19-04-2005 21:08									#91
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As I understand it, he was talking about marginal additions to the unemployment benefit period. Presumably, the first available job as a garbage picker-upper had long since passed.

	19-04-2005 21:11									#92
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So, it is agreed that unemployment benefits are good? Then, the question is at what level and for how long.

In the US, unemployment benefits are a bit like insurance in that employers pay into a pool according to their payroll, and that pool is tapped to pay for ongoing benefits (but at times, the pool can go into deficit and must be made up from general tax revenues)

	19-04-2005 21:13									#93
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Exactly. I was just making an economic argument for the need for unemployment benefits.

Another argument is that unemployment is necessary in a capitalist economy. If we have full employment, we have upward inflationary pressure, we have unsustainable growth and you lack a pool of people that employers can employ when they need to - cyclical and seasonal unemployment. And if you accept that some unemployment is needed, then surely you must accept that those who are unemployed be kept alive, and thus given enough money to cover very basic living, for humanitarian reasons.

Unemployment isn't bad, too much unemployment is.

	19-04-2005 21:14									#94
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Sure. I'm in for a little bit. Generous payments for a couple or three months.

	19-04-2005 21:16									#95
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As for the necessity of unemployment, I've never been a big fan of that view. Rather, it would be much better for both employers and employees to make jobs less "sticky" while running at or near full employment.

	19-04-2005 21:20									#96
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I agree, but with no unemployment, are you arguing there wouldn't be runaway inflation? Or that there doesn't need to be unemployment during recession parts of the business cycle so employment can rise later? Or even that tourism, agriculture and other industries don't necessitate seasonal employment, thus being unemployed at some parts of the year?

0 employment puts way to much pressure on businesses who can't then fire bad workers and hire others.

	19-04-2005 21:24									#97
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quote: I agree, but with no unemployment, are you arguing there wouldn't be runaway inflation?

In the US, inflation was pretty subdued in the late 90s with full employment. Full employment has happened so rarely lately that I don't know how you could prove a correllation. But as a start, you might look at those countries with full employment right now: Austria, Luxembourg, the Netherlands, Korea, Switzerland, Norway, Singapore, Iceland, etc.

In the late 90s, profits were hit, rather.

	19-04-2005 21:27									#98
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Full employment in the late 90s?

http://www.economagic.com/em-cgi/data.exe/feddal/ru

Didn't go below 3.9%.

	19-04-2005 21:29									#99
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http://www.econstats.com/IMF/IFS_Aus2_67R__.htm

Austria was at 5.9 last summer. Any figures for 2005?

Unless by full employment you mean the economic definition of full employment (ie. at the natural rate), in which case I agree completely. However that includes some unemployment.

	19-04-2005 21:29									#100
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3.8% was the lowest. But in any event, that's full employment in my book.

	19-04-2005 21:30									#101
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Ahh, you see, in my book, that's 3.8% unemployment. Hence there is still a need for some unemployment.

	19-04-2005 21:36									#102
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I'm going more by how it feels than anything. At 3.8% unemployment, it feels like everyone who wants a job and has reasonable expectations of a fair wage has one or is on his way to finding one. That's full employment and it has happened only a couple years of my life -- in the late 90s.

I guess I'm questioning whether the economists have a good handle on what the natural rate is and think instead that it can go pretty damn low without creating undue inflation, depending on the circumstances.

	19-04-2005 21:42									#103
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quote: those countries with full employment right now...Korea

Not quite. What's been happening recently is that the number of university graduates has been skyrocketing without a commensurate increase in jobs that require university-level skills. So unless you want a job for $2-3/hour a lot of people (especially new college grads) are getting the shaft hard.

On the other end, a lot of people in their 50's are being forced into early retirement and out of the workforce, making the image of full employment a bit illusory...

	19-04-2005 21:50									#104
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Maybe $2 - $3 an hour is a reasonable expectation of a fair wage for entry into the workforce. Full employment doesn't mean to me that everybody gets paid what they want. On the other hand, the forced retirement is silly, I agree.

	19-04-2005 22:24									#105
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quote: Originally posted by Drogue Austria was at 5.9 last summer. Any figures for 2005?

That's 5.9% using the austrian definition of unemployment

Using the ILO standard measure (has been unemployed and actively seeking work in the last 4 weeks) the rate in February was 4.6%, slightly up on the 4.5% of last year.

