A case for government intervention: unemployment

[shanek]

After the way I treated you? I spent days -- not hours, days -- preparing the titular argument of this thread, and you ignored it completely.

NO I DIDN'T!!!! I'm refuting the MAIN POINT behind your arguments! If I do that, I don't have to address the arguments themselves! I'm refuting what you are assuming as given AND ARE REFUSING TO CONSIDER!!!

the reference you gave is, as usual, utter BS. The quote gives the state the power to forcibly collect unemployment benefit -- it does not forbid private unemployment insurance.

Yes, it does! By vesting the power solely in the commission, they are forbiding private sector unemployment insurance!

I argued how any significant insurable risk gets insured

And IGNORED my arguments to the contrary! And refused to answer my DIRECT QUESTIONS and requests to provide evidence!

How do you measure in a free-market economy demand for something that the market cannot provide?

Oh, for crying out loud, it's done all the time! Find a newspaper article, essay, SOMETHING from someone bemoaning the lack of unemployment insurance!

Show me figures proving demand for unbreakable cars that get 2000 mpg and cost $10! You can't, can you?

I can show that there's demand for more fuel efficient cars at lower prices! You're wanting me to quantify something when I never asked you to quantify the demand for unemployment insurance! And you wonder why I call you a weasel!

If you can't show the evidence, your argument isn't backed up. If your argument isn't backed up, my refutation stands. That's how it works.

[Victor's typical bigoted insults deleted]

 

[shanek]

Good post, MKJ! (See, Victor? THAT'S how it's done!

Once arrived, the problem proved to be tenacious and difficult to solve. Beginning in the 1870s, unemployment became a persistent feature of economic life in the Northeast and the Midwest, and it became a national phenomenon no later than the depression of the 1890s. From the Civil War until World War II, unemployment rates ranged from roughly 4 or 5 percent in good years to more than 15 percent during the troughs of the worst depressions. But such figures (which reveal only the percentage of labor force members simultaneously jobless) understate the breadth of the phenomenon. In all likelihood, between 20 and 25 percent of working Americans experienced some unemployment during the average year, and they tended to remain jobless for roughly three months.

Ya hear that? Three months—exactly the figure I gave for natural unemployment.

During depressions, up to 40 percent of the labor force was laid off in the course of each year for spells averaging more than four months. The problem was most severe during the downturns that began in 1893, 1907, and 1920, and it reached its nadir during the Great Depression of the 1930s—when roughly 25 percent of the labor force was simultaneously jobless, with many of the unemployed remaining out of work for a year or more.

Okay, we've already discussed how the government created the Great Depression in other threads. As for the rest, note the figures—four months or more. Not the several months to years we have now.

You may think that being unemployed for three or four months is a bad thing. That's fine. You might think it's better for those persons to be working at a job. And I would agree. But how can there be any argument for the continuation of a "cure" that has made the disease worse?

 

[shanek]

Yes. I don't think that people drive carelessly because they are covered by auto insurance -- there are after all significant financial penalties associated with causing an accident, in addition to the risk of injury and death.

But in the case of low speed accidents where there's no real chance of injury, and where the person isn't causing the accident, just failing to prevent it, don't you think that in those cases there might not be the incentive to stop the accident? After all, there wouldn't be much damage done, and you could score some easy insurance money that way...

 

[shanek]

Mahatma Kane Jeeves

Ah, a fascinating read; thanks. I wager it won't change Shane's mind, though.

Why should it? It agreed with what I said!

 

[Thanz]

But in the case of low speed accidents where there's no real chance of injury, and where the person isn't causing the accident, just failing to prevent it, don't you think that in those cases there might not be the incentive to stop the accident? After all, there wouldn't be much damage done, and you could score some easy insurance money that way...

What the heck do you mean, easy insurance money? Most people have some sort of deductible for repairs to their car. If the accident is their fault, their rates may go up. An accident will cost the person money. There is no easy insurance money. And I can't think of anyone that wants to go through the aggravation of a car accident, no matter how minor.

 

[Michael Redman]

If anyone is interested in how unemployment insurance actually works in this country:

http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp

 

[Valmorian]

There isn't a single one covering it all; it's different in every state.

Yeah, I would imagine that it would be a state-enforced law. I don't doubt that there probably are some laws like this. I guess my question should have focused more on:
"Are there any private sector suppliers of Unemployment Ensurance anywhere in the world?"

Any private unemployment insurance company would be seen to be acting in contrary to the authority of the state, with the above mentioned police powers being used to that effect. Also, you don't have the choice of not paying into the system even if you'd never remove a dime frome it.

I'm curious, I wonder if any company has ever even tried to supply unemployment insurance?

Because as I pointed out, most people simply wait until their benefits are about to expire. That makes it clear that they most likely could have gotten a jub much earlier if they had the incentive to do so.

How do you know this? I know I sure didn't wait.. I was looking for a job the next day the last time I was out of work, even though unemployment insurance applied to me.

