Thursday, September 1, 2011

Redistributing Job Insecurity

President Obama seems to be in support of new legislation barring employers from discriminating against the unemployed. Via Catherine Rampell, here is President Obama:

"Well, there is no doubt that folks who have been unemployed longer than six months have a tougher time getting back into the job market. Now, the single most important thing we can do is just have the economy strong so that employers aren’t as choosy because they’ve got to hire because their businesses are expanding.

But we have seen instances in which employers are explicitly saying we don’t want to take a look at folks who’ve been unemployed. Well, that makes absolutely no sense, and I know there’s legislation that I’m supportive of that says you cannot discriminate against folks because they’ve been unemployed, particularly when you’ve seen so many folks who, through no fault of their own, ended up being laid off because of the difficulty of this recession."

This seems to be in line with much of the administration's efforts to try and get those long-term unemployed back to work. Recent musings on the Georgia Program, which seeks to offer government support to get employees trained in new skills, fit in this vein. While it is true that the reason for the massive increase in the duration of the unemployment is because of a concentration of unemployment in those group of older workers that can't seem to find any new job, trying to tackle a demand problem by getting these people back to the work force will do little but redistribute the burdens of unemployment. For example, if a firm decides to go on hiring binge and they say for every person they hire they will fire one of their current workers, most would respond well that's not really hiring at all. The firm is merely swapping one person from the unemployment line for another. This approach to addressing unemployment is exactly the same formula the administration is using. Without some exogenous force pushing demand up, anyone of these people that may be hired will still be hired into firms that are very reluctant to expand. These people will still be competing in a very tight labor market, where jobs are scarce. While the probability of these long-term unemployed getting hired increases with these proposals, this merely reduces the probability of anyone else seeking a job from getting one. A swing and miss I would have to say.

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