Monday, April 26, 2021

Markets, Willingness to Work, Businesses Willing to Hire and Government Distortions

Waiting for this week's bonus Federal unemployment payment to hit.

In reference to my post, Why Joblessness is the New "In" Occupation, Casey Mulligan, Professor of Economics at the University of Chicago, has tweeted out:

I find it difficult to see where in the Wall Street Journal excerpt I quoted I cast "blame" on those unwilling to work or those businesses unwilling to hire.

Rather, I was merely pointing out how governments can end up distorting markets.

It is more about government programs that change options for individuals.

For example, if government programs were to pay $1,000 per hour to people who were unemployed then a lot more people would stay fat and happy on the living room couch. There is no blame on my part for a potential employee taking advantage of such a mad government program. I am merely pointing out the environment.

If government programs were paying only 10 cents per hour then surely many more would get off the couch and start looking for a job.

It is not about, in most cases, absolute willingness to work, but about distorted options created by government unemployment programs.

As things stand, current data suggest that many are happy with the current government handouts so they stay home.

Likewise from the perspective of businessmen, there is no "blame" to be placed on businessmen or some charge of absolute unwillingness to pay more. A lot depends on the existence of consumer surplus for a given product as to whether a businessman would be willing to increase the wage for a potential employee.

If product A is priced at $10 and consumers would be unwilling to pay more than $10 for the product, then it would be difficult for a businessman to increase the wage (especially if materials going into the product have strong demand from other uses).

On the other hand, if product B is priced at $10 but consumers would pay as much as $20 for the product then the businessman would be willing to bid much more in terms of wages to get potential workers off the couch.

Whether we look at it from the perspective of the potential worker or from the perspective of the businessman, it is not about some abstract "willingness" but what options come into existence when government enters the scene and distorts market options.

BTW, Prof. Mulligan was chief economist of the President’s Council of Economic Advisers during part of the Trump administration and has written a book about the experience, You’re Hired!: Untold Successes and Failures of a Populist President. Sounds like it could be insightful

A Bezos boy delivered the book to me a while back and I have now put it at the top of my reading list.

A review will be forthcoming.


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