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Back to Work

Conservatives and the unemployed.

Mar 3, 2014, Vol. 19, No. 24 • By IRWIN M. STELZER
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Millions of Americans, glutted with benefits that until now have seemed likely to be renewed and renewed again, have suddenly become devoid of ambition, shed the work ethic, and taken to the couch and the TV remote. Or found a back pain or emotional problem that entitles them to the even higher benefits designed to ameliorate the plight of truly disabled workers.

Could she be on to something?

Could she be on to something?

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So runs the narrative that for too long has been the underpinning of conservative policies towards the unemployed, especially since the steady decline in the workforce participation rate. For many conservatives, “entitlement” is most frequently used as the adjective to precede “cuts.” They are not entirely wrong, but there are entitlements, and then there are entitlements. There are those paid to the undeserving unemployed, who will always prefer benefits to work, just as there are benefits available to the undeserving rich, who are allowed to treat ordinary income as capital gains and deduct interest paid on mortgages on second homes.

Now, there is little doubt that there will always be some who prefer benefits to paychecks, and who will game any system in order to avoid the biblical injunction to earn their bread by the sweat of their brows or, in the updated version, at the risk of carpal tunnel syndrome. My advice to conservatives is “Live with it.” Better that than to try to shape policy for the mass of the unemployed to thwart the relatively few work-shy for whom no available wage is high enough and no benefit our decent society is prepared to tolerate is too low. 

The undeserving unemployed will always be with us no matter the incentives available to them to train and find work. But their existence should not prevent a generous attitude towards the deserving unemployed, sidelined by forces beyond their control: an education system that leaves them unprepared to cope with a 21st-century economy; globalization that has destroyed jobs in America for the unskilled; easy money policies that have funded a recovery that adds to the wealth of the asset-owning while creating relatively few new jobs. These are the Americans on whom conservatives should lavish their policy-making ingenuity by creating a two-pronged program to woo workforce dropouts back into the labor market: Make work pay, and make jobs available. The first requires increasing the gap between what we pay people not to work, aka benefits, and what they can earn by working; the second requires that jobs be available to those with a renewed incentive to take those jobs.

Anyone familiar with art auctions knows that sellers have a reservation price, one below which they will withdraw their object from the sale. The same is true of even the most ambitious rational worker. If the wage offered, minus transportation, clothing, meals, and other costs of accepting employment is not sufficiently above the value of benefits, the worker will quite rationally prefer his benefits. Yes, for some there is the psychic reward and pride that comes with a paycheck, but it is not sensible to build policy on the assumption that such considerations would prompt the great mass of workers to take a reduction in income in order to participate in the labor market. Most will quite reasonably compare the gap between the income on offer in the workplace and the income generated from the benefits programs available to them, the latter constituting their reservation price.

At Harvard’s Kennedy School current and aspiring politicians, regulators, policymakers, and bureaucrats are taught that if they get the incentives right they will have done more to achieve their policy goals than regulatory oversight, auditing, and the other stuff of ever-growing government could accomplish. In the case of those who have dropped out of the workforce that would mean increasing income from work and, eventually but not until job-creating growth is restored, decreasing income from benefits.

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