Sunday, July 18, 2010

Personal Opinion enclosed---Republicans need to support extending Long-Term Unemployment Benefits NOW!

     Should the Republicans stop blocking the passage of a bill that will further extend unemployment benefits to the long term unemployed?  In all introductory economics textbooks, students learn is that if unemployment benefits are increased then people, especially, but not exclusively, at the lower-end of the pay scale, will respond to this incentive by taking more time to find another job. If you look at the differences in unemployment compensation offered by many European countries (which are relatively generous) compared to the US and Japan, you will see that the European countries experience persistently higher levels of unemployment.  Unemployment compensation is not the only cause of this, but it is certainly a contributing factor.  While the unemployment compensation, in general, does not 100% replace the working pay, it is enough to allow people to extend their search for a more "ideal" job. 
    Having said that, it is obvious we live in interesting times right now.  It appears that the bromide "a job is a job is a job" is no longer apropos (if it ever really was) and applying learned/current labor skills in lateral industries is increasingly difficult.   There is a continuing shake-out on the Aggregate Supply-side of the economy, as certain industries contract and the re-deployment of those resources (human, physical/financial capital, production capacity,etc) takes place.  Some of those resources are fluid and can go to other uses rather easily, and some are high static and not "fungible" and take more time, if ever, to find a new productive use. 
    Labor/skill specialization and advancements in production technology have converged to squeeze lot of people out of the pool of workers needed for current jobs.  This form of unemployment is called "structural unemployment", meaning a worker is no longer needed because his/her skill has been rendered obsolete by the adoption of technology. We can extend this definition to the advancement in processes that lead to efficiencies that allow for fewer workers to do a particular task. For example, the auto worker who operates a rivet gun is replaced by a robotic arm. The worker cannot move to another plant because the technology will be adopted industry-wide. Or a workplace design or innovation streamlines production.  He or she in either line of work is outta luck. 
    One could say, "Ah Ha! He/she can go to the businesses that makes the robotic arms and get a job!".  But does he/she have the necessary skills to make that transition? Where do they get training to do this and feed their families at the same time? What is the time lag between losing a job, training, and finding a comparable pay job? Hmmm...have to put yourself in their position.  The longer one stays unemployed the difficulty in finding gainful employment multiplies exponentially.
   If the economy is booming and jobs are plentiful, then a case can be made for REDUCING unemployment benefits because people can reasonably find a job and limited, if any, social damage would be inflicted on the least amount of people. However, when employment prospects are limited because: (1) the economy is simply not creating jobs  fast enough , if at all (2) there is a re-deployment of resources which is a slow process, (3) workers are structurally unemployed due to technological advances in production, then, I believe, the unemployment benefits have to be extended.  Having said THAT, there has to be a commitment by public policymakers and industry to facilitate training and/or re-training of workers AND a commitment from the unemployed to do so as well.   The social cost, which appears to be unseen to Republicans, of not doing so is too high.  Too much idle human resource creates lots of potential ancilliary social problems Not addressing it promotes uncertainity for those who still have a job and may feel "but for the grace of god there go I". That trepidation is not condusive to inspiring confidence, which, in addition to new jobs, is vital to economic recovery.
   My only question is, "What SERIOUS proposals are on the table to help the long term unemployed that complement the extension of unemployment benefits?"...Not a rhetorical question....
    So, Republicans, vote for this (sorry, it is on the Demand-side)! Democrats---work on this resource re-calculation problem (sorry, it is on the Supply-side).  Get out of your comfort zone and help my country, please and thank you!!
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