Monday, March 01, 2010

Not Exactly Nothing

The sad fact is that there's not much to be done for the long term unemployed, other than the obvious step of making sure that they don't miss any meals. Government retraining programs have a dismal record. So do tax credits for hiring workers, which are notoriously easy to game. Stimulus is a blunt tool. And the government can't hire the workers itself. What's left? Threatening employers at gunpoint?

The answer is, nothing. - Megan McArdle
Megan is appropriately pessimistic about the government's ability to create jobs. But that doesn't mean the government can't discourage or destroy the ability of the private sector to create jobs which it plainly can. For the government to avoid this is not nothing. Consider:
No. What I think is: These are the people who go to the wall when the cost of employing someone gets too high. We’ve spent the last seventy years increasing the hidden overhead and downside risks associated with hiring a worker — which meant the minimum revenue-per-employee threshold below which hiring doesn’t make sense has crept up and up and up, gradually. This effect was partly masked by credit and asset bubbles, but those have now popped. Increasingly it’s not just the classic hard-core unemployables (alcoholics, criminal deviants, crazies) that can’t pull enough weight to justify a paycheck; it’s the marginal ones, the mediocre, and the mildly dysfunctional.

If that doesn’t scare the crap out of you, you’re not paying attention. It’s a recipe for long-term structural unemployment at European levels of 10%, 15%, and up. What’s even crazier is that the Obama administration wants to respond to this problem by…raising taxes and piling more regulatory burden on employers. - Eric Raymond (HT: Arnold Kling)

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