Economic insanity...

Dangerous Keynesian Thinking on Unemployment

Robert Wenzel

The Washington Post has published an op-ed co-authored by Rick McGahey and Teresa Ghilarducci who are professors of economics at the Schwartz Center for Economic Policy Analysis at the New School in New York. The article is titled, Five myths about the unemployed.

Let's take a look at some of these "myths." McGahey and Ghilarducci write:

[Myth]People who receive unemployment benefits are slow to search for work.

This oft-repeated statement might have a chance of being true if benefits were unduly generous. They aren’t. Weekly unemployment insurance payment averaged $300 in 2010 and 2011, federal statistics show.
First of all M & G are misleading here in simply looking at unemployment benefits, almost all those on unemployment benefits receive food stamps (SNAP). But let's for a moment consider things relative to a $300 per week payment. Someone working 40 hours a week would have to earn $7.50 per hour to make a gross payment of $300 per week. Net would require a significantly higher hourly wage because of payroll taxes, etc.

Currently, the federal minimum wage in the U.S. is $7.25 per hour, so for a minimum wage worker there is absolutely no incentive to get back to work. The more a person can earn on an hourly basis, the less likely he is to stay on unemployment, but for the low wage earner, the incentive is to suck every penny of unemployment money that is offered, given the amount of current payouts.

Thus, it should come as no surprise that the least skilled have the highest unemployment rates. 12.7% of those without a high school diploma are unemployed, 8.4% of those with high school degrees but no college are unemployed, 7.4% of those with some college are unemployed and only 4.2% of those with a college degree are unemployed.

Many attribute this unemployment difference to the educational level itself of workforce members, but could it be that the lower educated, who are likely to be the least skilled, simply have more incentive to stay unemployed, given what they would earn working versus what they can earn on the dole?

D&G also write:

[Myth] Onerous regulations cause jobs to disappear.

Anti-regulation advocates say rules always bring increased costs and sometimes drive economically shaky firms out of business. But sophisticated studies don’t support their claim.

To take one example: Pollution-abatement technologies often create demand for skilled labor and financial investment. Studies have found that when regulators required power plants to install scrubbers in their smokestacks, it created incentives for innovation that lowered the costs of operating the anti-pollution equipment.
Sure, tighter regulations on carbon emissions will affect the coal and oil industries, but those same rules bring jobs in wind and solar plants. Jobs aren’t necessarily destroyed — they are moved around.
This is misframing the problem. The problem is not about businesses put out of work because of regulations. The problem is regulations on on-going businesses that make it dangerous for firms to bring on new employees because they don't know what the costs of bringing on such employees will be given that payroll taxes, business taxes and healthcare fees are all up in the air and are all likely to be higher.

What's up with M&G are trying to knock down these supposed "myths"? They are both big government Keynesian interventionists, who believe more government spending is the cure for all social and economic ills. They give away their biases in their closing comments:

We are stuck in a slow recovery. Congress needs to extend emergency benefits again, but most important, it needs to enact more economic stimulus to help create jobs That will drive down our excessively high unemployment rates.

Link:
http://www.economicpolicyjournal.com/2012/12/dangerous-keynesian-thinking-on.html