Why unemployment will be worse than in the 1980s

When factories closed down because of high natural gas prices, they said that we suffered from “demand destruction.” This was demand that would never return because the factory wouldn’t be opened again.

The same thing may be happening today in labor markets. The difference between 2009 and 1982 (the recession that the current recession is usually compared to) is that in 2009 it’s a lot easier and more common to move jobs overseas. So when companies need more labor, they will outsource to a low wage foreign country rather than hire expensive American workers.

Then there is the immigration issue. In the 1980s, according to the DHS Immigration yearbook, we gave permanent residence to between 500,000 and 600,000 immigrants each year throughout the 1980s.

In the last few years, we’ve been giving out legal permanent residence to more than a million new immigrants each year, with 1.1 million granted in 2008. Thus we have twice as many legal immigrants increasing the population each year (with many of them looking for work) compared to the 1980s.

The combination of work moving overseas, and new workers coming to the United States, means that the unemployment situation will remain dire for many years.

Comments

[Alkibiades]

HS,

Mish over at Global Economic Analysis has a post up about this very subject. He doesn't see equilibrium unemployment being reached until 2020 at best.

http://globaleconomicanalysis.blogspot.com/2009/11/mish-unemployment-projections-through.html

[Wade Nichols]

Yes, but our diverse population of unemployed workers is our strength!

It's even more depressing when you think how the Federal government doesn't seem to be doing anything at all policy wise to help out the tinkerers, inventors, thinkers, and doers. All I hear is chatter about "green jobs", green roofs, reducing our carbon footprint, helping "the community", community organizing, etc.

This is the same country that put men on the moon?

[EnviousRedneck]

It'll be interesting to see how much the new unemployment affects higher paid, higher educated people. If college grads have unemployment rates in the double digits, will that change how the Administration/Elite-opinion reacts? They are Obama's base, or a big chunk of it.

For all their supposed concern for the poor, Democrats don't seem to care when Janitors get undercut by Mexicans. Let's see how they react when their jobs dissappear.

[David]

Half you are completely correct. I see it all the time in the companies I work with - the most aggressive and driven among them are moving work overseas as fast as they can.

Big difference between the alphas and the betas. Alpha radiologist I know is doing just fine - he flew to India, did the deals, and now has most of his images interpreted in India (as a first pass)thereby doubling his income

Similarly, a law firm partner I know (not biglaw - partner in a firm that serves mid sized companies) now gets the majority of his simple legal work done abroad, with only the high end stuff done in the USA. He is doing just fine, winning more business from his clients. Basically he charges US legal fees and pays foreign wages.

The betas I know tend to just follow the rules, follow the normal path. The alphas find a way to get the new economy to work for them

[The Engineer]

Well, there's no doubt that if we have a European style social welfare system (which we're moving towards if we have "the public option" in our health system), then we'll have European style unemployment rates. One goes with the other.

[seeitnow]

Correct. In addition to the other problems mentioned, retail sector is dying - mostly due to dramatic increase in internet sales. Brick and mortar retail may never come back to anything like it was before.

[HS: No, I don't see that retail jobs are decreasing. That's the distribution end of marketing. But they're low paying jobs.]

[not too late]

This is the same country that put men on the moon?

Posted by: Wade Nichols | November 13, 2009 at 03:06 PM

Actually, no, it isn't. We are a new vibrant diverse people who don't waste our time with going to the moon. We are now refocused on social justice.

Cooperation rather than competition.

[Sensitive Jerk]

You forgot the key reasons: welfare and barriers to doing business. If there's no welfare (in its many forms) than Americans will accept lower wages. Poof! goes the unemployment rate. And opening a business and doing business are difficult because of high taxation, absurd work rules, barriers to firing someone, etc. As a red diaper baby, Obama is trusted by the corporation- and owner-hating masses. He could probably shame business-hating Democratic legislators nationwide into improving the business climate, but he won't.

[Tino]

Don’t forget demographic change.

My estimate is that currently the non-Hispanic white unemployment rate is 8.8% and rest (including Asians) 13.3%.

