Should We Hire The Unemployed For $40K Each?

Illinois Congressman Jesse Jackson, Jr. has a novel approach to solving both the rampant unemployment in the country, and the stagnant economy itself.† The government should start directly hiring the unemployed at an average annual salary of $40,000. The Democratic representative told the Daily Caller, “I believe in the direct hiring of 15 million unemployed Americans. At 40,000 a head, some more than 40,000 some less than 40,000, that would be $600 billion. It could be a five-year program.”

Needless to say, Republicans have immediately condemned the idea.† Conservative columnist Armstrong Williams argues that with so many Americans, according to him 137 million or 65 percent of the workforce, making under $40,000 per year currently, what is to stop them from leaving their jobs to take advantage of the government work, too?

Of course, Jackson is talking about laid off, unemployed workers, and, much as those who quit their jobs aren’t eligible for unemployment payments, it would be likely they wouldn’t be eligible for this theoretic jobs program, either.† Not to mention that the fact that 65 percent of Americans making less than $40,000 a year, which isn’t even twice the federal poverty level for a family of four, and doesn’t even meet the living wage requirement for most three member families, isn’t exactly something for the country to be proud of.

And Armstrong is against the idea for the same reason that he’s against extending unemployment benefits or having the government fund projects that would put people back to work at a decent wage.† It’s not the government’s job to be sure that people don’t starve, and any spending in that mode is a direct assault on those who work and pay (or avoid their fair share) of taxes.

What Jackson proposes is really more or less a direct stimulus — he’s telling Obama to bypass Congress and just hire the workers to build bridges, repair roads and teach students himself, rather than waiting for approval that will never come. As opposed to how Armstrong paints it, it’s not just a $40,000 per year handout for being out of work. It probably isn’t constitutional, but at the very least it’s a concrete effort to fix the situation, something both parties seem reluctant to do on their own.

Is $40,000 enough?† Is it too much?† Could we get the country back on track with lower unemployment and rebuild consumer spending and consumer confidence?† Would it just create more havoc in an already unstable economy?

 

Related Stories:

Who Needs Immigrant Labor When You Have Prison Inmates?

Cain: If You Arenít Rich, You Have Yourself To Blame

Extended Unemployment Benefits May Get Axed

Photo credit: revisorweb

331 comments

William C
William C2 years ago

Thanks.

SEND
W. C
W. C2 years ago

Thank you.

SEND
Stephen Brian
Stephen Brian7 years ago

Hi David :)

Sorry about the lack of introductory part last time to make it clear that I was addressing you. I think we are the only two left on this thread, though.

SEND
Stephen Brian
Stephen Brian7 years ago

My best guess is that the lag of employment behind the economy is responsible for the correlation between direct funding and economic growth. If that lag correlates with the period of normal economic fluctuations, we would get the correlation despite the damage that unemployment does to the economy. The funding would peak as the economy begins to bounce back. This seems plausible to me as they are both matters of the market's response-time to changes in the business-environment, though I certainly don't know if that theory is correct.

The correlation is stronger if you look at it decade-by-decade to filter out the effects of changing technology as much as possible. Also, the fact that 5/6 of them come out negative is significant. Even if they had a correlation very close to 0, the chances of that happening randomly would be 7/64, or about 11%.

I know the 2008 crash drove the 2009 losses. I do hold Obama accountable for the U.S. debt-crises and any double-dip it causes, though. I also hold his policies accountable for the shockingly slow recovery.

What were the laws in the 1970s? (Without names for the acts I can't check them out reliably.)

SEND
David C.
David Connally7 years ago

@Stephen

SS and Medicare spending was based on laws passed in the 70's and before. They were not due to action of the Reagan congress. Therefore your statement that congress demanded increase in social spending to compensate for higher defense spending is false.

I am still unable to understand why you spend so much time on a very weak correlation. The economy is immensely complex. On unemployment etc, not sure how you deduce this from Table 15. If you go to table 8.6, you'll see that unemployment compensation peaked in 1983 even though the economy bottomed in 1982. Thus, both economic growth and unemployment compensation grew in 1983. If I use your logic, I can argue that increased unemployment payments help the economy.

