{"id":17740,"date":"2012-01-13T18:09:59","date_gmt":"2012-01-13T07:09:59","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=17740"},"modified":"2012-01-13T18:09:59","modified_gmt":"2012-01-13T07:09:59","slug":"the-costs-of-unemployment-again","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=17740","title":{"rendered":"The costs of unemployment – again"},"content":{"rendered":"

\t\t\t\tOne of the extraordinary things that arose in a recent discussion about whether employment guarantees are better than leaving workers unemployed was the assumption that the costs of unemployment are relatively low compared to having workers engaged in activities of varying degrees of productivity. Some of the discussion suggested that there were “microeconomic” costs involved in having to manage employment guarantee programs (bureaucracy, supervision, etc) which would negate the value of any such program. The implicit assumption was that the unemployed will generate zero productivity if they are engaged in employment programs. There has been a long debate in the economics about the relative costs of microeconomic inefficiency compared to macroeconomic inefficiency. The simple fact is that the losses arising from unemployment dwarfed by a considerable margin any microeconomic losses that might arise from inefficient use of resources. in this blog, I discuss some of those issues.
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\nI last visited this issue in some detail in this blog – The daily losses from unemployment<\/a>. In terms of estimates, not much has changed in the US economy over the last 2 years. The daily losses in income alone are enormous.<\/p>\n

One of the strong empirical results that emerge from the Great Depression is that the job relief programs that the various governments implemented to try to attenuate the massive rise in unemployment were very beneficial. At that time, it was realised that having workers locked out of the production process because there were not enough private jobs being generated was not only irrational in terms of lost income but also caused society additional problems, such as rising crime rates.<\/p>\n

Direct job creation was a very effective way of attenuating these costs while the private sector regained its optimism. In fact, it took about 50 years or so for governments to abandon this way of thinking. Now we tolerate high levels of unemployment without a clear understanding of the magnitude of costs that that policy position imposes on specific individuals and society in general.<\/p>\n

The single most rational thing a government could do was to ensure that there were enough jobs to match the available labour force.<\/p>\n

In the growth period before the current crisis few countries had returned to the full employment states that they achieved in the Post World War 2 period up until the mid-1970s when the OPEC oil shocks led to a paradigm change in macroeconomic policy setting. The neo-liberal approach emphasised fiscal austerity to support an increasing reliance on monetary policy for counter-stabilisation.<\/p>\n

So already in this period of relatively better economic growth there were substantial losses being recorded both in terms of lost GDP (production and income foregone) and the additional personal and social costs that accompany persistent unemployment.<\/p>\n

It is well documented that sustained unemployment imposes significant economic, personal and social costs that include:<\/p>\n