What will happen to national unemployment in a typical recession 2040?

[DaveinHackensack]

You're right that outsourcing and insourcing have exacerbated the unemployment situation. I made similar points, and speculated about some possible solutions in this comment on Fred Wilson's blog: http://www.avc.com/a_vc/2009/10/donors-choose-the-hp-match.html#comment-20897748

A couple of other factors that will keep unemployment stubbornly high in the near future: Average hours worked are at something like 33 per week, and the percentage of unemployed plus underemployed (those working part time who want to work full time) and those too discouraged to look is about 17%. So, as the economy starts to weakly recover, the first thing employers will do is increase their current employees' hours instead of hiring new workers. Then, once they start hiring new workers, some of those under-employed and discouraged folks will start looking for full time jobs again, which will push the unemployment rate back up.

[M Stein]

In terms of immigration, Denmark is moving in the opposite direction.

"We thought it was important to substantially increase this aid so that immigrants who want to return home because they are not able to adapt to Danish society have a strong financial basis to start a new life,' said foreign affairs spokesman Soeren Espersen of the far-right Danish People's Party.

The offer is aimed at immigrants and refugees who 'cannot or do not want to integrate into Danish society,' said the head of the DPP's parliamentary group, Kristian Tuelesen Dahl.

The centre-right minority government reached an agreement on the financial incentive with the far-right DPP as part of its 2010 budget negotiations.

In addition, 20 million kroner will be set aside for city councils in charge of integrating immigrants to 'motivate' foreigners to return to their homelands.

Opposition parties are shocked by the news, and fear it sends the message 'that foreigners are not welcome in Denmark'.

Since 1997, around 2,524 immigrants have voluntarily repatriated to their home countries, according to Denmark's refugee, immigrant and integration ministry."

http://www.dailymail.co.uk/news/worldnews/article-1226698/Denmark-pay-immigrants-12-000-home-wont-assimilate.html#ixzz0WmVGyQXs

[dearieme]

"We are a new vibrant diverse people": Werner von Braun was pretty diverse.

[The Undiscovered Jew]

In terms of immigration, Denmark is moving in the opposite direction.

"We thought it was important to substantially increase this aid so that immigrants who want to return home because they are not able to adapt to Danish society have a strong financial basis to start a new life,' said foreign affairs spokesman Soeren Espersen of the far-right Danish People's Party."

European countries should pay way more than 10000 euros.

I'll bet for at least $100,000 Denmark could clear out 75% of all their nonwhite immigrants in three year.

10000 euros isn't enough because the minorities in Denmark likely earn that much just from welfare.

They need to up the reward for leaving/renouncing citizenship so they can a flood of nonwhites out of Denmark.

The longterm benefits of such cash payments far outweigh any short term deficits.

I'd happily pay extra taxes if the US government used the money to pay immigrants and their children to leave.

[David Alexander]

*I'd happily pay extra taxes if the US government used the money to pay immigrants and their children to leave. *

In contrast, I'd have no desire to trade my rights as a citizen for $100K...

[dk]

Sensitive Jerk.....I really think people overestimate how much welfare effects the employment stituation. section 8 simply results in inflated rents anyway.... so it really doesnt HELP poor people persay....afdc is only available to mothers w/children and that only for 5 years...
The only real form of welfare (by that I mean a direct rich to poor subsidy) that the general public gets is food stamps and medicaid. UI is literally insurance not welfare.

I think people VASTLY overestimate the expense and use of welfare in the us. All the social welfare programs taken together likely wouldnt equal SS expenditures.

[Stopped Clock]

I've worked in retail long enough to be sure that both the availability of jobs and the salaries have dropped a lot in the last 15 years. 15 years ago you could work retail and be middle class. Now it's seen as a refuge for high school dropouts and busy moms and not much else. An average department store would have two or three people covering each department, and pay them maybe $8 an hour, in the early 90s. Today it's rare to even have one person for each department, and their wages are barely any higher than 20 years ago, even ignoring inflation.

