Car Breaks Down, Shows The Importance of Extending Unemployment Benefits

When everyday economists sit and think about people who are unemployed, what they model is the idea that someone calls you everyday and offers you a job with a random salary, and whether or not you accept that offer depends on how much you like sitting around watching TV.  Those who put some thought into it might go as far to note that you answering the phone cuts into your “leisure” time, and your “leisure” time might be inversely proportional to how much you look for a job.

This is why an economist like Casey Mulligan can write that unemployment insurance is “making this the year [the unemployed] coach junior’s baseball team” instead of, as Annie Lowrey found at TWI, the year of mental illness and suicide from the displacement that comes with being out of the workforce.

And what’s never mentioned by economists is that sometimes you have to, ya know, drive your car to go get a job, they don’t just magically call.  And sometimes that car breaks down, or it needs gasoline, or it needs regular payments in order to get and then show up for a job. Here’s Arthur Delaney with a sad story:

Over the summer, Congress spent nearly two months debating reauthorization as benefits lapsed for 2.5 million people. Among them was Lori Hancock, a 52-year-old woman in Weldon, Ill. who said she lost her job in November 2008. She received no benefits for two months starting in June and fell behind on car payments.

“I’d been submitting 20 to 30 job applications a week, and finally I got a job. But, after working for only 2 weeks, my car was repossessed, and without any transportation to get to work, I lost that new job,” wrote Hancock in a post on http://www.unemployedworkers.org, a website by the National Employment Law Project. “If Congress hadn’t let those benefits lapse last summer, I’d still have my car and my new job. Now I have neither. What happened to me could happen to almost anybody.”

Think of what a waste that is. For her, who has to restart a job search with even less than she started with. For her employer who lost an employee that could have been productive and the wasted effort of hiring her. For her family and friends who have to see their loved one suffer needlessly. For the macroeconomy which is sputtering trying to get jobs going again. For the community who loses the productive labor she and that job would have provided for even more time. For the company that owns the car debt that now owns a depreciated automobile.  And so on.

The Job Of Looking For Work

The economists Cahuc and Zylberberg put it best in their book, The Natural Survival of Work: “The job of looking for work is one of the most profitable for society as a whole. It ensures the reallocation of the labor force toward the most efficient jobs, and thus constitutes an essential source of growth. The search for a job is thus an economically useful activity; it should be remunerated as such.”

And I’d go further. The act of looking for a job requires a baseline of support, and that baseline is a prerequisite to actually being able to function in the modern economy. A prerequisite to the important ability to find, contract and perform labor, labor which grows the economy and provides benefits for all.  It also doubles as a point of emergency spending whenever the economy needs extra stimulus to kick in.  Insuring our weakest also insure all of us in the macroeconomy.  Go figure.

Many people agree on this.  Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, someone who argues that further monetary policy can’t do anything, wants to see unemployment insurance extended.

So does Heather Boushey of Center for American Progress, who explains unemployment insurance and why it is so important here:

Summer Time For the Left

Karl Smith noted that “In some ways the past two decades in economic research has been a summer time for the left. New research suggests the minimum wage isn’t as bad as suspected. Supply Side economics has been abandoned by its founders. Behavioral economics presented evidence that people could be better off with a more tightly designed safety net, as opposed to a simple negative income tax.”

He didn’t even mention my favorite part of this summer time for liberalism - A lot of new empirical research has been done recently that has found  problems with unemployment insurance are really overstated. More than half of the reasons for observed slower job finds for those on unemployment is healthy increases in finding the best fit for a job — having access to liquidity, the healthy stuff we want to subsidize — not incentivizing people to not work.  Another thing economists are realizing is that the spike is often a measurement error associated with people dropping out of the labor force (pdf), a particularly negative event for this recession in particular, which is the first one on record since at least the 1960s where it is more likely someone drops out of the labor force than finds a job.

So, what’s not to like?

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5 Responses to Car Breaks Down, Shows The Importance of Extending Unemployment Benefits

  1. Alicia says:

    From

    http://www.dol.gov/opa/media/press/ETA/ETA20101615.htm

    “The U.S. Department of Labor today announced the findings of a multi-year study of the impact of the Unemployment Insurance program in stabilizing the economy during a deep recession”

    Reading it is on my list of to-dos but thought I’d drop it here in case others find it of interest.

  2. Pingback: Car Breaks Down, Shows The Importance of Extending Unemployment … | The Daily Conservative

  3. rjs says:

    mike, i prefer to use the phrase unemployment rations, or stipends, when talking about this issue…benefits sounds too much like entitlements, which has become a scorned word…

  4. Alex says:

    This is a genuinely important point that needs making. It reminds me a little of the dark winter of 2008 and the frantic calculations of the minimum cash float GM’s supply chain needed to keep the lights on and the lines rolling. Below a certain level there is no way in which you can meaningfully interact with the economy.

  5. Billy Joe McAlester says:

    Casey Mulligan is a big fat idiot who should have the pleasure of living on UI. I’m sure he’ll find that it’s not sufficient to support a “vacation” of any length.

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