CBO Nonsense

From the CBO Director’s blog:

Many factors are responsible for the rise in unemployment in general and in long-term unemployment:

-Weak demand for goods and services, as a result of the recession and its aftermath, which results in weak demand for workers;

The better question is: what is causing weak demand? Could it be that people are realizing that it’s fiscally unhealthy to spend lots of many that they don’t technically have? Could it be that the extend-and-pretend games of the last thirty years are starting to catch up to us? Could it be that, having pulled demand forward for so long, the future is now finally catching up to us?

-Mismatches between would-be employers’ needs and the skills or location of the unemployed;

This is actually a valid point, although it’s probably helpful to look at a couple of points that contribute to this situation. The declining value of an American education certainly contributes to mismatched needs and abilities. Interestingly, the sheer vapidity of modern American education is mostly due to Boomer tinkering. Also interesting is that Boomers are now in charge of major businesses, just in time to find out how terribly awry their experiments in education have gone. Furthermore, their arrogance and blind trust in their educational model prevented them from doing the one thing that would currently save their companies: hiring bright kids out of high school and training them on the job instead of waiting for them to get a college diploma. (Of course, it probably didn’t help that Boomers made employment testing illegal.)

Regarding location, I think there are three reasons people refuse to move for work. First, government benefits currently make staying in the same place to wait for a new job feasible. Second, I would theorize that most of the once-employed are intelligent to suspect that government benefits may not be around forever, and therefore it is best to stay where one is, since one will have more social capital at one’s current location than at a new location. Finally, the increasingly transient nature of jobs discourages employees from traveling, particularly in light of government benefits. Why endure moving a thousand miles away only to lose your job after a year? Especially when, after moving costs and loss of social capital are accounted for, you’re fiscally worse off than if you’d been on government benefits?

-Incentives for people to stay in the labor force and continue searching for work that result from extensions of unemployment insurance benefits; and

This is more of a technical point, as unemployment statistics are calculated by dividing the number of unemployed workers by the total labor force. The issue is defining the labor force (if memory serves me correctly, the government has six or seven definitions). Some metrics only consider adults that are currently looking for work as part of the labor force, and so the claim being made by the CBO is that rates are artificially (or, more accurately, tautologically) high because there are some who are looking for work instead of just giving up.

-The erosion of unemployed workers’ skills and the belief of some employers that people who have been unemployed for a long time would be low-quality workers (a phenomenon sometimes called stigma).

This is pretty much the same as above. As the social stigma that comes with long-term unemployment wears off, more of those workers who were at one time out of the labor force will come back into the labor force (by seeking jobs) and tautologically drive up the unemployment rate.

In all, the CBO is blaming increased unemployment rates on the fact that Americans are finally realizing that man cannot live by debt alone and on an increasing number of people who have the gall to seek employment again. In essence, the CBO would prefer that people continue to spend money they do not have and just go back to being lazy and unproductive. And that’s how the government plans on reducing unemployment.

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