Stimulating Unemployment

An editorial in today's Wall Street Journal makes the obvious point that if you pay people not to work, they won't work — big surprise. Alexis de Tocqueville made the same observation in the 1840s with his Memoir on Pauperism . . . as have countless other people with a modicum of common sense. The bottom line is that we felt compelled to point out to the Journal that it isn't enough just to say "don't do that" when it comes to stupid government programs. In social justice, the proper course of action is to organize with others and come up with something better. Simple gainsaying is rarely effective.

Dear Sir(s):

"Stimulating Unemployment" (Wall Street Journal, 07/20/10, A16) raises serious questions about how unemployment benefits and similar payments are administered. As implemented, unemployment benefits and welfare create a powerful disincentive for people to become productive, whether through wage system jobs or entrepreneurial endeavor. There is no incentive to take a job that offers a wage less than or equal to the benefits received, or to try and exercise creativity and inventiveness to generate a more risky and, potentially, more socially and personally lucrative return.

A possible solution would be to phase out the practice of terminating benefits once the recipient has secured employment or is engaged in some form of productive work. To stimulate production and employment, the current all-or-nothing system should be replaced with a sliding scale. When a welfare or unemployment recipient secures gainful employment or otherwise engages in productive activity, benefits should be reduced, not eliminated. To ensure that the system encourages productive activity, it should not be a dollar-for-dollar reduction, but, e.g., 50¢ for every dollar earned.

A sliding benefits scale could be combined with a program encouraging widespread direct ownership of the means of production. Asset acquisition could be financed by the expansion of bank credit backed by the present value of existing and future marketable goods and services. Loans could be secured with capital credit insurance and reinsurance instead of traditional forms of collateral. An unemployment and welfare reform package along these lines could provide a solid and financially sound economic stimulus package financed by private sector growth, not increased government spending.

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