You can find standardized unemployment rates at the OECD's website

quote: Originally posted by DanS But as a start, you might look at those countries with full employment right now: Austria, Luxembourg, the Netherlands, Korea, Switzerland, Norway, Singapore, Iceland, etc.

Hmm, looking at that list you seem to define 'full employment' as unemployment below 5% - not too bad a definition.

In that case the full list of OECD countries with full employment is:
Austria, Iceland*, Ireland, Japan, Luxembourg, Mexico*, Netherlands, New Zealand, Norway, Switzerland and the United Kingdom.

*these are not standardized rates so may not be comparable.

There are also a few countries who are between 5% and 6% unemployment so could be said to be approaching 'full employment' on your definition, they are: Australia, Denmark, Hungary and the United States.

	19-04-2005 22:32									#106
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quote: Youths? Those who have support of their parents and couldn't claim unemployment benefit anyway? Funnily enough minimum wage is going to entice more of them to work, it's a very specific section of the populace. So by your logic companies should be made to pay a living wage, no?

the report looked at 25 - 30 year olds.

quote: You're prepared to make generalizations of that gravity based on a study in one single country?

two countries - USA and France.

quote: Not only that, but unemployment benefits also gives the leeway for people to look for work in their branch.

you need 2 years of unemployment benefit to find a job? thats waaay too much. and then you wonder why France average 10% over the last decade or so.

quote: While LoA is largely right, in that less unemployment benefit means more people accept the worst, lowliest job that comes along quickly, in terms of economics this can be a very bad thing.

in terms of economics, this is a GOOD thing. when more people get back to work, it gives them more money, so they can buy more stuff, so firms have more revenue, so that they produce more, and so that they hire more. then yoiu can get your old job back. more employed is better then less employed

	19-04-2005 22:37									#107
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quote: Originally posted by DanS I'm going more by how it feels than anything.

Thats economics for ya.

	19-04-2005 22:38									#108
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there has been talk here like unemployment benefits are enough to provide you with a cozy life. however i dont think thats the case.

	19-04-2005 22:59									#109
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quote: Originally posted by Lawrence of Arabia in terms of economics, this is a GOOD thing. when more people get back to work, it gives them more money, so they can buy more stuff, so firms have more revenue, so that they produce more, and so that they hire more. then yoiu can get your old job back. more employed is better then less employed

Have you read my posts?

A small amount of unemployment is good for the economy, and waiting a little longer to get a better job can be good for the economy - it raises income, government revenue, output and GDP. Getting everyone unemployed into jobs that pay peanuts is not good for the economy, if they can wait and get better jobs.

	19-04-2005 23:03									#110
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quote: Originally posted by DanS I'm going more by how it feels than anything. At 3.8% unemployment, it feels like everyone who wants a job and has reasonable expectations of a fair wage has one or is on his way to finding one. That's full employment and it has happened only a couple years of my life -- in the late 90s. I guess I'm questioning whether the economists have a good handle on what the natural rate is and think instead that it can go pretty damn low without creating undue inflation, depending on the circumstances.

Oh I agree, I think we can hit 4% or 5% or so as a natural rate. Any less and it looks unsustainable. But the issue was that there is a need for some unemployment.

What I mean, is that 4% unemployment is better than 1% unemployment, as far as the economy is concerned.

	19-04-2005 23:12									#111
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quote: A small amount of unemployment is good for the economy, and waiting a little longer to get a better job can be good for the economy - it raises income, government revenue, output and GDP. Getting everyone unemployed into jobs that pay peanuts is not good for the economy, if they can wait and get better jobs.

yeah, and I disagreed. a small amount, sure. but 10% is waay too much. if you are waiting two years for a new job, there is a problem, and its structural, and the only way to get rid of it, is for the unemployed to find jobs they wouldnt normally take, to get the economy going again. they can find a better job later, when there ar emore jobs availalbe. if France employed even half of 10%, their economy would grow tremedously

	19-04-2005 23:22									#112
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quote: Originally posted by Lawrence of Arabia yeah, and I disagreed. a small amount, sure. but 10% is waay too much.

