Today’s Wall Street Journal has both an editorial and a “Notable and Quotable” section promoting the idea that reducing or eliminating unemployment insurance benefits drove employment in 2014 and “created some 1.8 million jobs.” In “President Costanza’s Jobs Boom,” the @WSJ editors reference three economists at the National Bureau of Economic Research, Marcus Hagedorn and Iouril Manovskii and Kurt Mitman who treated the December 2013 benefit cutoff as a “natural experiment.” They compared the reduction from an average of 47 weeks of benefits to 27 weeks nationwide, as well as counties with different benefit levels, and found that:
“The cut in unemployment benefit duration led to a 2% increase in aggregate employment, accounting for nearly all of the remarkable employment growth in the U.S. in 2014.” (This is the first time I have seen 2% referred to a remarkable growth but that’s another issue.)
The editors go on to say:
“Notably, job growth improved most in states and counties that offered the most generous benefits before Congress took away the punch bowl. This suggests that the extra jobless benefits reduced the incentives for businesses to create jobs and for jobless workers to fill the vacancies.”
Not All Work Is the Same
I assume this means that a plethora of jobless workers desperate to do anything for any wage creates jobs. It also means that, to the editors, a job is a job is a job. They’re fungible, interchangeable and generic. Work is work. But not all jobs are created equal.
Ironically, The Wall Street Journal’s Lauren Weber made precisely this point in 2012 in an article called, “Not All Jobs Are Created Equal.” In it, @laurenweberWSJ said, “The year’s best jobs boast a good work environment, high salaries and are relatively low stress.” She references a study done by CareerCast.com, a career website owned by Adicio Inc., that ranked 200 jobs from best to worst, using data from the Bureau of Labor Statistics and other government agencies. The jobs were ranked based on five criteria: physical demands, work environment, income, stress, and hiring outlook. The Top 10 Best Jobs of 2012 were all career-level positions that require high levels of training and education. Not one of them is available to people just because their unemployment benefits have run out.
A person who loses his or her job usually applies for benefits and then begins looking for a job. If the economy is good and jobs are available, the process takes a few weeks to a few months and then ends with a new position. If the economy is not good, however, the person faces a choice:
- Option One: Collect benefits and keep looking for a job equal to the previous one at approximately the same salary.
- Option Two: Stop looking and take whatever job is available at whatever salary it pays in order to keep the lights on and food on the table.
Most people choose Option Number One at the beginning precisely because not all jobs are created equal. It makes more economic sense to try and find a new job that pays what the old one did because that’s the best way to pay the bills—not to mention continue in your career.
When benefits run out, however, the model changes. Option Number Two becomes mandatory: take a job, any job, and bring in some money. But the jobs that are available are entry-level, retail, or minimum wage positions.
These jobs do not pay the mortgage and taxes on a house that you bought with your professional salary, so you need two or even three of them to make ends meet. Employment increased last year and people went back into the workforce because they were desperate, not because they lacked incentives to work.
Movement is Life
Having said that, I will add that doing those jobs when you’re out of work has some benefits. I discussed this in one of my Unemployment Over Fifty posts, “Movement is Life.” There are advantages to getting out of the house, doing something productive, earning some money and feeling wanted,even if it’s not at a professional level. This does take time, however, and that mean your underemployment job prevents you from finding a career-level position. It’s a trade-off, something the WSJ’s editors fail to mention.
What I do challenge completely is the economists’ conclusion, stated in the “Notable and Quotable” called “The 2014 Employment Miracle:”
“In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.”
No statistics were provided in either the editorial or the N&Q to buttress the assumption that the job was actually created. Because a desperate person takes a job that pays far less than a career position, does not mean that the job was created—only that a job already available was filled.
I only wish that the gainfully employed and very well-paid editors of @WSJ actually had to face this decision and make the trade-off themselves. Given their compensation packages and investment portfolios, I doubt that would ever happen. But it would certainly teach them not to equate the job they have now with stocking shelves at Home Depot, greeting people at WalMart, flipping burgers at McDonald’s, or running a cash register at Piggly Wiggly. And it might disabuse them of the notion that a job is created just because a desperate person is willing to take it.