I’ve argued many times before against the popular view that increased immigration is detrimental to native employment and income. The simple argument about an increase in supply of cheap labor driving down wages and forcing expensive native workers out of the job market is just that: simple, too simple. There’s even evidence that the opposite is true: immigration increases native wages (because it allows native workers to move up the pay scale). But even if immigration did impose a cost on the host country, that wouldn’t be the final argument against immigration, since such a cost could be seen as a form of global redistribution and global justice: improving the lot of the poorest of the world surely justifies imposing a burden on those who have more wealth and who had the good fortune of being born in the “right” part of the world. True, this burden shouldn’t fall on the poorest members of the “right” countries, but if it does that can be corrected by national redistribution.
Still, let’s return to the labor cost argument against immigration. Here’s another piece of evidence that tips the scales yet a bit further against the view that the extremely low cost of immigrant labor results in displacement of low-level native labor. The evidence I want to cite is about internal migration in China, but it’s perfectly possible to use it against arguments favoring restrictions on international migration:
Hundreds of millions of rural migrants have moved into Chinese cities since the early 1990s contributing greatly to economic growth, yet, they are often blamed for reducing urban ‘native’ workers’ employment opportunities, suppressing their wages and increasing pressure on infrastructure and other public facilities. This paper examines the causal relationship between rural-urban migration and urban native workers’ labour market outcomes in Chinese cities. After controlling for the endogeneity problem our results show that rural migrants in urban China have modest positive or zero effects on the average employment and insignificant impact on earnings of urban workers. When we examine the impact on unskilled labours we once again find it to be positive and insignificant. We conjecture that the reason for the lack of adverse effects is due partially to the labour market segregation between the migrants and urban natives, and partially due to the complementarities between the two groups of workers. Further investigation reveals that the increase in migrant inflow is related to the demand expansion and that if the economic growth continues, elimination of labour market segregation may not necessarily lead to an adverse impact of migration on urban native labour market outcomes. (source, source)
- Pros of Rural-urban Migration (socyberty.com)
- Worker Shortages Seen in Chinese Export Centers (nytimes.com)
- Immigration and the economy: Everything you believe is wrong (blogs.berkeley.edu)
- Why an immigration amnesty could benefit British workers (newstatesman.com)
Welfare – meaning the provision by the government of a minimum level of material wellbeing and social support for all citizens – is a strange thing in the U.S.: it’s not directed mainly at the poor, it’s underfunded, it seems to be compatible with a high poverty rate, and it’s not colorblind – at least not in its effects.
Take a look at the following facts (source):
- In 2010, nearly half of Americans lived in a household that received direct government benefits. That’s up from 37.7% in 1998.
- At the same time, government revenues have been declining: adjusted for inflation, federal tax revenue was the same in 2009 as it was 1997, even though the U.S. population grew by 37 million during that period. In 2011, the federal government took in $2.3 trillion in tax revenue, and spent the exact same amount on military, Social Security, Medicare, and Medicaid alone.
- The share of entitlements like Social Security and Medicare going to the bottom fifth of households (based on income) has fallen from 54% in 1979 to 36% in 2007.
- The result of all of this: nearly 1 in 6 Americans – and more than 1 in 4 blacks – still live in poverty. The unemployment rate in 2009 was around 10% – for young, uneducated African-American males it was even 48.5%.
None of this should lead to the conclusion that the U.S. welfare system is completely dysfunctional – unemployment insurance, for instance, has rescued millions of Americans from poverty during the last recession. What it should lead to is serious consideration of the possibility and desirability of a completely new system.
More posts in this series are here.
Unemployment is a violation of an individual’s right to work. It stunts her creativity and diminishes her wellbeing, in a material, moral and psychological sense, in many cases even pushing her into poverty, ill health and depression.
For a person with no pre-existing health conditions, losing one’s job increased the chances of reporting a new health problem by 83 percent. Overall, the newly unemployed had a 54 percent chance of reporting fair or poor health. (source, source)
Unemployment is also self-perpetuating because it makes it harder to find a new job – employers prefer candidates who already have a job. In addition, it depresses wage levels, even decades after the end of a spell of unemployment.
