Megan McArdle Says Fix the Jobs

This is part of the series highlighting supporters of pro-jobs policies. An updated list of supporters can be found here.

Megan McArdle has been focusing on how to lower the long-term unemployment rate. Long-term unemployment brings a lot of social ills that affect both the person unemployed and the people around the person. McArdle eloquently states:

“Short of death or a debilitating terminal disease, long-term unemployment is about the worst thing that can happen to you in the modern world. It’s economically awful, socially terrible, and a horrifying blow to your self-esteem and happiness. It cuts you off from the mass of your peers and puts stress on your family, making it likely that further awful things, like divorce or suicide, will be in your near future. When millions and millions of people are stuck in this debilitating trap, we should be sounding forth the alarm.”

Citing a study done by economists Alan Krueger of Princeton University and Andreas Mueller of the University of Stockholm McArdle addresses why long-term unemployed slowdown and stop their job search over time:

“People stop looking for a job because it’s so unpleasant. They asked respondents to provide detailed information about what they’d done over the course of the previous week, and how their various activities had affected their mood. Most ranked their job search highest on stress and anxiety, and lowest on happiness.

A job search gets more unpleasant as time goes by. The longer you spend looking, the more unhappy it makes you, and the more anxious you become about being unemployed. This should make you try harder to find a job. But Krueger and Mueller suggest that heightened anxiety actually had the opposite effect. People tend to want to minimize the amount of time they spend feeling miserable. So they try not to think about it, which isn’t a great recipe for finding a job.”

She goes on to propose:

“The best way to shorten unemployment is to make job-seeking less emotionally painful.”

“Denmark, for instance, combines a generous system with an extremely aggressive job-retraining program. They will not let you sit on the dole indefinitely. But they will relieve you of financial worry, and give you something concrete you can do to make yourself more employable. Judging from their employment figures, this works very well.

If you don’t like the Danish program, there are other things we could do. We could create a temporary hiring program, along the lines of the Works Progress Administration, to be activated during periods of long-term unemployment, with a mandate to hire as many people as necessary to keep the unemployment rate down. These jobs would be time-limited, ending when the unemployment rate dropped below its target for several months running, and they’d pay less than normal jobs — just enough to keep the lights on and prevent labor scarring. We could waive the payroll tax on new hires — one month’s rebate for every month that the new hire has been unemployed. And if all else fails, we could offer people grants to move from places like Buffalo, New York, where there are no jobs, to North Dakota, where the oil industry has pushed unemployment below 3 percent.”

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