As my lone reader (hi Mom!) will know, I have an interest in economics. I have put off introducing my economic thoughts into this blog, since I thought it would dilute the focus of this blog, but now that I have been giving more thought to the philosophical underpinnings of economics, it seems that I have no reason not to introduce this topic to this blog.
Alex Binder, of Christian Economics, has provided an argument that the government could be an “employer of last resort” in the case of the economy experiencing drawn out unemployment. He has written this post and a later post as a reply to Darwin of DarwinCatholic, who had already replied to the first post. As can be seen, I’m jumping into a developing discourse, so hopefully I can stay afloat, considering my paltry knowledge of economics in general. So here goes.
A job guarantee program provided by the government seems that it would prolong, if not unemployment in absolute terms, underemployment and could also harm total contributions brought to society overall by workers who gain experience and a wage in the private sector.
First, as I’m sure you’d grant, a job received through a job guarantee program would, for the hired individual, count as underemployment. They would not be able to work as long as they wish, nor would they be working in an area that they possess particular expertise. I’m assuming it’s a given that the work of this program would be something pretty much everyone could do, but most people who become unemployed in this sort of recession are coming from specialized fields. For as long as this job guarantee exists, the incentive is lowered for these individuals to look for work and lower their wage expectations so that they can get back to work quicker, seeing as they have a way of bringing in money to satisfy their immediate needs and because they will also be spending time working in an underemployed position rather than searching for work. Yet, for a great amount of people who have become unemployed, they have become unemployed precisely because they were making too much for their position to be sustained, insofar as we consider their wages to be the result of consumer demand for their products and services. (As it is, the shifting of demand could be due to the application or negation of distorting effects on the economy by the government. So surely some of this unemployment must count as structural, considering the distorting effect of the government on consumer demand and producer supply?) Wouldn’t it be better for these individuals to more quickly find work in their own specialized field because they more rapidly realize that their position is worth less than they were previously making?
Further, individuals who put off employment in their specialized field (or maybe just from entering a specialized field, it needn’t be the case that they find work in the same field as they were previously employed, if they were even previously employed, like college students wouldn’t be in this sense) are also putting off gaining experience and, by corollary, value-adding to the society. The effects wouldn’t be immediate, but if we suppose that a person who finds work 3 months quicker in a specialized field and can give an output of 10 utiles after a year’s experience, 15 after 2 years, and so on, after a lifetime of work with even an extra year’s worth of experience in that field they would contribute greater than an arithmetical amount of comparative utiles to society. Moreover, they would, if we assume they have found a lifetime career, also bring in more income over the longer run, because they have an extra year where wage raises could come into effect and accumulate. The job from a job guarantee program would be, in comparison, “misemployment,” to make somewhat of an analogy to Mises’ concept of “malinvestment,” where capital is misallocated and so generally wasted, usually due to government distortion of the markets (as we saw with the housing bubble).
So it seems that a job guarantee program would, overall, decrease the amount of value added to a society, due to its prolonging underemployment and contributing to “misemployment.”