[Joshua Holmes]

Some other reasons:

1. Personal debt is much higher today than in the early 1980s. The reason is that you can't get anything except trade work or a McJob without a college degree. More people have more student loan, which means less room to save and spend. Also, housing prices are still way, way above their historical mean, and there are a great many people more deeply in debt for their house than there were in the 1980s.

2. After the end of Manufacturing America, job growth happened in government and FIRE industries: finance, insurance, real estate. The FIRE industries hired because they enjoyed a bubble mixed with securitization and outright fraud. Those industries aren't likely to enjoy the same bubble again, nor should they.

[Pseudothyrum]

All developed economies have high unemployment rates and a certain degree of stagnation -- this is a hidden fact of modern economics.

The fact is that the American economy, just like all of the European economies, is already built -- it is a fully mature economy, and the only reason it keeps growing is because of mass immigration.

We need more jobs related to SUSTAINING an economy rather than BUILDING one because, as I stated above, the economy is already totally built and mature. There are no new territories or resources to exploit, and we already have a massive oversupply of homes, autos, clothes, food, and all other consumer goods -- because our economy is fully mature now, there can be no growth unless the USA and Europe is willing to invite tens of millions of 'new consumers' (inevitably non-Whites) to kick-start the growth cycle again. Right now most of the middle-class American people need personal debt relief more than anything else.

The study of modern economics in developed nations needs to switch over from a model based on raw growth to one based on slow and steady sustainability. As the environmentalist Edward Abbey said: "Growth for the sake of growth is the ideology of the cancer cell."

[Pseudothyrum]

DaveinHackensack:"Average hours worked are at something like 33 per week, and the percentage of unemployed plus underemployed (those working part time who want to work full time) and those too discouraged to look is about 17%. So, as the economy starts to weakly recover, the first thing employers will do is increase their current employees' hours instead of hiring new workers."

We here in the USA ought to move to do what the French and some other Europeans did, that is making 30-35 hours a week full-time and enough that a person can make a living wage. As I wrote in my above comment, because modern economies are already established and totally built, there is no reason why people should need to work more than 35 hours a week for a living.

For the people who WANT to work more than 35 hours a week I say go ahead (even though it isn't necessary to the functioning of modern economies), but some of us have families, friends, hobbies, writing/reading, and so on that we'd rather be doing.

[Tino]

"I think people VASTLY overestimate the expense and use of welfare in the us. All the social welfare programs taken together likely wouldnt equal SS expenditures."

You underestimate welfare. in 2009 the cost of all means tested social programs is $780 billion.

http://www.heritage.org/Research/Welfare/upload/SR_67.pdf

[Sensitive Jerk]

dk,

>>>I really think people overestimate how much welfare effects the employment stituation. section 8 simply results in inflated rents anyway.... so it really doesnt HELP poor people persay (sic)

Just because it doesn't HELP poor people doesn't mean it doesn't have any effect. Sure, various government schemes lead to capitalists being less willing to build and maintain rent spaces (driving up prices overall) but I speak to people regularly who get fiendishly subsidized (below $200/month) rent. Plus, I think the primary effect of welfare (esp. via government) is to make its recipients into wretched, vile misanthropes. They don't need to adapt to a boss or clients. They know that people like me (producers) despise them. If it weren't for government "largesse", the stress of being eaters would probably lead to them being somewhat productive.

>>>The only real form of welfare (by that I mean a direct rich to poor subsidy) that the general public gets is food stamps and medicaid. UI is literally insurance not welfare.

Wrong on so many levels, but on UI especially. I don't know of any insurance company that will willingly give extra months/years of payouts away for political reasons. It's literally welfare, paid for especially by people like me, who refuse to not work. Plus, it still leads to people delaying finding work, obviously.

>>>I think people VASTLY overestimate the expense and use of welfare in the us. All the social welfare programs taken together likely wouldnt equal SS expenditures.

