Tuesday, May 17, 2011

Reflections on the (Real) Unemployment Rate (part II)

In our previous post we discussed the government's dishonest economic figures, that seek to obfuscate the true level of unemployment. While it would be quite challenging to determine what portion of unemployed Americans pass up jobs that they consider below them, anecdotal evidence leads me to believe that this figure is high. A young and healthy neighbor of mine bemoaned his unemployment, yet (unlike many local Mexican & Polish immigrants), it did not even cross his mind to pick up a shovel during the great storm or a rake during autumn and make some money. So, to a certain degree there is truth in the statement: "immigrants do jobs that Americans won't do." 

But, rather than simply accept this as a given, it should serve as the beginning of a broad discussion on culture, work and welfare. The first question should be "how did we arrive at this point?" The second and more important question should be "is the widespread preference for welfare over work economically and socially sustainable?" And lastly, "what can we do to change this reality?" It's stunning how so few mainstream "experts" have failed to seriously explore these questions. I assume that only a minority of these individuals enjoy living in a state of idleness and dependency. It is more likely that their choices are driven by the belief that they are entitled to economically and personally rewarding employment, regardless of the time and energy they invested in developing marketable skills and regardless of the availability of such positions. And in many cases a distorted incentive system has made it all too easy to choose this option. While economists are troubled by the under-utilization of skilled labor (i.e. the engineer who is forced to become a cab driver), it makes zero economic sense to spend scarce public funds to allow low skilled workers to opt for unemployment over work that reflects their level of education and ability. And equally it makes no sense to import workers to fill low skill positions, while millions of American laborers are unemployed.

A sustainable employment policy would push the unemployed to choose one of two paths: develop skills that the market demands or "take the jobs that Americans won't do." To put it simple, after being unemployed for X amount of time, you would be mandated to take any available job. An economically sound approach would focus on  increasing human capital by shifting resources away from unemployment benefits towards education and job training. Such a policy would encourage and generously subsidize students and unemployed adults to pursue fields with low unemployment rates, such as engineering, medicine and mathematics. Those who were not so academically inclined would be encouraged to enter blue collar trades with comparatively low unemployment. More than anything we must reinforce the belief that all honest labor is preferable to sloth and dependency. No American is above washing dishes and picking fruits, unless ill conceived government subsidies allow them to be. We cannot escape the consequences of forty years of wanton spending, waste, warfare and unsustainable entitlements. But, if we work hard, exercise thrift, save and invest, perhaps our children will regain the path to the American Dream.

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