Needless to say, these costs don’t affect only the unemployed themselves. Their families and children also suffer:
We find that a parental job loss increases the probability of children’s grade retention by 0.8 percentage points, or around 15 percent. After conditioning on child fixed effects, there is no evidence of significantly increased grade retention prior to the job loss, suggesting a causal link between the parental employment shock and children’s academic difficulties. These effects are concentrated among children whose parents have a high school education or less. (source)
And the ripple effect of unemployment covers the whole of society. Unemployment has a social cost: above and beyond the fiscal pressure – unemployment benefits have to be paid, either through increased taxes or cuts in other public services – it deprives society of valuable input and human ingenuity.
Still, all these costs should not blind us to the real benefits that unemployment can bring. And I’m not talking about those few individuals who are “liberated” from their mind numbing jobs and take the chance offered by unemployment to start a successful business doing something they always wanted to do but never had the chance or guts to do. Neither am I referring to kidults reveling in “funemployment”, staying with their parents well into their twenties or beyond, and taking the opportunity to prolong their childhood. Those are not the majority of the unemployed.
However, some among the majority may also find a silver lining. Maybe unemployment makes them less materialistic and more financially prudent; maybe some of them will use their free time to volunteer and educate themselves; society may become humbler and gentler; maybe concerns for social justice become more prevalent since the unemployed, ex-unemployed and their friends and families have become more conscious of the role of luck in life’s outcomes, as compared to the limited role of desert. Some health indicators may improve:
Interestingly, though high-stress events such as foreclosures and unemployment may hurt the health of those directly impacted, there’s some evidence that recessions have a positive impact on a nation’s health overall. In 2000, Christopher Ruhm, an economist at the University of North Carolina at Greensboro, found that a 1 percent rise in a state’s unemployment rate led to a 0.6 percent decrease in total mortality, looking at mortality changes in the United States between 1972 and 1991. … economic downturns could improve health through “declines in smoking, excessive alcohol consumption and overeating during recessions as people look for ways to save money.” (source)
Of course, there’s no way these benefits cancel out all of the costs. Unemployment is a scourge and a human rights violation, and capitalism doesn’t do itself any favors by maintaining and temporarily inflating its “industrial reserve army“.
This may be the right time for some shameless self-promotion: a few years ago, I published a short book dealing exclusively with work – although that’s not what you would think when reading the title.
What Work Is, by Philip Levine
We stand in the rain in a long line
waiting at Ford Highland Park. For work.
You know what work is–if you’re
old enough to read this you know what
work is, although you may not do it.
Forget you. This is about waiting,
shifting from one foot to another.
Feeling the light rain falling like mist
into your hair, blurring your vision
until you think you see your own brother
ahead of you, maybe ten places.
You rub your glasses with your fingers,
and of course it’s someone else’s brother,
narrower across the shoulders than
yours but with the same sad slouch, the grin
that does not hide the stubbornness,
the sad refusal to give in to
rain, to the hours wasted waiting,
to the knowledge that somewhere ahead
a man is waiting who will say, “No,
we’re not hiring today,” for any
reason he wants. You love your brother,
now suddenly you can hardly stand
the love flooding you for your brother,
who’s not beside you or behind or
ahead because he’s home trying to
sleep off a miserable night shift
at Cadillac so he can get up
before noon to study his German.
Works eight hours a night so he can sing
Wagner, the opera you hate most,
the worst music ever invented.
How long has it been since you told him
you loved him, held his wide shoulders,
opened your eyes wide and said those words,
and maybe kissed his cheek? You’ve never
done something so simple, so obvious,
not because you’re too young or too dumb,
not because you’re jealous or even mean
or incapable of crying in
the presence of another man, no,
just because you don’t know what work is.
