Skip to comments.The Great American Job Machine (destroying US jobs is a good thing)
Posted on 12/09/2003 10:17:58 AM PST by dead
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.
Rich Lowry is author of Legacy: Paying the Price for the Clinton Years.
I've switched jobs at least eight time in my career, and every single job switch involved higher wages, including two switches that were prompted by layoffs.
Union thugs don't want to learn new skills to get a higher paycheck.
They just want the higher paycheck.
I'm guessing it wasn't a matter of luck.
Yep. As soon as I attain one level I am looking ahead at how I can attain the next. S'why my crapper is filled with books on software development theory.
If they were talking about voluntary job switching I might agree. But I know too many technical people (especially those over 40) who were laid off and are now working low-level jobs as security guards, airport screeners, and truck drivers to believe this is the case for those forced to switch involuntarily.
When I got laid off I took a 30% pay cut to get another job where I could learn new skills. It took me 4 years to match my old salary. I'm finally doing better than my old salary (after 7 years) but I bet if you averaged the post-layoff years the average over time would be barely more than the salary I was at when I got punted.
Where is the job creation part though? People left the farms for better paying jobs in the cities. The only thing equivalent to this is foreigners coming here to work, which in no way helps us out, no matter what corporate intersts tell you. I would believe we were experiencing creative destruction if retail clerks were becoming software engineers, but it seems like the exact opposite is happening.
Me too. Except the recent ones. Faced with the prospects of not being able to get an engineering job in the near future, I see that I can start at the bottom of any career path that tops out far below what I am currently earning.
I can assure you, the employment prospects for me look mighty grim. It is indeed a tragic thing to send me looking for a new carrer at the bottom of the heap in a path that peaks out far below what I am currently making.
I suppose you have some carrer suggestions for those who have dedicated thier lives to engineering, only to have the "United We Stand" croud turn them out on the streets.
This is not a "buggy whip" situation. Buggy whips were not made out of the country and then brought in more cheaply. Engineering applications are still in demand, even more so as time passes.
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