Wikipedia on SS: "The original Social Security Act[1] (1935) and the current version of the Act, as amended[2] encompass several SOCIAL WELFARE and social insurance programs. The larger and better known programs are:"

http://en.wikipedia.org/wiki/Social_Security_(United_States)

Generally, people have little idea how invasive our governments are. This link is making the rounds. If it's correct (or close) it's all the argument one needs:

http://gregmankiw.blogspot.com/2009/11/poverty-trap.html

[dk]

while I wouldnt exactly consider HF an unbiased source.....page one....

"Roughly half of means-tested spending goes to disabled or elderly persons. The other half
goes to lower-income families with children, most of which are headed by single parents."

On the same page it mentions that 52% of MTS goes to medical expenditures. Medicare is not MTS BTW.

Which just makes my point...people imagine some low class able bodied guy lounging on a couch smoking weed with his baby mama his whole life while the gov ships him a check.....and this just isn't the case.

Im not talking elderly im not talking disabled I'm talking direct long term subsidies from the rich to the able-bodied poor/general public. and that most people far overestimate the extent of these.

the HF paper also included housing subsidies which IMO are far more a gift to landlords and RE developers than a subsidy to the poor. (more $
bidding for same# of units=higher price/unit)

[www.facebook.com/profile.php?id=13946733]

"The same thing may be happening today in labor markets. The difference between 2009 and 1982 (the recession that the current recession is usually compared to) is that in 2009 it’s a lot easier and more common to move jobs overseas. So when companies need more labor, they will outsource to a low wage foreign country rather than hire expensive American workers."

This is the single most misleading economic sentiment in the public today. Do you think American workers deserve higher wages simply because they are American? No. Let me say this loud and clear:

1. AMERICAN WORKERS ARE MORE PRODUCTIVE

You earn what you produce. We are more productive than workers in any other country. However we are only that productive when employed in certain jobs, mostly services and high-tech manufacturing. If you are looking for someone to run a sewing machine all day, you would be an idiot to hire an American.

2. Low-Tech manufacturing jobs do not take advantage of American worker's strengths.

3. Because of American labor law, social security, and health care obligations, it is not economically viable to hire an American for any job that produces less than $14 an hour or so. Therefore employers with a business model that calls for such jobs are FORCED to move to other countries.

Basically, if you want the luxury of a job in a highly developed country like the United States, you now need highly developed skills commensurate with the economy in that country. On the flip side, the super-cheap goods produced abroad combined with cheap subsidized domestic food supplies and our generous welfare programs now make it fairly easy to live a decent lifestyle without working at all!

[www.facebook.com/profile.php?id=13946733]

Dk,
"I really think people overestimate how much welfare effects the employment stituation. section 8 simply results in inflated rents anyway.... so it really doesnt HELP poor people persay....afdc is only available to mothers w/children and that only for 5 years..."

I lived in a Section 8 apartment for $25 a month for 2 years. That was the minimum rate if your income was zero. All utilities included. I agree it is difficult to get by on welfare alone unless you are a single mother, but you can do occasional work in the black market or just take casual under-the-table jobs. Some people also work part-time until they hit the optimum point on the Earned Income Credit curve, then quit until next year.

Pseudothyrum,

I think you are making an artificial distinction. In reality there is a lot of turnover of capital goods every year. Infrastructure, factories, technologies all wear out and get replaced and improved. That is growth. Even in the most "built" industries like electricity production, we still have a lot of new wind and solar infrastructure being built.

Growth comes from the ever-expanding appetites of human beings. We are never satisfied. Give us a Camry, we demand a Prius; give us a Gamecube, we demand a Wii; etc. That is growth. People will never be satisfied with what they have, they will always demand new, improved, and never-seen-before goods and services. The house I live in today is far superior to the house I grew up in, etc.

There are millions of hidden improvements in nearly everything we touch. So much so that I would say from my perspective we have had massive DEFLATION since 1989. The CPI may disagree, but I think you can buy more happiness for $100 today than back then, mainly thanks to the internet, globalization, and Wal-Mart.

[dk]

james....if your income was zero how did you pay 25$ a month :) j/k .....

I'm under the impression that you can't GET welfare unless you have a minor child if you are not disabled (the fdc in afdc)....if you wanna prove me wrong.... point me to a program where this is not the case.

