Friday, December 20, 2013

More on North Carolina Unemployment Insurance

Evan Soltas, who was the one that got me looking into this, has an update on the issue here:

He adds this graph:

This graph makes it look like the reduction in unemployment is completely related to exits from the labor force.  I'm not sure about the graph.  It's comparing a current rate, to the year-over-year change in another rate, to the year-over-year change in a raw quantity.  There is enough noise in these series already.

Here, I have changed the three measures to month-over-month, seasonally adjusted changes, in thousands of persons, just showing the last two years for more clarity:
FRED Graph

In the last 4 months, the North Carolina unemployment rate has dropped by an average of more than 0.4%, per month.  At the national level, only about 0.75% of the labor force is even on EUI at this point, which adds another wrinkle to the interpretation here.

In the end, while messy data series are the means we use to argue, my reading of Evan's argument is that he considers any drop in the unemployment rate that results from the drop in EUI benefits to be problematic.  If they drop out of the labor force, he suspects that EUI would have kept them engaged in job hunting.  If they become employed, he suspects that they would have benefited by waiting longer to find a better job.

So, data or no data, this really comes down to a philosophical or narrative choice.  We have to be careful here to avoid "mood affiliation", or narrative thinking where we imagine a typical worker.  There were probably around 35,000 people collecting EUI in North Carolina, with 35,000 narratives.  So, when Evan prints things like,
"I think that it is likely that, on the margin, the "active search" requirement is more powerful in keeping people in the labor force than is desperation."
I think he's making several errors of binary, narrative thinking.  Isn't there a middle ground between bureaucratic requirements and desperation that is more populated than these two poles? (Long term unemployed do skew older and more educated.  The GAO found that of the people who exhausted EUI, more of them ended up moving into social security programs than into SNAP programs.  And less than 1/4 had left the labor force.)  Is it the goal of every person with long-duration unemployment to be in the labor force as often and as soon as possible?  I don't actually quite know what to make of this sentence.  If we are thinking on the margin, are we thinking of someone ruled by desperation?  I wouldn't expect the desperate person to make their labor force participation dependent on their benefit status.  I would expect the marginal person to be, say, a guy in his 50's whose wife is working, who almost has the house paid off, who has saved some money for retirement, but not quite as much as he would like.  He sincerely would like to take a job when the right one comes along.  Etc.  He probably doesn't need 99 weeks of UI, not that he can't use the money.  He isn't in any position to claim another type of public support.  It seems reasonable to collect EUI.  Nobody's shaming him for it.  But, he's not going to go apply for SNAP.

For the single 30 year old mother who has been out of work for 18 months, there are other programs.  She will apply for SNAP, and she should.

On the issue of former EUI recipients who are now employed, earlier than they might have been, Evan cites this paper from Daron Acemoglu and Robert Shimer about the productivity benefits of unemployment insurance.  But, I believe that paper concerns itself with moderate levels of UI around 26 weeks.  This roughly describes the level North Carolina has reverted to, and that the US will probably be returning to.  I don't believe that paper offers a defense of 99 week, or even 75 week UI, and Evan is ignoring the problem of hysteresis for longer spells of unemployment.

This isn't a decision between a carefully calibrated safety net and no safety net at all.  This is a decision between a broad, temporary policy, which has uncertain ramifications and a return to the normal, highly developed system of social support that the country generally supports as a general proposition.  The food banks Evan references are part of that support system, as well as many public programs that dwarf the reach of EUI.

(A couple closing comments, here.)

Edit: It was bothering me that the graphs in this post were based on data from both the establishment and the household survey.  Here is the graph with all of the numbers from the household survey, so the summed changes in employment and unemployment should equal the change in the labor force, for each month.  The basic trends are the same, but this is a little more coherent to me (green is employment, blue is unemployment, red is labor force, all are expressed as monthly changes in thousands of people):
FRED Graph

No comments:

Post a Comment