Monday, 30 September 2013

Tackling Unemployment: The Question George Osborne Forgot To Ask - Is Employment Always Desirable For Everyone?

In his conference speech today, the chancellor George Osborne proposed a new headline-grabbing scheme called 'Help to Work', under which the long-term unemployed will be required to do community work (picking up litter, cleaning graffiti, and so forth) in order to carry on receiving benefits. 

There clearly are issues that need addressing here - it's just that the Government never seems to ask the proper questions. I'll have a go. If one really wants to ask the questions properly, the first question must be concerning whether employment is, or should be, desirable for everyone. To assume that employment is desirable for everyone is, I think, a mistake, particularly if one never even enquires as to why it might be the case that some people are better off being unemployed.  But bear with me, I'll return to that in a moment.

Given that the government has based its policy on the assumption that no unemployment is desirable, it failed on the first hurdle. But let's overlook that for a moment and assume that at least some of the 200,000 people to whom this policy applies would be better off if they were not unemployed. This produces further corollary questions. Is it probable that at least quite a few long-term unemployed people are stuck in a state of inertia? Probably, yes! Is it desirable that those long-term unemployed people get out of that state of inertia? Almost definitely, yes. Is the answer to get them to contribute something back to society, while at the same time enforcing on them some kind of compulsory community activity? Maybe in some cases, yes, maybe in other cases no. Is every long-term unemployed person a good candidate for this scheme? Almost certainly not.

So, even if the policy's benefits aren't immediately obvious, it is perhaps at least the case that most of us agree that the long-term unemployed people that 'are' in a state of inertia would be better off if they got out of that state of inertia. The twofold question, then, is whether or not the 'Help to Work' policy is a good policy (by good policy I mean that its benefits outweigh its costs), and whether the state can successfully identify those who are in a state of inertia and those who are better off being unemployed. Here's one thing to consider. Incentives aren't going to be much use to those who can't find jobs (either through the unemployed person being barely employable, or through stiff competition, or through scarcity of vacancies). Therefore, penalising people that fall into this category won't do much good, because the incentive is powerless to change any of those three main barriers to employment.

If there are people that are perfectly employable but who are adroit at beating the system then they might be worthwhile targets. But I don't think the 'Help to Work' policy is the answer; I don't see it changing much for those with a genuine barrier (or barriers) to work, and I think many of the people with the biggest barriers to work are the very same people that are the least likely to find jobs.

If you want to have them forced to do community work to receive benefits, then fine, it might do some good in a few cases. But even if you endorse the proposal, you have to be prepared to accept that it probably won't help those that most need help. Let's now get to the real issue by retuning to where we started, and elaborating:

Is unemployment good for some people?
To answer that, consider that once you get rid of the emotive word 'unemployed' and replace it with, say, 'person of leisure' you tap into an interesting perspective - and that is the fact that most people in the UK would be a person of leisure by choice if they could. One only need to look at most lottery winners to see that if given the opportunity to not have to work, to sleep in as late as they like, and to pursue interests for which they wouldn't otherwise have time, most would grab that opportunity with little hesitation.

Nowadays we work many fewer hours than our great-great-grandparents did, because we are wealthier than they were - and as a result we have many more leisure hours than they did. If increased leisure goes hand in hand with increased unemployment then at least in some cases a rise in unemployment need not mean a decline in well-being.  For example, as incomes rise families may decide that they need fewer wage earners in the house, or individuals might feel able to save some money and take some time out to pursue other extra-curricular projects.

The point is, there are obvious benefits to being a person of leisure, and there are obvious costs, just as there are obvious benefits to earning a living wage, and obvious costs. But if Gary wants to live on £56 per week and forgo the extra money to do other things with his time, and John wants to sacrifice 40 hours free time per week (and having lie-ins in bed) to have more money to spend and more of a career, then I can't see much wrong with the situation, nor can I make an automatic assumption that John is better off than, or more ethical than, Gary.

You may say that it's wrong that 200,000 such people are living off other taxpayers' money - but at a net cost of only about 25p per week for each of us, it may be the case that it's a price worth paying, particularly if there are many hidden benefits that are beyond the radar. Of course, the problem really is that a great majority of the long-term unemployed probably aren't doing anything like as much as they can with their leisure time, which is why most of us do not want them to remain on benefits. That is to say, if Chris is spending all his leisure time eating crisps and watching rubbish on daytime television, then we have every reason to resent his life of leisure. But - and here's the part that's seldom considered in the analysis - if Chris is spending his life of leisure honing a skill that might make him a good candidate for being the next Anton Chekhov, or the next Frank Lloyd Wright, or the next Bob Dylan, or the next Adam Smith, or the next Alexander Fleming, or even the next Einstein or Shakespeare or Michelangelo, then we should be pretty glad that he's not working 40 hours per week in Barclays Bank or Waitrose.

