Why Oh Why Can't We Have a Better Press Corps? No, High Unemployment Is Not Primarily the Result of "Generous" Unemployment Insurance Benefits
The New York Times continues to print Casey Mulligan, who claims--once again--that the unemployment rate rose to its current levels and remains high because the federal government made unemployment insurance more generous, and that as a result all those lazy lucky duckies decided to take a vacation on the hard-working taxpayer's dime:
Casey B. Mulligan: Hiring, 'Quits' and Layoffs: The recession and lack of recovery have often been characterized as a lack of hiring [due to deficient aggregate demand]…. But the aggregate data… can be misleading….[Y]oung people have high rates of job turnover…. [Y]oung people could dominate the job turnover statistics, even while they do not dominate the employment statistics…. Michael Elsby, Bart Hobijn and Aysegul Sahin…. found a very different pattern for people 16-24 than they did for people 25-54. Estimated job separations among employees ages 25-54 were 33 percent greater in 2009 than they were in 2007….
Before the recession began, quits were… most common… now the number of quits [has fallen] about equals the number of layoffs… [because] of the unemployment insurance system. A person who quits his or her job is not eligible for unemployment insurance…. By 2010… the government subsidy for calling a separation a “layoff” rather than a resignation was up to about $10,000 from $3,600…. [E]mployers and employees now often have a lot to gain by calling their separation a layoff rather than a quit…
Of course, that is not how the people Mulligan cites, Elsby, Hobijn, and Sahin, read the situation:
[R]esearch on… UI benefits suggests… a 1-week increase in potential benefit duration is associated with an increase in the average duration of the unemployment spells of UI recipients of around 0.08 to 0.20 week (see Moffitt 1985, Katz and Meyer 1990, Meyer 1990, Card and Levine 2000, Krueger and Meyer 2002)…. [A] back-of-the-envelope calculation therefore suggests that EUC… [could account for] between 0.7 and 1.8 percentage points of the 5.5-percentage-point rise in the unemployment rate…. [T]he true effect… is likely to be at the lower end of these estimates. Many of the larger estimates… are based on data from the 1970s and 1980s, when temporarily laid-off workers, who are more responsive to the generosity of UI, made up a larger fraction of unemployment. In addition, many of the larger estimates in the literature… identify the effect of UI by exploiting differences in benefit schedules across states and time. As Card and Levine (2000) point out, however, many states extend UI benefits as a response to poor job-finding prospects in recessions, so that this approach may overstate the true disincentive effect…. Card and Levine’s estimates based on an exogenous policy change lie at the low end of the range of effects, suggesting a more modest impact of EUC…
No, of course, I have no idea why or how Casey Mulligan--or, indeed, anybody--could think that Elsby, Hobijn, and Sahin's work supports his theory.
And, of course, I have no idea how the timing is supposed to work here--how if rising layoffs, falling quits, and falling hires are all being driven by lazy workers' decisions to take a vacation on extended UI benefits it can be the case that hires and quits start falling long before layoffs start rising or UI benefits are extended.
And I have no idea why the New York Times doesn't have some of its highly-paid editors call up Elsby, or Hobijn, or Sahin and ask them "do you agree with this interpretation of your work?" before they publish.