Well, it’s not really a map, or not really a real map, but I found it telling. And this is what the “map” looks like when we use some actual figures about U.S. corporate profits and compensation (but a similar pattern occurs in other developed countries):
Corporate profits are doing just fine, and are even better than before the recession. Workers’ compensation, on the other hand, has at best been stagnant:
Add to that the unemployment figures, and you have a nice downward slope. The “map” hints at “going under water”, and that’s about right for many of us.
More serious and more informative maps about income inequality are here, here, here and here. More on the link between income inequality and human rights is here. More data on income inequality are here. Something in the recession is here, and here are more human rights maps.
- Inequality, A Collection of Images (2) (filipspagnoli.wordpress.com)
- Human Rights Facts (211): U.S. Public Opinion on Income Inequality (filipspagnoli.wordpress.com)
- The Causes of Wealth Inequality (12): Immigration (filipspagnoli.wordpress.com)
- Income inequality in Toronto (ekonometrics.blogspot.com)
- Would income inequality result in higher mortality rates for the poor? (ekonometrics.blogspot.com)
“It’s the economy, stupid“. The famous phrase suggests that economic basics rather than social or cultural issues, politicians’ personal merit, foreign policy successes etc. determine democratic outcomes. People vote against incumbents when unemployment is high and GDP growth low, whatever the causes of the economic downturn. One can accuse George H.W. Bush of many things but he wasn’t by far the sole or main cause of the recession that propelled Clinton to power.
It seems that people use democratic elections – especially high profile one such as presidential elections – to signal disapproval of the economy, whatever the real responsibility of individual politicians for the state of the economy (it’s silly to assume that individual politicians, even American presidents, have the power to dramatically change the unemployment rate, for better or worse).
This graph shows a clear correlation between incumbent margins of victory in US presidential elections and changes in the unemployment rate:
(source, incumbents running for a second full term won when the unemployment rate was falling and they lost when it was going up)
The unemployment rate in 1980 was 7.2%, up considerably from the year before; Jimmy Carter duly lost his bid for reelection. In 1984, the unemployment rate was actually higher at 7.5%, but was on its way down from the previous year; Ronald Reagan was reelected in a landslide. (source)
Granted, the number of observations is low, too low to be certain about the correlation (and others have expressed doubts about the data).
Some more certainty is given by the fact that it’s not just unemployment but also income that is correlated with election results:
If we assume that the economy does indeed determine democratic outcomes in this way, then we face a problem because some of the traditional justifications of democracy become unavailable. Democracy is supposed to improve the quality of politicians: when a politician has to face popular judgment and has to pass the test of accountability, she will try harder to respect the will of the people, to avoid engaging in corruption and to generally do a good job, because doing so will convince the people that she deserves reelection. Also the freedom of the press is in part justified on this basis. A free press is able to give people the information about politicians necessary to make an informed judgment at the next election. Government transparency combined with accountability as a prerequisite for reelection provides politicians with the necessary incentives to do a good job, or at least a job that is considered good by an informed majority of public opinion.
If, however, democratic election results are determined less by the actual way in which politicians do their job than by the economic basics, then we lose this justification. If a politician won’t be reelected during an economic downturn, even if she does all that’s humanly possible to avoid it or lessen its impact, she has one less reason to do her best. She may still do her best out of a sense of responsibility or public service and remain unconcerned by electoral prospects, but we should not underestimate the motivation provided by the mere fact of having and retaining a position of power.
This isn’t the first time I mention sample sizes as a common problem in statistics. Usually, the problem is one of survey design: insufficiently large sample sizes for respondents produce unreliable survey results.
However, the same error – or fraud, when the error is willful – can occur in data interpretation. Take a look at this graph by John Taylor:
Taylor’s conclusion: The data on spending shares show that the most effective way to reduce unemployment is to raise investment as a share of GDP. But why begin the scatter plot in 1990? There’s no good reason. In fact, most folks typically download the entire history of available macro data. … The chart below goes back to 1948:
This is a form of cherry-picking data that allows you to “prove” a strong correlation where there’s actually none at all. In this way, you’ll find a correlation in almost all data sets, as long as you pick a sufficiently small sample of the set. In this example, you can only limit the selection to the last two decades if you have a good argument about why the economy is different now compared to some decades ago, and why there’s a correlation now when there wasn’t before. However, that argument – which would be interesting – seems to be lacking. And if it’s lacking, there’s no excuse for cherry picking the last two decades.
