Archive

Economics

I’ve been catching up on This American Life podcasts this week. My mind is still fixated on the programme from a couple of weeks ago, “Trends With Benefits”.

Apparently, the number of Americans receiving federal disability payments has nearly doubled over the last 15 years. There are towns and counties around the nation where almost 1/4 of adults are on disability.

Planet Money‘s Chana Joffe-Walt spent 6 months exploring why this is the case and returns with a complicated picture of what this means about the US economy as well as the larger industry that supports this structure:

Chana Joffe:  Joseph and Ethel Thomas live in a depressed town in a poor state in a national economy that is basically in the process of fully abandoning every kind of job they know how to do. Being poorly educated in a rotten place, that in and of itself has become a disability.

This is a new reality. This gap between workers who are fit for the US economy and millions of workers who are increasingly not. And it’s a change that’s spreading to towns and cities that have thrived in the American economy. Places that made cars and steel and batteries and textiles.

The disability programs are acting like a sponge, sopping up otherwise desperate people. This is happening so often in so many parts of the country, this shift from work to disability programs, that I have actually been reporting on it for years, and I didn’t even know it.

David Autor:  Well, that’s kind of an ugly secret of the American labor market, that part of the reason our unemployment rates have been low until recently is that a lot of people who would have trouble finding jobs are on a different program. They’re on the disability insurance program. And they don’t show up in the labor force statistics. And so it artificially reduces the unemployment rate that we observe.

Chana Joffe:  So you’re saying we all already knew it was bad. It’s actually worse than we think.

David Autor:  It is. It’s been worse than we thought for a long time. This has been going on pretty rapidly for now more than 20 years.

Chana Joffe:  David Autor says disability has become a sort of de facto welfare for people without a lot of education or job skills. Except it is the worst kind of welfare program, because it includes one feature you never, ever want from your social safety net.

David Autor:  Once people go in that direction, they’re unlikely to come back.

Chana Joffe:  The problem with using our disability programs as a sort of quiet de facto welfare system is they’re not designed to help people to deal with their disabilities, to get jobs, to make increasingly more money over a lifetime. They’re not there to catch you when you fall down and help you back on your feet.

Once a worker gets on disability, there are really only two ways out. You get old enough that at 65, 66-years-old, you move on to a different government program, Social Security for seniors, or you die. Those are the two ways people exit disability. Almost no one gets better. The benefits don’t get you rehabilitative services or supportive technology. They just give you a monthly income.

And it’s not a great income, about $13,000 a year. But if your alternative is a minimum wage job that will pay you $15,000 a year– a job you may or may not be able to get, may or may not be able to keep, that probably won’t be full time, and very likely will not include health insurance– disability may be a better option.

Well let’s just think about what that option means. You will not work. You will not interact with coworkers, get promoted, make more money, get whatever meaning people get from work. And assuming you rely only on those disability benefits, you will be poor for the rest of your life. That is signing up for disability. That’s the deal. And it’s a deal 14 million Americans have chosen for themselves.

–This American Life, “Trends With Benefits” (bolding added)

The entire programme is worth a listen and really illuminates an integral aspect of how US federal benefits work that has been missing from most of the policy debates I’ve heard.  A lot to mull over, but so insightful in understanding why these problems seem intractable.

Advertisements

…Across the world, it seems, wealthier people are much more likely to complain — or kvetch, if you will — about being busy than the poor. It’s not simply that the well-to-do work more, although that’s part of it, says Daniel Hamermesh, the University of Texas economist who co-authored the 2005 study with a former graduate student. It turns out that if you hold the hours people spend at their jobs and on household chores constant, individuals who bring home bigger paychecks still feel more stressed for time. Increase a husband’s income, and his wife begins to feel busier.

Hamermesh reached his conclusions by analyzing time-use surveys from the United States, Germany, Australia, and South Korea. The results were fairly consistent across international borders, although they varied a bit in South Korea, he says. In general, the richer a survey taker was, the more they kvetched about their lack of time. Women, meanwhile, kvetched more than men. And although Hamermish is hesitant to make cross cultural comparisons, he says that Americans appeared to be the “world champions” of kvetching.

All of this seems a bit counterintuitive. After all, one of the perks of being rich is that you can afford to pay people to take care of life’s necessities in order to free up more time for life’s pleasures. A nurse and a Google engineer might work the same hours. But the engineer can afford a babysitter and maid.

Nice in theory. But in practice, hiring help only makes a marginal difference, Hamermesh says. “You can’t pay somebody to sleep for you,” he explains. “You can’t pay somebody to read Proust for you. Or go to the opera, or go to the movies, or go to a ballgame.” And that’s where a bit of psychology comes into play.

We all live on two things: time and money. And people who have extra income don’t get much, if any, extra time to spend it. As a result, Hamermesh argues, each of their hours seems more valuable, and they feel the clock ticking away more acutely. Much the way it’s more stressful to order dinner from a menu with 100 items than 10, choosing between a night at the symphony, seats at the hot new play, or tickets to Woody Allen’s latest flick is in some senses more stressful than knowing you’ll have to save money by staying in for the evening. There’s a lot the rich could be doing and too few hours to do it all. 

That isn’t to say the rich are necessarily more stressed overall. While the poor are less likely to complain about a lack of time, they are much more likely to complain about a lack of money. “One of them is always going to be scarce for you. If you’re rich, it’s time that’s scarce. If you’re poor, it’s the money that’s scarce,” Hamermesh says.

So should we all feel guilty about our kvetching? Not necessarily — as long as you remember that, in the scheme of things, being busy is a nice problem to afford.

–Jordan Weissman, “Why Only Yuppies Feel Busy: An Economic Theory

To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce. But the distinction between doing something and doing nothing would not have been lost on the Framers, who were “practical statesmen,” not metaphysical philosophers.

–Supreme Court Justice John Roberts, National Federation of Independent Business v Sebelius, 28 June 2012, pg 24

Didn’t expect to LOL at the SCOTUS decision. But calling economists ‘metaphysical philosophers’? Maybe Supreme Court Justice Roberts and I agree on more than I thought…

Also, yay for the Supreme Court deeming it is constitutional for Congress to try to expand health care to virtually all Americans. Seriously having a whatwillItellmykidswhentheyaskmeaboutthisdate moment. Talk about historic, folks.