Thursday, July 15, 2010

Making Us Pay for Their Crisis


It is often argued that low benefits are needed in order to encourage people to take shitty low paid jobs. But this is irrelevant in a recession as Gordon Campbell points out.

Gordon Campbell asks: why do business leaders keep on calling for cuts to welfare in future – when their own activities are currently failing to create sufficient jobs for those people likely to be tipped off welfare?

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

So, why do business leaders keep on calling for cuts to welfare in future – when their own activities are currently failing to create sufficient jobs for those people likely to be tipped off welfare? Leave aside the possibility that our CEOs aren’t very bright, or that they remain captive to the old slash and burn policies they learned from Roger Douglas nearly 30 years ago. Krugman, again, has an apt explanation : he puts it down to a belief in what he calls the’confidence fairy.’
But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain.

What’s the evidence for the belief that fiscal contraction is actually expansionary, because it improves confidence?


http://gordoncampbell.scoop.co.nz/2010/07/06/campbellbusiness-leaders-and-the-confidence-fairy/

So if "work incentives" is not the reason for cuts in welfare, education, health, and social services- could the reason be that they want us to pay for their crisis; so they can continue to get rich at our expense?


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