[The Undiscovered Jew]

*I'd happily pay extra taxes if the US government used the money to pay immigrants and their children to leave. *

In contrast, I'd have no desire to trade my rights as a citizen for $100K...

Posted by: David Alexander | November 13, 2009 at 08:25 PM"

It depends on how poor the immigrant's ancestral homeland is.

In your case, if you renounced citizenship for $100,000 you would probably be going back to some black Carribean hellhole like Haiti or the (somewhat less bad) Dominican Republic.

The most unlivable countries in the world are African. African immigrants would be the hardest to bribe off because their home countries are so hellish and so they would be reluctant to leave for any amount.

Fortunately for programs like Denmark's, the rest of the third world isn't really that unlivable. Many immigrants in Western countries come from countries where they can live quite comfortably for the rest of their lives with $100,000 in the bank.

Take the case of Europe. Europe doesn't have a terribly large African population. Most of their nonwhites are Muslims.

The living standards in Muslim countries like Algeria and Tunisia are such that, while Algeria isn't nearly as wealthy as Europe, it has just high enough living standards that France could expect a sizable portion of their Algerian citizens to pick up and leave if they offered a big enough "citizenship buyout" for around $100,000.

Spain's immigrants are mostly from the Magreb and Latin America.

In the US, we have a big legal Hispanic population that could probably be persuaded to mostly leave if we paid them enough because Latin American living standards such as Mexico's aren't nearly as bad as Haiti or Uganda.

The reason the buyouts don't work well enough currently is because the buyouts aren't larger than the welfare benefits the immigrants currently receive.

$100,000 per person should clear out tens of millions of immigrants over a period of years with little turmoil.

[HS: It would be a lot less expensive to reduce the number of immigrants by simply not allowing any new immigration.]

[Tino]

"Medicare is not MTS BTW."

Which is why they don't include it. Medicaid is means tested and costs far more than the wars in Afghanistan and Iraq combined.

"the HF paper also included housing subsidies which IMO are far more a gift to landlords and RE developers than a subsidy to the poor."

The supply of housing is elastic, so it is a subsidy. At any case if you don't think it helps why not abolish them?

You also ignore all the in kind transfers of wealth that the poor do not pay for, such as free education, subsidized child care, youth programs etc.

[The Undiscovered Jew]

[HS: It would be a lot less expensive to reduce the number of immigrants by simply not allowing any new immigration.]

Why not both?

Somebody can do the calculations for whether paying $100,000 cash for a NAM to leave America costs less over the long run than keeping them here where they and their progeny will use up welfare.

[Sensitive Jerk]

dk,

I get the impression that you're just avoiding my best arguments. Maybe you don't consider UI to be welfare, but I do (for the reason mentioned above) and (regardless of what you call it) it has the effect of delaying job searches... sometimes for over a year. When people say that they can't find work, what they almost always really mean is that they can't find work they're willing to do at an offered wage. Obama has taken some drastic steps:

"When the economy deteriorated in 2008, Congress extended benefits, giving more money and setting longer time frames for the states with the highest unemployment numbers. The economic recovery bill that Obama signed extended those time periods again. Depending on circumstances, most people receiving benefits should get an extension, with the hardest hit states winning extended benefits through Dec. 31, 2009.

"Unemployment benefits are normally taxed as regular income, but the bill exempted the first $2,400 of unemployment from 2009 income taxes."

Maybe the word "welfare" is too specific. I'll just call it government transfers to people which make them less inclined to work because they don't have to pay for stuff themselves.

You also had no response to the Mankiw piece. Weird...

>>>On the same page it mentions that 52% of MTS goes to medical expenditures. Medicare is not MTS BTW.

You're right. It's just a transfer of money to people for doing nothing.

>>>Which just makes my point...people imagine some low class able bodied guy lounging on a couch smoking weed with his baby mama his whole life while the gov ships him a check.....and this just isn't the case.