If some people are better off unemployed, then one might note with a certain degree of irony that quite a few people bemoaning their unemployment are actually better off than the alternative. Take the people in the North of England who are often complaining that they've been stuck on the dole for years because, according to them, "Thatcher ruined British industry" (she didn't - see bottom of the page*). I don't have much time for this kind of irrationally - it is both economically incorrect, but it also shows a character defect in those doing the complaining. I'm sure many of the people claiming long-term unemployment benefits could have found jobs if they'd really wanted. Not only does geography tie people down (which is often understandable if you have family connections in a particular place), it's perhaps more the case that being unwilling to learn new skills or consider other alternatives will naturally retard employment opportunities.

Here's the real point. For many, if it really is the case that the diminution of British industry has consigned many people to a life of paid leisure on the dole, and they really have little motivation or opportunity to work, then why aren't these people some of the happiest of all? And if anyone questions the extent to which we value leisure, you only need to look at two examples; A) how most lottery winners live their lives, and B) the fact that we’ve progressed over the last 100 years from working on average a 60-70 hour week to working a 30-40 hour week. The point being, leisure is much more desirable that people realise – and I think that people on the dole who are determined to find work by changing vocations, learning new skills, and soliciting further training, will do so.  The people who've remained on the dole for years on end must be the people who've considered a life of leisure with lower income to be preferable to finding work by changing vocations, learning new skills or soliciting further training in order to do so. Far from being the ones consigned to a plight, they are in many cases some of the most fortunate in the country, as they enjoy all the benefits of being people of leisure, and they find themselves with more free time than most of us. Clearly one must consider such things on a case by case basis, but it would seem it must be true of some people.

The government continues to make two mistakes; firstly it just naturally assumes that always and in every case being employed is better than being unemployed. And secondly it fails to ask why people are unemployed, and in doing so it fails to pay enough regard to the mental states of many unemployed people. There is plenty of research that gives good indication that for some individuals being unemployed is better for one's mental state than being in jobs with low psychosocial quality.  The negative effects of the mis-matching can be even further long-term unemployment and poorer mental health. Given that many of the long-term unemployed people will be people that are going to find it hardest to enter the work environment - with its concomitant social engagements, as well as increased pressure, less energy and more demands made on the mind - it could be argued that the government needs a different approach to help people rather than just focusing on reducing unemployment.

Of course, in saying some people are better off unemployed, I’m not saying that the unemployed people in question will never go on to make good use of their skills in some occupational capacity, or that it’s always better they are not in work. The question isn't about whether it's good to be unemployed for ever - it's about whether it is better for some people to be unemployed for a certain period of time in their life, which, if it is - and as we've seen there are good arguments that it is - this somewhat undermines the government’s automatic assumption that everyone who has been unemployed for three or more years is better off being coerced back to work. 

What you have to take into account is that for many unemployed people (although not all), a life of leisure brings about opportunities that are preferable to taking the kind of jobs that are available. Sure, it’s true the taxpayers are funding that life, but if the individual in question is genuinely better off by having the opportunity to go good things or build some foundations for the future, then I don’t see why it should be perceived as a bad thing that Tom, Dick, Harry and Lisa are living a life of leisure.

Perhaps Tom prefers to study academic books intensely (for future benefit) rather than taking the low-paid jobs available. Perhaps Dick runs his family home in a way that the government can’t fully appreciate. Perhaps Harry has spent the last few years writing books that will one day change the world. Perhaps Lisa spends a lot of time giving valuable time and company to a lot of lonely elderly people who would miss her if she was coerced into taking a low-paid full time job. The upshot is, few people ever ask the right question about unemployment – it seems to me most people just assume that in all cases it is less preferable for a person to be employed. It is an assumption that I think has needed correcting for some time.

 * On The Myth That Thatcher Ruined British Industry
The obvious point is that in a free market economy there is no place for national affiliation. If an employer has found 100 non-British workers who are willing to work for £3 per hour less than his 100 British workers, the nation is better off (as is the global economy), because before the non-British workers began to do the jobs, there were 100 potential workers each being overpaid by £3 per hour.  In a 40 hour week that amounts to a net overpayment of £12,000. In market economics, Adam Smith's 'invisible hand' states that competition brings about self-interest for the good of everyone, where prices near-perfectly match supply and demand.  Free market economy at a global level works well because hard workers, innovators, entrepreneurs and finance experts amount to different people, with a free market that enables them to coordinate their skills. It's no use being emotionally affiliated to an industrial factory that's costing us money just because it happens to be one’s own place of work, or because it happens to be based in one's own country. Thatcher's critics have got it backwards – she didn’t ruin the British economy - it is the efficiency of the relationship between prices, supply and demand that she used to help save the British economy. The northerners who are bemoaning post-Thatcherism fall largely into two camps; they are either people who really want to seize opportunities and as a result decided that after their industry has been outsourced they'll change vocations; or they are people who have decided that a life of paid leisure (albeit low income) is preferable to changing vocation or learning new skills.


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