If there’s one Milton Friedman quote that’s repeated far too often it’s the following: “You cannot simultaneously have free immigration and a welfare state”. The income of relatively rich people in many poor countries pales in comparison to what the poor, unemployed, sick, young and elderly in rich countries get from welfare and social security transfers. Hence, the argument goes, opening borders and eliminating immigration restrictions would cause massive flows of people to those rich countries. Perhaps some of these people would come in the hope of finding a good job, but at the same time they have the certainty that, if they fail, they will enjoy generous social protection. And all the rest will come just for the benefits.
The problem, some say, is that rich countries can’t afford large increases in the numbers of welfare beneficiaries, and that they therefore must limit immigration. Open borders are only feasible when global poverty has been solved and income levels are more or less comparable across countries. Or, when rich countries would decide, unrealistically, to eliminate their welfare systems or at least coldheartedly decide to exclude all immigrants from welfare.
However, as I’ve stated before, immigrants in the U.S. use welfare at lower rates than natives and have higher rates of labor force participation. In the U.K., immigrants represent about 13% of all workers, but only 7% percent of unemployment benefits (source).
Anyway, even if we assume that open borders will be a net negative for western welfare systems, there’s no need to limit the options to the stark choice between welfare and open borders. We could, for example, give immigrants access to labor markets but only limited access to unemployment benefits, or we could delay their benefits, demanding that they first contribute to the system during a number of years (something which might actually strengthen the system). However, we’d have to be careful and not create inequality, discrimination and a class society.
Or we could decide to grant immigrants full access to welfare because we believe that global inequality should be reduced. Access to welfare would then be a kind a development aid.
And, finally, it’s possible to view matters from an entirely different angle. Large chunks of welfare transfers go to the elderly. Given the demographic evolutions in many rich countries, it may be that immigration will be the only way for aging countries to sustain their welfare states.
- Immigrants — Good or Bad? (realclearpolitics.com)
- Should the U.S. Restrict Immigration? (psychologytoday.com)
- Who is Eligible for Welfare in the United States? (brainz.org)
- The Aging, Crisis-Prone Welfare State Must Confront The Problem Of Welfare Migration (businessinsider.com)
Employers often use background checks before deciding to hire someone. For example, they may check the criminal record of job candidates, their credit scores, health history etc. It’s somewhat understandable although not always acceptable that they are reluctant to hire someone who has been in jail, has been sick for a long time, or has proven to be undisciplined by not paying her bills.
Let’s focus on ex-convicts for the moment. These people have a hard time as it is, sometimes even for no good reason because they shouldn’t have been incarcerated in the first place (I argued here that many countries, and especially the U.S., put too many people in jail). So, allowing employers to use criminal background checks can force ex-convicts into a vicious circle: unable to find a job, they may be forced to go back to crime.
Furthermore, there’s a racial aspect to all of this: in the U.S., African Americans are more likely to be ex-convicts. According to some, this racial discrepancy is precisely the reason to allow criminal background checks. If employers aren’t allowed to check individual candidates, they will resort to statistical discrimination: they know that blacks are more likely to have a criminal record and so they won’t hire any blacks at all, just to be safe.
However, if you espouse this argument in favor of background checks, you essentially want to make things better for one disadvantaged group – blacks, who are generally disadvantaged in employment, see here – by making things worse for an even more disadvantaged group, namely ex-convicts. And that’s assuming that employers will hire more black people if they can use criminal background checks; but assuming that means assuming there’s no racism. Helping a disadvantaged group by harming an even more disadvantaged group is plainly absurd, and you can only fail to see that it’s absurd if you have an overriding fear of government regulation. Regulation should be kept in check but not at any price. I think in this case regulating businesses and outlawing background checks is the appropriate thing to do.