No, because with accidents you have problems other than monetary—being hurt or killed, having to do without a car for a period of time, etc. With unemployment insurance, what real incentive is there to get a job right away when people are paying you to essentially jump thorough a couple of easy hoops?

What incentive? How about more money? Isn't this the same incentive that is supposed to encourage workers in a free market to strive for better positions, to educate themselves, etc?

Since what we're talking about is no part of the free market at all, this accusation baffles me.

The point I was making is that saying someone receiving U.I. would never go looking for another job is quite contrary to the usual 'free market is good' arguments.

If people will do the least amount of work required to simply survive, how would new companies form? Why would anyone risk losing all that money? They could just always take the safest path and stay solvent instead of risking it on a potential loss.

 

[Libertarian]

And I can't think of anyone that wants to go through the aggravation of a car accident, no matter how minor.

True. BUT, people will take on the RISK of an adverse consequence if that consequence diminishes. Everyone (including you) is constantly making these decisions, on a daily basis.

I don't want to crash my motorcycle. No one does. But if you take away my helmet, I will drive more carefully.

I don't want a speeding ticket. Yet I am always driving over the speed limit. I'm making rough calculations, almost subconciously, that if I can save 10 minutes per day by driving faster, then it's worth the RISK of getting an occasional speeding ticket. Especially since the last ticket I got was several years ago.

 

[shanek]

What the heck do you mean, easy insurance money? Most people have some sort of deductible for repairs to their car. If the accident is their fault, their rates may go up. An accident will cost the person money. There is no easy insurance money. And I can't think of anyone that wants to go through the aggravation of a car accident, no matter how minor.

Read what I wrote: I was speaking of a person deliberately not preventing a low-speed crash. The deductible wouldn't apply, their rates won't go up, it won't cost them money, in fact, they can easily get money for repairs from the other person's insurance company.

 

[shanek]

If anyone is interested in how unemployment insurance actually works in this country:

http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp

In the majority of States, benefit funding is based solely on a tax imposed on employers. (Three (3) States require minimal employee contributions.)

Doncha just love how they spin that? Here's a hint: If your employer pays it as a result of hiring you, it's coming out of money that would otherwise be paid to you. Make no mistake: You are paying for unemployment insurance, you can't opt out, and you can't take that money anywhere else or self-insure it.

 

[shanek]

I'm curious, I wonder if any company has ever even tried to supply unemployment insurance?

Not to my knowledge.

How do you know this?

From my mother, who worked with the NC ESC for decades.

I know I sure didn't wait.

I didn't say every single person would wait.

What incentive? How about more money? Isn't this the same incentive that is supposed to encourage workers in a free market to strive for better positions, to educate themselves, etc?

It has to do with the additional work vs. the benefit you receive. When you're getting paid for essentially doing nothing, it would have to be quite a bit more money to get you back in the workforce. And people with higher paying jobs experience less unemployment.

The point I was making is that saying someone receiving U.I. would never go looking for another job

When did I say "never"?

If people will do the least amount of work required to simply survive,

When did I say that they would?

 

[mgidm86]

Furthermore, can you make up your mind? Does private unemployment insurance fail to exist because government legally prevents it, or because there is no demand?

I'm definitely no economic mastermind, but why would anyone pay for privatized unemployment insurance while the government is already taking it out of our checks? And don't tell me they arent. A business owner I know (my stepdad) was complaining that "he was paying for all my bills" while I was on unemployment recently. I countered that the money is being equally paid out by me, in that if he didn't have to pay for unemployment insurance, that my paycheck may have been a little fatter. He agreed.

To me, the arguement that the fact that there is no private unemployment insurance proves that there is no demand is hogwash. As I said, I'm no expert and I'm willing to be proven wrong.

 

[Jaggy Bunnet]

Private unemployment insurance certainly does exist in the UK. A simple Google search provides dozens of links to providers. For example:

www.unemployment-insurance.co.uk

And that is in addition to the compulsory government run system. It is most commonly used to cover mortgage payments during periods of unemployment as the government benefit would come nowhere near to covering these due to a combination of low benefits and high house prices.

As the UK shows it is possible for such insurance to exist, the interesting question is why it does not exist in the US. In the UK, the existence of a government system does not prevent a private system existing. My guesses:

Government system pays higher benefits than the UK, meaning there is no need for private insurance.

Government system provides benefits that are sufficient for the majority of workers, but not all. However those with higher salaries/outgoings have a high expectation of being able to get a new job quickly. As a consequence, they do not put a high value on such insurance.

 

[Michael Redman]

The fact that the state is in the unemployment insurance business does not necessarily mean that private actors would be illegally stepping on their toes if they tried to do the same thing. Take a look at supplimental Medicare policies, for example. The fact that the Federal Government provides medical insurance to all people of retirement age does not in any way prevent private medical insurance from offering additional benefits.

