To Be Jobless In America

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Moreover, Keynesian economics and the political changes it brought about altered the way the unemployed reacted psychologically and emotionally. If the state claimed to have the power to create jobs by its manipulations, as well as the right to deliberately cause workers to lose jobs, then those who lost the jobs were unlikely to blame themselves for their idle state. The logic of Keynes’s argument permeated the consciousness of thousands who never had read a word he wrote. As a result, the tendency of the unemployed of the thirties to consider themselves somehow responsible for their unfortunate condition, the tendency that puzzled and exasperated social scientists like Bakke and radicals like Matthew Josephson, weakened greatly in the postwar years. Being unemployed certainly remained seriously disturbing; it was no joke. But the typical attitude of those without work was expressed by one unemployed man whose benefit payments had been withheld because of a disagreement about his eligibility. “I feel,” he told a reporter, that “these people are just holding me back from something I deserve.”

This attitude surely represented an improvement over that of the jobless of earlier times, but there was a certain irony in the situation. At a time when protection against unemployment was more and more considered to be a right, events were demonstrating that the government did not have the ability to keep everyone at work. For a decade or more after World War II the new economic mechanisms functioned smoothly. The number of idle Americans ranged mostly around four per cent of the work force, roughly what experts considered full employment, and it never remotely approached the rates of the 1930’s. Inflation troubled some economists (and more consumers), and unemployment among blacks, youths, and people without much education was ominously high; but these problems seemed manageable.

In the late 1960’s, however, the rate of inflation began to quicken, pushed up by world shortages of raw materials and the enormous budget deficits resulting from President Lyndon B. Johnson’s unwillingness to call attention to the huge costs of the war in Vietnam by seeking a tax increase. By the early 1970’s an alarming new term, “double-digit inflation,” was entering the lexicon of economics. Still worse, unemployment increased along with prices, in direct violation of the “laws” of Keynesian economics. Then the Arab oil embargo of 1974 and the subsequent quadrupling of petroleum prices further disrupted the economy. The United States experienced a bad recession, by far the worst economic downturn since the Great Depression.

Unemployment rose abruptly to about nine per cent; then, as the economy recovered, it fell back with agonizing slowness, remaining for month after month in the seven to eight per cent range. To deal with the large number of jobless people who needed larger dollar benefits to keep up with inflation and who were idled for longer periods of time, Congress extended benefit periods and increased the size of weekly grants. Soon there was little relationship between what the unemployed were taking out of the system and what they and their employers had paid in; in other words, the system ceased to be actuarially sound and therefore it no longer insured, in the sense of “made certain.” When, in May, 1977, President Carter proposed that general federal revenues be used to bolster the shrinking insurance fund, it was no longer possible to ignore what was happening. A second great irony was now apparent: while workers were finally coming to accept unemployment insurance payments without shame or self-doubt, the “insurance” was in fact becoming a euphemism for public charity or welfare.

Then there was the question of whether or not freeing the jobless from irrational guilt and self-doubt was having unintended side-effects. Was the system actually increasing unemployment? Nineteenth-century theorists had been sure that insurance would do so, both by siphoning off resources from the “wages fund” that supposedly financed all payments for labor, and by satisfying the urgent needs that otherwise forced unaided unemployed people to search for work. The first of these notions was long ago exploded by economists, but as presently constituted, the insurance system does sometimes come close to encouraging idleness.

Conditions vary from state to state, but because benefit payments are never subject to income tax, the difference between the take-home pay of a worker and the spendable income of the same person when collecting unemployment insurance can be quite small. Peter Passell, the economist, has offered a striking example. Take a family of four in New York State, the husband and wife each holding down jobs paying $190 a week. Such a family’s after-tax income would be about $270 a week. Suppose the wife lost her job. She would draw $95 a week in unemployment benefit, but since the money would not be taxed, and because the family’s tax bracket would also be substantially lower, the actual income available to the family would be reduced by only $30 a week. “Thirty dollars a week isn’t much of an inducement to look for work,” Passell comments, adding that particularly for middle-income workers in cyclical industries where relatively brief layoffs are common, the tendency when discharged is to sit back and wait to be rehired rather than to search hard for a new post.