Posted 1 year ago on May 14, 2012, 3:46 a.m. EST by Misaki
This content is user submitted and not an official statement
If unemployment is such a problem, why don't people volunteer to work for less than workers in China? The answer is that the basic necessities of living, such as housing, are more expensive here in the United States. Even room-sharing arrangements cost more, at $200~500 per month, than the entire monthly income of many workers in China.
Every town has housing vacancies, and some communities even deliberately limit the construction of new buildings that would cause the number of empty housing units or amount of unused office space to rise. This artificial scarcity of housing exists because for many people, real estate is an investment and more construction would drive down prices. Empty units that do exist can remain unfilled for the simple reason that it is more profitable to wait for someone who can pay the market price than to rent a housing unit for whatever a prospective resident can afford.
The loss of utility that results from the willingness of people to pay higher prices for goods from a monopoly, in this case the monopoly of housing units existing at a certain location, is well known in economics. To put it shortly, the willingness of people to accept high prices in housing, or any other good that is sold for significantly more than its production cost, causes sellers to avoid selling to people who need that resource but are unable to pay as much. Lack of price discrimination is why the US cannot compete directly with China on manufactured goods.
What is it about the unemployed that has led to them being out of work while other people are still living comfortably? In many cases, the reason is nothing more than a lack of experience compared to other job candidates. In technical terms this means that high unemployment is not structural and more public spending on education will not help. For those not convinced by the protests led by college graduates about inequality and lack of jobs or the $1 trillion in student debt in the US, some excellent sources of data are a survey of small businesses by the NFIB which showed concern about low demand at a historical high during the recession with almost no businesses reporting the cost or quality of labor to be a problem [http://macromarketmusings.blogspot.com/2012/04/is-there-really-aggregate-demand.html] as well as the Census Bureau and BLS which collect information about unemployment in various occupations [http://krugman.blogs.nytimes.com/2012/05/09/occupational-hazards/]. Every major occupational category has seen a significant rise in unemployment, meaning that there are people with the proper credentials and actively looking for work who are unable to find any.
Corporate profits are doing fine as reported by the US Department of the Treasury, having risen by 57% to nearly $1.6 trillion per year since the first quarter of 2009 [http://www.slideshare.net/USTreasuryDept/recent-us-economic-growth-in-charts]. The only problem the economy has is a lack of work, which forces people to live off of things like food stamps and unemployment benefits funded by working taxpayers or future generations. For example, leaving taxes low now and raising them later would mean it becomes more difficult to compete against existing holders of wealth.
While polls show that a majority of people think that higher taxes and more government spending would lead to growth, the policy of growth at all costs does not have equivalent support. People are even willing to support a presidential candidate who they think avoids speaking honestly if it will lead to a reduction of government spending and waste. If we are to restore equality and opportunity to the United States, we need a different approach than socialism and taxes. We can start by examining why people feel that working harder, instead of smarter, has the greatest benefit to themselves and to the rest of society including the unemployed.
“There is still this heavy cultural message that men should be out there earning money and supporting themselves,” quoted from an article that mentions the higher pay of males and their greater willingness to stay in the labor force. [http://www.nytimes.com/2011/12/29/business/young-women-go-back-to-school-instead-of-work.html]
93% of males report working at least 35 hours and 51% more than 44 hours in a typical week, compared to 78% of females reporting they work at least 35 hours and 26% more than 44 hours in a typical week. [http://www.gallup.com/poll/122510/Self-Employed-Workers-Clock-Hours-Week.aspx]
If given the choice 71% of males would prefer to have a job outside the home instead of staying home and taking care of a house and family, compared to 48% of females. [http://www.cbsnews.com/htdocs/pdf/SunMo_poll_0209.pdf]
Labor participation rates for both genders have been approaching each other for decades and male participation in the work force is at a record low due to the lack of jobs. However, there has been little or no public support for measures to reduce the average amount of time spent working so that more people can find employment. A rare exception is work sharing, also known as short time compensation, which allows employees to draw unemployment benefits for a reduction in work hours, but the program is built around the assumption of full time work and is not intended to create jobs or encourage new hiring.
One explanation for why males have such a desire to earn money comes, appropriately, from an analysis of messaging data for the online dating site OkCupid. The study found not only that people frequently exaggerate their income, for example that there were "consistently 4× the number of people making $100K a year than there should be", but also that there was a high degree of correlation at most ages between the listed income of a male user of the site and the number of messages he received per week. [http://blog.okcupid.com/index.php/the-biggest-lies-in-online-dating/]
Another explanation is that males see financial success as an admirable achievement that benefits society, or simply have nothing else to do. Economist Robin Hanson once suggested that people spend too much effort on unproductive activities in an attempt to impress others [http://www.overcomingbias.com/2007/01/against_admirab.html], and many people do not realize that work can fall into this category as well.
There are two considerations that should influence the decision to work full time, for someone of either gender. The first is how much value there is in higher qualities of goods, which full time work may allow someone to purchase. The second is the effect on other members of society, and what actions by an individual will lead to the best outcomes for other people.
The effect that income and wealth have on social dynamics, by influencing the opinions of other people, distorts the prices that higher qualities of goods are offered for. These financial measures might be seen as attractive because of the stability they imply, such as access to better health care, living in communities with lower crime and more opportunities, and no need to make sacrifices to obtain basic necessities. They might also be seen as indicators of ability that suggest benefit for other people unrelated to physical comfort, such as intellectual rapport.
The consequence is that for someone who does not see significant benefit from these factors, higher quality and more expensive goods are likely to be overpriced compared to their intrinsic utility while lower quality goods may provide more value at the market price.
This tendency is accentuated by low production costs for goods due to technological innovation, which means that frequently, more expensive goods are justified in cost only by their "brand". One might be lead to assume, for example, that a food is more delicious because it has attractive packaging.
The value of brands is not zero. They can represent a consistent level of quality, but more subtly can also influence the perceptions and goals of other people in a way that benefits society. In the absense of a common understanding in society of how to resolve social ills, an interest in brands can serve as a way for someone to direct their actions to help society.
This leads to what is effectively a number of parallel monopolies, because the value of a brand can sometimes be higher when it is more rare or when opinion on its value is controversial. Another OkCupid study, in fact, found exactly this result. People who provoked a strong negative reaction from some users and a strong positive reaction from other users received much more messages than people who were more uniformly rated. [http://blog.okcupid.com/index.php/the-mathematics-of-beauty/]
This combination of brand identity and the promise of higher quality are what reduce competition and allow high profits for a brand, and directly suggest the possible benefit from working less for someone who has goals that require time. Competing products may provide just as much utility at a much cheaper price even if they don't have the same social value.
However, people might also assume that spending more money leads to greater employment, or that buying products specifically made in the United States instead of overseas is the best way to support the economy. There is a simple standard to establish whether this is true. Determine "percent of money I earn that comes from people richer than me", and compare it to "percent of money I spend that goes to people richer than me". If the first is higher, then you are helping to raise employment. If the second is higher, you are making unemployment and income inequality worse.