In fact, we do have forms of private unemployment insurance in this country. Many creditors offer credit protection that pays bills under certain circumstances, including unemployment, in which an individual's income is disrupted. I don't know if there is any full income replacement insurance, but I haven't looked much. I think more research into the facts needs to be done before a resolution to this question can be found. Simply crafting well reasoned arguments, absent the actual facts, just leads to endless fighting.

 

[shanek]

The fact that the state is in the unemployment insurance business does not necessarily mean that private actors would be illegally stepping on their toes if they tried to do the same thing.

In and of itself, no. When it becomes a function of the police powers, as it is in NC, then it is.

I was just reading today about how the NC ESC was starting to crack down on this. There were a dozen different companies (which they didn't name) involved. Apparently, any form of unemployment insurance not run by the ESC is considered fraudulent by the State of North Carolina.

That must be why they named it the ESC...because you can't ESCape from it!

Take a look at supplimental Medicare policies, for example. The fact that the Federal Government provides medical insurance to all people of retirement age does not in any way prevent private medical insurance from offering additional benefits.

But they are still limited in the services they can get. The services have to be available under Medicare, even if they aren't going to use Medicare to pay for it, and any doctor that goes along with it can have his license revoked.

In fact, we do have forms of private unemployment insurance in this country. Many creditors offer credit protection that pays bills under certain circumstances, including unemployment, in which an individual's income is disrupted.

But you'll notice that they don't pay the money to the insured person; they pay the bills directly, and the bills paid are approved in advance. That's how they get around it. Plus, it's not available in all states. You can't get it in North Carolina, for example; you can only get it if you sign up for it and have them pay your bills for you while you are still employed.

 

[Victor Danilchenko]

schplurg

I'm definitely no economic mastermind, but why would anyone pay for privatized unemployment insurance while the government is already taking it out of our checks?

Why would anyone pay for private retirement if they already had SS? Why would anyone pay for private schools and universities if they already had free public schools and cheap public higher-ed?

The libertariuan party-line is that those things exist because government is so inept, that even with the taxes mandatorily collected to support those institutions, it's still more efficient for many people to pay for market alternatives. However, this argument mysteriously becomes "why would anyone pay for X if government already provides it?" the moment a difficulty is reached.

the answer is that people would have paid for private unemployment insurance despite government program, the same way they pay for private retirement or education; and they certainly would have paid for it before government unemployment insurance was created. The market may have been small, but it would have existed. The simple undisputed (yes, so far undisputed) fact is that private unemployment insurance ios impossible for purely theoretic reasons having nothing to do with specific economic and government infrastructure of any specific country.

To me, the arguement that the fact that there is no private unemployment insurance proves that there is no demand is hogwash.

Yup. it's the argument that assumes the conclusion (that market can meet every need) and then argues back to the premises (that if there is no market for X, that must mean that there's no need for X).

if you read the very first post in this thread, that is where I argued why private unemployment insurance is in principle impossible.

 

[Jaggy Bunnet]

Victor - in case you missed my earlier reply, unemployment insurance DOES EXIST in the UK.

Therefore for you to state as an undisputed "fact" that it is impossible for such insurance to exist is blatantly untrue. Or do you just ignore evidence that destroys your theory?

 

[Victor Danilchenko]

Jaggy Bunnet

Victor - in case you missed my earlier reply, unemployment insurance DOES EXIST in the UK.

I didn't miss it -- I am researching it now. I do find it curious that it seems to be unique to UK, and I am trying to figure out why. My suspicion (as yet un-confirmed) is that in UK, the government underwrites unemployment insurance.

I did do a Google search, and all other hits on the first two pages were to government unemployment programs.

Therefore for you to state as an undisputed "fact" that it is impossible for such insurance to exist is blatantly untrue. Or do you just ignore evidence that destroys your theory?

I stated that it was undisputed before I read your post. Currently, I am trying to figure out whether your finding actually disputes my argument at all -- if the government under-writes the insurance company's risk, that only confirms my argument, rather than disputing it.

 

[Victor Danilchenko]

Haven't found anything yet, but all the hits are from UK, no matter which way I search; and coverage seems to always be restricted to UK citizens only. This lends credence to my supposition that there's something that UK government does that enables unemployment insurance.

Edited to add: One hint of an answer do far, from here:

A particular government sponsored initiative, is encouraging people to buy mortgage unemployment insurance.

Doesn't say anything about what initiative that would be, though.

 

[shanek]

Why would anyone pay for private retirement if they already had SS? Why would anyone pay for private schools and universities if they already had free public schools and cheap public higher-ed?

Because SS is a fraud, and the government schools are of much lower quality. This has been asked and answered, Victor. Why do you continue to ignore these points?

the answer is that people would have paid for private unemployment insurance despite government program,

You have yet to provide one iota of evidence for this.

The market may have been small, but it would have existed. The simple undisputed (yes, so far undisputed)

Only if you ignore all of my posts on the matter, which you do.