Where's the disagreement there? I said a small amount is good. 10% is obviously way to much. However there comes a point when unemployment begins to create inflation, when it gets too low. The economy overheats and economic growth is too high. Krugman estimates economic growth in the US to be stable at around 2.2% economic growth. Some go up to 4%, but that's largely rubbished by academic economists. In unemployment gets too low, economic growth starts to get too high.

I never said 10% was good, it's obviously not. I said *some* was good. 1% is too little, 10% is too much. Ideally, it should be somewhere between the two.

quote: Originally posted by Lawrence of Arabia if you are waiting two years for a new job, there is a problem, and its structural, and the only way to get rid of it, is for the unemployed to find jobs they wouldnt normally take, to get the economy going again. they can find a better job later, when there ar emore jobs availalbe. if France employed even half of 10%, their economy would grow by an additional 0.5%, according to Okuns law. Okun's Law: Change in Unemployment=-0.5* (growth - 3%)

Very true. However then a drop in Unemployment from 10% to 5% would lead to real GDP growth of 7%. Is that sustainable? Will it lead to too high inflationary pressure?

Edit: Using the traditionally used sacrifice ration of 5:1 (5% of one year's GDP must be forgone to reduce inflation by 1%), France reducing unemployment from 10% to 5% will likely increase inflation by 1.4% each year.

	19-04-2005 23:26									#113
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quote: Hmm, looking at that list you seem to define 'full employment' as unemployment below 5% - not too bad a definition.

I was setting the bar somewhat arbitrarily at about 4.5%.

	19-04-2005 23:27									#114
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quote: Where's the disagreement there? I said a small amount is good. 10% is obviously way to much. However there comes a point when unemployment begins to create inflation, when it gets too low. The economy overheats and economic growth is too high. Krugman estimates economic growth in the US to be stable at around 2.2% economic growth. Some go up to 4%, but that's largely rubbished by academic economists. In unemployment gets too low, economic growth starts to get too high.

yes, but only if productivity doesnt change.

quote: Actually, that 3% is meant to signify NAIRU. Okun's law states that reducing unemployment by 1% increases GDP by 2% (2.5% if you go to the original text, but has since been scaled down). So reducing their unemployment to 5% would lead to a 10% raise in GDP.

silly me I divided wrong. thanks for the correction

(but its actually 7%, because Okun only kicks in after 3%. )

	19-04-2005 23:28									#115
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Drogue learns from the best/ I just got DanSed.

	19-04-2005 23:31									#116
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quote: Very true. However then a drop in Unemployment from 10% to 5% would lead to real GDP growth of 7%. Is that sustainable? Will it lead to too high inflationary pressure?

well, look at the phillips curve. the more social programs there are, the higher the natural rate of unemployment is (a country who has good social services has a phillips curve that is to the right of a country with less unemployment benefits, etc.)

but since you need to cut those benefits to get growth of employment, you are actually increasing employment, while at the same time, pushing the phillips curve to the left, moving NAIRU further to the left, and giving the economy a way to reach 4% unemployment as a natural rate (or whatever a countries natural/ structural rate is. in switzerland, its around 2.2% i think)

	19-04-2005 23:35									#117
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quote: Originally posted by Drogue Very true. However then a drop in Unemployment from 10% to 5% would lead to real GDP growth of 7%. Is that sustainable? Will it lead to too high inflationary pressure?

Don't worry. We'll do everything in our power to raise unemployment and to restrict growth. What are employment and growth when they can lead to inflation

	19-04-2005 23:37									#118
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quote: Originally posted by Lawrence of Arabia Drogue learns from the best/ I just got DanSed.

realised my mistake on the 3%

	19-04-2005 23:39									#119
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however, NBER paper #6111 makes it clear the effects of increases in the minimum wage. France's minimum wage is 255% larger in real terms then in 1951. In the US, the real minimum wage (federal) has decreased by 25% since 1951. yet for every increase of 1% in real minimum wage, 4.6 French out of a 100 lost their jobs, costing everyone more, and slowing down the economy.

	19-04-2005 23:41									#120
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quote: Don't worry. We'll do everything in our power to raise unemployment and to restrict growth. What are employment and growth when they can lead to inflation

hahahah. inflation. theres no chance of that in Europe as long as the euro bank's target inflation rate is 2%. if they set it at 2.5%, it would stimulate growth almost right away, and not by pocket change either.