Thursday, August 11, 2011
Carney: Unemployment Benefits Could Create Up To 1 Million Jobs
Okay, I am not a Wall Street Journal writer so someone help me out. How does extending UE or even giving out UE benefits out create jobs let alone 1 million jobs. For if that were the case wouldn't our unemployment rate be below 8%? When I was laid off I had UE benefits but every cent went toward the house payment. I don't think my mortgage payments allowed Citi to hire more employees but I could be wrong. So again, please, someone let me know how this works and how a Ivy educated man in Obama can think this works.
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The way you've posed your question suggests to me that you don't really want an answer, but I'll take a chance anyway. UE benefits create jobs due to what I've heard called the "multiplier effect", where money put in the hands of those who will spend it generates demand, which requires retained and added employment to fulfill. The converse (divider effect?) is easy to see, where people losing jobs and curtailing spending reduces demand and precipitates additional layoffs. I won't defend the specific claim of "up to" 1 million jobs, but the basic idea is valid, and has worked before in our history (the last few years of the Great Depression, for instance).
ReplyDeleteConsidering your argument against, I'll say that 1) your particular situation is not necessarily typical of the average UE recipient. 2) even though "every cent" of your benefit went toward the mortgage I imagine you ate occasionally, maybe bought gas for your car, possibly paid other bills. Where did that money come from? Did the UE money free it for those other uses? 3) Why do you think money paid to Citi Bank has no affect on its willingness/ability to retain or add employees?
One additional comment on your statement that the unemployment rate should be lower if this idea were valid: Is it not possible that the current rate is, in fact, lower than it would otherwise be without UE benefits?
Older_not_wiser - I am looking for specific examples on how this example will work. We have had this before and we did not see a decline in the unemployment rate. I'd like to see the times it worked as you allude to.
ReplyDeleteI don't think I am atypical when I was receiving UE benefits. You are correct that I did eat, put gas in the car and other things but that was because my wife still had her job. I do agree that people will continue to spend that money but it does not generate new demand for product; rather at best it sustains demand to a degree.
Citibank still shed jobs during the time that I was on UE benefits that is why I don't think my payment helped.
You realize that if we add 1 million new jobs into the market it should move the needle, right?
Ardent Viper - Take a look at some agenda-free analyses of the Great Depression. That spending wasn't unemployment insurance per se, but programs with the same effect: putting money in the hands of people who will (must, really) spend it. Again, I won't defend the specific claim of 1 million jobs added. Like most forward-looking statistics that come out of Washington, it contains a component of wishful thinking. "Up to".
ReplyDeleteGoing back to my initial skepticism of your motive in posting, if you're looking for "here's what we spent and here's the x number of jobs it created" you will never find it. If you use that as your criterion you are free to go on believing that UE benefits cannot stimulate demand. The US economy is an enormous entity, driven by an uncountable number of individual decisions. It's enormously difficult to find unadulterated cause and affect. But as Jay Carney said, there is little the government can do that more directly affects economic activity than giving money to people who can't help but spend it. If you're willing to acknowledge that UE benefits can prevent further decline it's not such a leap to see that they can reverse it.
It's basic economics.
ReplyDeletePeople who are on UE spend all that money on bills to live. Those bills are paid to companies that employ people. So UE generates jobs as well as maintaining others through the multiplier effect of that spending in the economy.
"but it does not generate new demand for product; rather at best it sustains demand to a degree."
ReplyDeleteYou answered your own question. Demand, by definition, creates jobs. People purchase products. That purchase creates demand within the economy. Some of that demand is non-incremental some is not. Demand, even stable demand, creates jobs because corporations must purchase products to fulfill your demand. If you maintain demand and the economy grows through natural means (as it must with populations and the natural demand cycle of those bodies) then demand will invariably increase - increasing demand.
In other words, by maintaining demand by the people who are on UE, you increase demand by utilizing the new entries to the economy as incremental rather than as an offset to current declines that would occur from lack of UE.
Most economists feel that UE generates an economic value of 1.4:1. That means that for every $1 invested in UE, that dollar generates $1.4 in the economy for a 40% return on investment.
Very few things the government can do generate any economic value, so generating 40% lift for every dollar spent is something that cannot be overlooked in an economic recession.
I've always found it odd that you rail against UE but yet you take it when you are unemployed. How do you rationalize this illogical contradiction in your stance?
*"then demand will invariably increase - increasing demand."
ReplyDeleteShould read - "then demand will invariably increase - increasing jobs."
If UE benefits create jobs then why have we not seen millions of jobs created with previous extensions and other tax withholding changes? How will this time make a difference? As for me taking UE benefits, I did that to keep a roof over my families head while I looked for a job and I took a job for what I was getting on unemployment.
ReplyDeleteI am with Viper on this one. UE benefits may sustain some business but it does not lead to growth. How can it? How can someone getting only 60% of their prior salary/wage help create jobs in this manner?
ReplyDeleteI get the economics of WHY you took UE, but isn't it hypocritic for you to then rail against UE when you have partaken yourself? Based upon your philosophy, shouldn't the government have let you lose your house rather than interfere with your failure to plan for the possibility of losing your job?
ReplyDeleteYou preach personal accountability. This seems to fly in the face of that concept.
And UE generates a multiplier effect of 1.4x it's dollar investment based upon what I've read. That is growth no matter how you slice it. The fact that the growth contributed may be offset by declines elsewhere in the economy is not an indicator of UE not generating growth. It's a mathematical certainty if the return on investment is 1.4x.
Sorry, math doesn't lie only statisticians do.
Different anon, as Jay Z says: "Men lie. Women lie. Numbers don't."
ReplyDeleteThe last time we had an extension of UE benefits the White House estimated that without the benefits we would have seen a 600,000 less jobs and seen the GDP lower by .6%.
ReplyDeleteI am not a hypocrite for taking the UE benefit as when my benefits were about to run out I didn't picket or beg the government to continue the paycheck. Instead I found a job that paid me the same amount I was getting while on UE.
The same report I cited above said that GDP increase .8% in 2010 when the last UE benefit extension took place. Is that really the best use of our money? Can we implement plans with greater increases in GDP? What are states doing that increased employment, like Governor Perry?
I still don't see how my personal story is me not being held accountable?