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Tue, Dec 12, 2017 03:40 PM
Wednesday, March 8, 2017 issue
The Amazing American job machine
Guest commentary

By Rich Lowry



The American economy is destroying jobs, and that's a good thing.

It is in destroying jobs that the economy improves and makes it possible for the standard of living of all Americans to increase. This constant churning means that even a "stagnant" American job market is extremely dynamic, and that the ranks of the unemployed are not necessarily the dispossessed of the earth, as Democrats tend to portray them.

Keep this in mind as Congress gears up for a debate on whether unemployment benefits should be extended beyond their normal six-month term for the fourth time in the past two years. Democrats will attack anyone opposing this extension as a heartless extremist attempting to trample on the poor. But an extension of benefits might, perversely, prolong unemployment, and it will serve to dampen the dynamism of the American economy, which is its greatest asset.

In any given year, roughly 10 percent of all jobs in the American economy are destroyed, while an equal number rises up to take their place, according to the latest Economic Report of the President. The trick, of course, is to create more jobs than are lost. Since 1980, according to Michael Cox of the Federal Reserve Bank of Dallas, "Americans have filed 106 million initial claims for unemployment benefits, each representing a lost job." But during the past decade, the economy has still added a net 40 million new jobs.

Since 1970, the median duration of unemployment has been 6.6 weeks when the economy is growing, and 8.2 weeks immediately following a recession. In roughly 40 percent of cases, the period of unemployment is 5 weeks or less. So the unemployed aren't a single class of people, but a group constantly changing as people cycle in and out.

In many cases, job turnover —although painful — is a very good thing. It is by switching jobs that people learn new skills and find a better match for the skills they already have, thus earning higher wages. A typical young worker has seven jobs during his first 10 years in the job market. A third of that worker's wage growth will occur when leaving one job for another.

Public policy should be leery of anything that discourages this churning in the job market. (Otherwise, four out of 10 of all Americans would still be working on a farm, as we were a century ago.) Because unemployment benefits essentially subsidize unemployment, they can have this effect, encouraging people to stay unemployed instead of jumping back into the job market.

As the economy begins to purr and the unemployment rate dips, the last thing the government should do is give people a disincentive to join in the great roiling American job market. Opposing an extension of unemployment benefits isn't heartless, but an act of well-placed faith -- in the dynamism of the American economy and in the resourcefulness of its workers.

(c) 2003 by King Features Syndicate




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