Sure, some low-class able-bodied guy can impregnate at his leisure while valuable people take up the slack at the point of the government gun:

http://www.news.com.au/story/0,27574,25559154-401,00.html

And thanks to the liberal insistence that workers should pay for everyone else's bastards:

http://www.npr.org/templates/story/story.php?storyId=4865449

(The trend line since the 60s is the same for other races, but nowhere near as bad.)

>>>Im not talking elderly im not talking disabled I'm talking direct long term subsidies from the rich to the able-bodied poor/general public. and that most people far overestimate the extent of these.

I get to interact with these "disabled" at work. I call Bullshit! on many of them. The more correct descriptors for many would be "lazy" and "entitled."

>>>the HF paper also included housing subsidies which IMO are far more a gift to landlords and RE developers than a subsidy to the poor. (more $
bidding for same# of units=higher price/unit)

I already covered this! I'm not a fan of developers, landlords, corporations that accept government dollars because some liberal rams through a pro-poor subsidy. Rich people can be mooches, too. The effect is the same. Some person is being coddled with sudsidies, lowering his willingness to find more work, create more value, because he doesn't have to pay squat for his housing. The damage to the rest of the housing market is a side benefit of liberal scheming.

>>>james....if your income was zero how did you pay 25$ a month :) j/k .....

The dude told you. Black market stuff. Generate some small, untaxed revenue, claim that you're making less or nothing. Live off of whatever transfer payments and subsidies liberals have forced on workers.

[David Alexander]

*It depends on how poor the immigrant's ancestral homeland is.*

Long-term immigrants like my mother have little incentive to return since their exposure to a foreign culture can leave them alienated to the modern version of their former nations. Eventually, one does become used to the idea of running water, functional power supply, paved streets, uncorrupted civil servants, and advanced healthcare.

For what it's worth, my aunt thought she could retire early in our hometown in Haiti, but she ended up returning to the United States to continue working as a RN because she wanted to maintain first world living standards in the third world. Even at $10,000 a year, it's only good for ten years worth of living, and this presumes that you're able to find work in your former home nation. I'd suspect that once family members in the home nation learn about the program, freeloading by relatives and friends and kidnappings by criminal gangs seeking to extract the money would reduce the value even further.

*It would be a lot less expensive to reduce the number of immigrants by simply not allowing any new immigration.*

Fun Question: Would you bar citizens and permanent residents from bringing their spouses or children into the country? I'd suspect that would destroy the ability of immigrants to complete their immediate families, but also for Americans to marry foreigners...

[Tino]

According to the best calculation, by the National Research Council, each unskilled immigrant lifetime cost for the public sector (benefit minus taxes) in 2009 dollars is about $150.000. Note that this was done a few years ago, before the expansion of the government, and thus underestimates the cost.
Other sources of underestimation is that they assume children converge in income to whites after a couple of generations.

[The Undiscovered Jew]

"Long-term immigrants like my mother have little incentive to return since their exposure to a foreign culture can leave them alienated to the modern version of their former nations. Eventually, one does become used to the idea of running water, functional power supply, paved streets, uncorrupted civil servants, and advanced healthcare."

Again, you are talking about black immigrants who would be the hardest to convince to go return.

Many other third world countries aren't as bad as Haiti and it is plausible a large cash buyout would create an exodus of nonwhites out of America.

Mexico's per capita GDP is about $10,000. Mexico also has running water, health services, power supply, etc.

It isn't as great as the US (duh) but it is good enough that we could expect millions of legal Mexican immigrants to take a $100,000 citizenship/greencard buyout and head back to the mother country if we offered such a package. Mexico is good enough that hundreds of thousands of white American seniors are willing to retire there.

As long as the home country has a minimal standard of living, we could get plenty of nonwhites to pick up and leave.

[HS: Although this is interesting, it would be better to focus on how to convince the politicians to stop NEW immigration and crack down on ILLEGAL immigration, rather than try plan how to convince people we've granted permanent residence to leave.]]

[dk]

tino and SJ.....

Which is why they don't include it. Medicaid is means tested and costs far more than the wars in Afghanistan and Iraq combined.....

That really REALLY depends on the accounting being done. I wouldnt either affirm or dispute that claim. And I don't think anyone else is qualified to for the next ten years or so.

