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A conservative is a liberal who has been mugged, $600 per week extra unemployment benefits edition

A conservative is a liberal who has been mugged, $600 per week extra unemployment benefits edition

Last updated on: March 27, 2020 at 7:59 am by Jane the Actuary

A conservative is a liberal who has been mugged, $600 per week extra unemployment benefits edition 2020-03-27T07:59:18-06:00 Jane the Actuary

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From a local grocery sales circular, March 25, 2020

“A conservative is a liberal who has been mugged by reality” — Irving Kristol.

“If you’re not a liberal at twenty you have no heart; if you’re not a conservative at forty you have no brain.” — unknown.

Folks, the stimulus/relief bill I wrote about earlier this week finally passed, in its somewhat less pork-laden Senate version. And at the time I was so angry about the Democratic wishlist provisions of the House bill ($15 minimum wage, board representation by workers on large companies, etc.), that I was just relieved that the more extreme version didn’t come to pass. Sure, the new bill has lots of giveaways, and I think the notion of cutting $1000 checks for everyone at a time when the key issue is that large portions of the population are not simply unemployed but prevented from working, is really not the right answer.

But there’s one thing that troubles me in particular: the provision in which every unemployed person, up to the end of July, receives an extra $600 per week from the federal government. This is not “up to their full salary.” This is regardless of their prior salary.

This is just mind-blowing. This works out to $15 per hour. For a good half of the population, they would receive more income by losing their job than keeping it, or by finding a new one.

Here are some of the ways people are defending it on twitter:

“But you can’t quit your job and get unemployment, you have to be laid off.” True, but workers will be angling to get laid off. Strictly speaking, you can’t be fired “for cause” and get unemployment, but I don’t know whether all the usual checks to prevent that will still happen. And in any case, there’s not a clear line between the two situations; will small businesses jump through all the hoops needed to collect government money if they know they can lay off workers without causing them economic harm instead? Will workers do their best to keep the business going if their buddy who got fired is celebrating more money per week than he’s ever gotten before? And “unemployment” is also defined as “unable to work because your kid is home from school” — which for many people, is something under their control, in terms of how hard they work at seeking accommodations, which parent stays with the child, at what age they deem the kid old enough to care for themselves, etc.

“But there are no jobs for people to go to, and people shouldn’t be working.” Listen to the radio: Amazon is advertising their need for workers. In the paper the other day was a call from the local grocery store: “We’re hiring at all our locations – immediately! Work for us as long as you need. We WILL be flexible with any needs you have at home.” And these are jobs that I think we can all agree that people are needed to fill; we need workers to stock grocery store shelves and man the registers (and wipe the carts!). We need workers to process online orders for all the goods we cannot get by going out to the store.

“But if you are unemployment, you have to be looking for work and have to accept job offers or you lose your benefits.” Given the circumstances, will these provisions really be enforced?

“But it would have been too hard for states to reprogram their computer systems so we had to do a flat amount.” This was something a Washington insider claimed on twitter. Look, I’m not an expert. But how hard would it have been for states to have sent datafiles with not just names of claimants, but their past salary?

There is a huge moral hazard issue here — a massive incentive for the lower-income half of the workforce, and the comparatively lower income portion, beyond that, to enjoy the extra benefits and as a result, act in ways that cause greater harm to the economy and the well-being of those around them.

And, again, near as I can tell, people don’t see that because they either

(a) believe that state government runs like a well-oiled machine and will ensure that all UI recipients perform their duty to look for work and accept it if offered, and will judge “suitable work” appropriately, and/or

(b) believe that all workers hold themselves to the highest ethical and “work ethic” standards and will forgo the ability to sit at home and collect more money than otherwise, in order to serve others by stocking the shelves at the local Jewel —

plus maybe a few who believe that

(c) if this causes employers to bid up wages so high that the math works again in favor of taking jobs, then that’s a good thing (with no inflationary consequences),

and there may be some whose income is so high that (d) they think that $15 per hour is a trivial sum and don’t see why it would cause anyone to be concerned.

So readers, what would you do, if you were in this situation?

Uncategorized

coronavirus

moral hazard

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