In fact, employment always lags the economy. Layoffs lag economic shrinkage, employment recovery lags economic recovery. This is why the massive unemployment increase in 2008, 2009 are due to the recession in the Bush term. Republicans falsely hold Obama responsible for the large job loss in 2009. In fact they were caused by the 2008 recession.



SEND
Stephen Brian
Stephen Brian7 years ago

Hi David :)
From Table 15.5: Year ; Defense International ; Social Security Medicare (% of GDP)
1980 ; 5.4 ; 5.5
1981 ; 5.6 ; 5.9
1982 ; 6.1 ; 6.3
1983 ; 6.4 ; 6.5
In Reagan's big jump in military spending, the 1982 budget (as back then budgets were made in advance so he didn't have the 1981 budget) was matched to within rounding error by a rise in Social Security and Medicare spending. The rest of the federal spending certainly got cut.

I used the same table to check GDP growth against different categories of spending, and the negative correlation between growth in GDP/CPI and spending does not come from rises in mandatory spending due to unemployment, etc. In fact, oddly enough, I found a positive correlation between those for most decades. Even so, you're correct in that correlation itself does not imply causation. I found causation earlier, and still do, from the order of events. The budgets are normally written before the year in question so the market of that year can react to them, but not the other way around. As the strongest correlation came from when they were run on the same year, it seems the strongest effect comes from the market's reaction to the predictions based on the announced budget.

SEND
David C.
David Connally7 years ago

@Stephen,

On the Reagan spending data, my sources are OMB tables 8.6 and 8.8 which provide all data in constant 2005 $$. I should also have said that the mandatory spending numbers I quoted exclude interest received on the SS trust fund and interest paid on the national debt.

I might also mention that SS withholding increased substantially.

SEND
David C.
David Connally7 years ago

You said that in the Reagan years, congress demanded increased spending on social programs to compensate for higher defense spending . This is simply false. (Unless you can provide me with a change in statutory SS or Medicare benefits).

Between 1980 and 1988, non-defense discretionary spending DECLINED at a 1.8% annual rate. Total mandatory spending grew at a 2% rate. Virtually all of this increase was due to higher Social Security and Medicare payments. In fact most other mandatory spending DECREASED.

I have been unable to find any statutory change in SS or Medicare benefits in the Reagan years. Of course, taxation of SS benefits BEGAN in 1984 - not indicative of a congress that thinks only of protecting social programs. Let me know if there were increases in statutory Med and SS benefits.

Stephen, I see you making broad generalizations to suit your politics, but when I look at the actual data, none of your assertions are supported.

SEND
David C.
David Connally7 years ago

@Stephen

I don't dispute there's a weak but statistically significant negative correlation between spending expressed as a % of GDP and GDP growth rate. You say that proves causality, I say that conclusion is not logical.

Correlation RSQ is 0.07 (my data analysis - see earlier comment); you say RSQ = 0.1. I say it is not possible to determine which is cause and which is effect and that 90 % of variance is unexplained. It is not clear to me why you are so insistent in your argument when unknown sources of variance dominate growth.

On which is cause and which is effect:

We KNOW recession reduces growth and as a consequence increases safety net spending. This is not a matter for debate - it is indisputable. This means lack of growth can cause increase in entitlement spending, i.e. spending can be an effect NOT a cause. (I can think other mechanisms but endless arguing over 7 to 10% of the variance is not productive).

SEND
Stephen Brian
Stephen Brian7 years ago

Hi David,

Sorry. Got cut off: (I'm annoyed that Care2 took out the character-counter.)

The data from Reagan's time was meant as the citation you requested a while back. Without a deal to match military buildup with social program-spending, how likely is it that the change in program-spending would randomly track that of the military spending through its massive increases under Reagan? Remember that he was not pushing just to spend more across the board, but specifically for an arms-race with the USSR. Had Reagan gotten his way, then, the military budget should have shot up, but the social program-budget should have continued normally (with normal fluctuations). Like I said earlier, Congress demanded that matching increase.

SEND