The Great American Job Machine

international | anti-capitalism | opinion/analysis

Tuesday December 09, 2003 16:50

by Rightteous pragmatist

The American economy is destroying jobs, and that's a good thing.

It is in destroying jobs that the economy improves and makes it possible for the standard of living of all Americans to increase.

This constant churning means that even a "stagnant" American job market is extremely dynamic, and that the ranks of the unemployed are not necessarily the dispossessed of the earth, as Democrats tend to portray them.

Keep this in mind as Congress gears up for a debate on whether unemployment benefits should be extended beyond their normal six-month term for the fourth time in the past two years. Democrats will attack anyone opposing this extension as a heartless extremist attempting to trample on the poor. But an extension of benefits might, perversely, prolong unemployment, and it will serve to dampen the dynamism of the American economy, which is its greatest asset.

In any given year, roughly 10 percent of all jobs in the American economy are destroyed, while an equal number rises up to take their place, according to the latest Economic Report of the President. The trick, of course, is to create more jobs than are lost. Since 1980, according to Michael Cox of the Federal Reserve Bank of Dallas, "Americans have filed 106 million initial claims for unemployment benefits, each representing a lost job." But during the past decade, the economy has still added a net 40 million new jobs.

Even when the economy isn't creating net new jobs, as has been the case recently, it's creating new jobs. Payroll employment was stagnant last year. But between 3.5 million and 5 million workers entered new jobs each month in 2002. Even during a "jobless recovery," the majority of workers looking for jobs in any given month is different from those workers seeking jobs the next month.

Since 1970, the median duration of unemployment has been 6.6 weeks when the economy is growing, and 8.2 weeks immediately following a recession. In roughly 40 percent of cases, the period of unemployment is five weeks or less. So the unemployed aren't a single class of people, but a group constantly changing as people cycle in and out.

In many cases, job turnover — although painful — is a very good thing. It is by switching jobs that people learn new skills and find a better match for the skills they already have, thus earning higher wages. A typical young worker has seven jobs during his first ten years in the job market. A third of that worker's wage growth will occur when leaving one job for another.

Public policy should be leery of anything that discourages this churning in the job market. (Otherwise, four out of 10 of all Americans would still be working on a farm, as we were a century ago.) Because unemployment benefits essentially subsidize unemployment, they can have this effect, encouraging people to stay unemployed instead of jumping back into the job market.

One study shows that each additional week of unemployment benefits increases the time a person spends unemployed by a day. Indeed, the unemployed are twice as likely to find a job in the week before their benefits expire than in the weeks prior. Makes you go, "huh," doesn't it?

People respond to incentives. Experiments in a few states have shown that giving a re-employment bonus to the unemployed speeds up the time it takes them to find a new job by roughly a week. Europe has longer and more generous unemployment benefits than the United States — and also chronically higher rates of unemployment.

So, as the economy begins to purr and the unemployment rate dips, the last thing the government should do is give people a disincentive to join in the great roiling American job market. Opposing an extension of unemployment benefits isn't heartless, but an act of well-placed faith — in the dynamism of the American economy and in the resourcefulness of its workers

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Comments (3 of 3)

Aye, we're roiling away...

by gb waldschmidt

Sat Dec 20, 2003 23:28

had to go to an Irish site to get handy links on the fiasco down south in Miami.

oh- we're roiling in new jobs for sure.

so speak the politicians at their $1000-a-plate fundraisers, "...we're creating more and more new jobs..."

"I know," mumbles the waiter, balancing the plates. "I have three of them now."

Come and get yer $5-per-hour American. And thank you for shopping at Wal-Mart.

Ah yes, forcing people into soul destroying employment is a good thing

by David

Fri Dec 12, 2003 23:11

Why didn't i realise this before?

Job losses are a good thing because they help create jobs?
No, job losses are a good thing because they force workers to accept rubbish conditions in order to survive. they're a good thing for the people so wealthy that they can not possibly spend the money they already have so they need to "earn" more and tightening the chains of wage slavery help achieve this noble cause

American jobs

by Ed Lee

Fri Dec 12, 2003 23:01

I know i read somewhere that America has on average the lowest wage-earning jobs in the western world. That's not surprising since a tiny minority of elites own the majority of the wealth. Good for them.

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The Great American Job Machine

Comments (3 of 3)