The supply of housing is elastic, so it is a subsidy. At any case if you don't think it helps why not abolish them?....

which is why housing prices stayed so flat during the recent bubble? Their great elasticity? And gladly I would.

SJ.....

manikow..... I'm not going to go over every single website you throw out there with a fine toothed comb but manikows graph asserts that a person with a income of 50-40k is just as well off as someone with an income of 20k and since I know members of both groups in the real world....this is bullcrap. And I'm not going to go over all his data to prove it...his assertion doesn't pass the smell test. In fact it doesn't even come close to passing. Anyone who believes that must have a very homogenous peer group in terms of SES. Figures lie and...

UI...making $900 bucks a month for what 6...9 months or so is not sufficent incentive for most people to leave their jobs. most wage earning people live with less than a 6month cushion of savings. losing their job is a hard hard thing for them. UI is taken out of wages that would otherwise be paid to them to insure agaisnt this.
Insurance can be abused just ask your local fire D. Hell even life insurance is scammed from time to time. But UI IS NOT welfare...your saying so doens't make it so. Of course there is abuse and fraud in the system. But that will occor in any large system including a perfect free market.

>>>james....if your income was zero how did you pay 25$ a month :) j/k .....

J/k means just....you guess it. :) mighta been a clue too.

[Tino]

1. Medicaid is expected to costs close to $380 billion 2009. The wars in Iraq and Afghanistan cost $150 billion. It is one thing to say that the total costs of the wars are say 10-20% higher than the financial costs, but it’s not realistic to say that the non-financial cost is infinite, or that ANY figure is true.

2. “which is why housing prices stayed so flat during the recent bubble? Their great elasticity?”

Housing supply is very inelastic in the short run and very elastic in the long run. When you analyze a permanent government program the long run effect is what matters.

3. There is plenty of empirical research that shows that UI increases unemployment duration. What happens is that people are more selective in what jobs they accept. The strawman that “ha ha ha, you think someone quits their job as a lawyer to get UI” has nothing to do with it.

4. Mankiw did point out that he didn’t know if the graph was literary true, and that it was just an illustration. In fact this trap is likely to be true for some people and far from true for others, depending on what benefits they are entitled to, health status, if they have kids etc.

This is not a debate to be settled by anecdotal arguments. Let’s just look at the broad picture:

The total non-defense spending of the US government before the crisis was 4.5 trillion. That is not trivial, and it does deter labor supply.

52% of African Americans are employed. The rest are not dying on the streets, and many or most are supported by the state.

[dk]

1....See my previous post.

2.ten years is pretty longterm i can build lotsa houses in ten years. Anyhow it is widely known the HS in coastal areas (where most of the population is) is not very elastic at all. Reasons for this can be debated...but there it is.

3. the strawman is yours my friend...the argument is whether UI is more welfare or insurance.
Nowhere have I said anything about work duration or lawyers.

4. Certain things just defy logic and common sense/experience. Manikows graph was one of them.

To anyone not being purposely obtuse, who has any real life experience at all..the claim that government programs make up the difference between 20k and 40-50k of income is a joke.

I feel I've made my points clear....I'm done with this topic. I'll let you all have the last word....

[Kirk]

Before employment improves, the people who worked in construction are going to have to find jobs in other fields. And these people number in the millions.

I'm unaware of any other downturn where this happened. Even during the Great Depression, this didn't happen. Jobs were scarce all around, but you didn't have the gigantic, nation-wide overbuild that you have today. When the economy recovered, so did construction.

My county is home to about 300k people. Along with 500+ foreclosures every month, it has over 12 million square feet of empty commercial space. Much of it is factories that have been vacated. The factory I work in has approx. 25,000 square feet of empty space in it. (We used to have 560 people working here. It's down to 220, leaving lots of empty space.)

The factory next door has been vacant for over five years, going back to before the downturn.

So please don't tell me about "capital expeditures," and how "factories are replaced as they're worn out." They're not.

Most of the construction industry will have to find work in other fields. And that's going to take a long time.