of an earthquake aid, we should not do the same to the victims of the economy.

As I see it, this is the most compelling argument. While there are people who are content to milk the system, most people prefer to work, if only because a job tends to pay better than the government benefits. If supporting a few sponges is part of the price of helping out people who are truly in need, then that seems to be an acceptable cost. I would like to think that we are compassionate and ethical enough to sustain our brother and sisters in their time of need. Also, to be a bit selfish, almost anyone of us could be in their situation. And, on that day, we would surely not wish to be abandoned.

There is also a practical argument being put forth by proponents of the extension: unemployed people who receive additional support will spend this money and this will help keep the economy going. It can be added that this is better than simply dumping money directly into businesses because it also helps unemployed citizens.

Since the money in question must ultimately come from the taxpayers (either via taxes now or later taxes to pay off loans taken now), this can be seen as a money game: money is taken from the taxpayers (now or later) and given to unemployed people so they can spend it to keep other people working…so they can pay the taxes needed to provide money to the unemployed so they can spend it. Obviously, this cannot work very long as a closed system and money must come in from parties other than those who jobs are kept going by the spending of the unemployed. As such, this aspect of the economy would have to be sustained by loans or by the taxes paid by other people.  However, this system might last long enough for the unemployment problem to turn around.

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Bringing Down the World

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Coat of arms of Greece.
Image via Wikipedia

While the economic crisis hit the United States hard, it hit Greece and some other European countries harder. Greece seems to be the worst off-there has been rioting in the streets (never a good sign).

While Greece once enjoyed an excellent rating from a financial standpoint, the evidence seems to be that the country was cooking the books with the aid of certain financial companies. The gist seems to be that Greece was hiding its debts in a way that enabled it to maintain  a good rating when, in fact, it was high risk. This is, of course, all part of the pattern of how the financial evil magic of Wall Street enabled economic chaos to rip through the world.

Interestingly enough, most (if not all) of this seems to be completely legal. This is hardly shocking, since the folks who write the laws are rather close to the Wall Street folks (identical, in some cases-which is as close as one can get).

What is most interesting is that failed terrorist attacks stir up far greater concern and responses than the financial misdeeds that have done so much damage. Of course, the financial folks are not considered terrorists. After all, they do not aim to create fear and terror. The fear of unemployment, the terror of losing one’s house, the horror of riots and financial collapses are merely the side effects of their misdeeds.

In response to the Greek situation, other countries have stepped in to provide money. This includes money from American taxpayers. In short, the rest of us are being forced to pay for the misdeeds of those who profited from creating this financial nightmare. Worse, little or nothing is being changed to prevent it from happening again.

At this point, I am not claiming that this is the start of the downward spiral of Western civilization. That is a matter for historians to sort out after the collapse. However, financial ruin is a good place for the end to begin. Thank you Wall Street for your contribution to bringing down the world. Enjoy those profits.

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