Let’s turn briefly to another type of background check: credit scores.
[M]illions of Americans, as a direct consequence of looking for work, have lower credit scores. … The use of credit checks in employment decisions should be banned. It is a form of discrimination against the poor — the codification and enforcement of class barriers. It is therefore a form of discrimination against those groups more likely to be poor. (source)
It seems there’s a
growing tendency of HR departments to check the credit scores of potential employees apparently deeming this data to be an important predictor of employee behavior. This creates a Catch-22 scenario for the unemployed where you can’t improve your credit score unless you get a job and you can’t get a job until you improve your credit score. (source)
Apart from the obvious fact that credit scores seem to be a type of knowledge that is much less useful for an employer compared to a criminal record – if your house burned down and your credit score is low as a result, does that make you a bad employee? – there’s a real issue for the poor here. They shouldn’t be discriminated against just for being poor. It’s not just a lack of conscientiousness or discipline that can lower your credit score. Back luck and poverty won’t help either. Some say the free market and competition will take care of this: employers stupid enough not to hire good poor people simply because they have a credit problem will lose out. Their competitors who don’t engage in credit checks will hire them, and those businesses will acquire a commercial advantage. I don’t know. Seems awfully optimistic to me.
By the way, all this is another reason to make unemployment insurance more generous:
I’d rather see our energy focused on longer-term, more generous unemployment benefits that might keep some people from trashing their credit while they look for a job. (source)
- Are Businesses That Use Background Checks in Hiring Guilty of Discrimination? (race.change.org)
- Background Checks in Hiring: Discrimination or Due Diligence? (blogs.wsj.com)
- EEOC: Employers can’t refuse to hire convicts (hotair.com)
- How Job Screening Can Become Discrimination (abcnews.go.com)
In the U.S., and probably elsewhere as well, there’s a large discrepancy between the unemployment rates for people of different races. The easy answer is “racism!”, but that may be a bit too easy. Some of the discrepancy can be explained by education levels. However, perhaps it’s those discrepancies in education levels that are caused by racism and discrimination, at least in part. I personally believe that the discrepancies in unemployment rates have many causes, and that racism is definitely one of them. I’m just not sure about the particular weight we should accord it.
I’ve posted several times before about evidence of racism in the behavior of employers and recruiters. For instance, there’s substantial empirical proof that someone’s race can make it less likely to be called back for a job interview. In fact, black men without a criminal record are less likely to be called back for a job interview than white men with a criminal record. This has to have an impact on employment rates by race, which in turn has an impact on different poverty rates by race.
Some more evidence of discrimination in employment decisions is here:
White, Asian and Hispanic managers tend to hire more whites and fewer blacks than black managers do, according to a new study out of the University of Miami School of Business Administration. Using more than two years of personnel data from a large U.S. retail chain, the study found that when a black manager in a typical store is replaced by a white, Asian or Hispanic manager, the share of newly hired blacks falls from 21 to 17 percent, and the share of whites hired rises from 60 to 64 percent. The effect is even stronger for stores located in the South, where the replacement of a black manager causes the share of newly hired blacks to fall from 29 to 21 percent. … The finding is clear evidence that the race or ethnicity of those who make hiring decisions can have a strong impact in the racial makeup of a company’s workforce. (source)
Given the setup of the study, the racial discrepancies can’t be explained by demographics. You could assume that managers may not be motivated by racism but just anticipate the racism of their customers: they want to hire people of the same race as the majority of their customers because they believe that customers have racial preferences – or are racist – and prefer to be served by people of their own race. However, the customer population of a store doesn’t normally change when there’s a new manager. Hence, the change in recruitment policy by the new managers can’t be explained by customer demographics.
Another possible explanation is that managers, rather than being racist themselves, recruit in a racially biased way because they anticipate the racism of their existing employees: black managers hire fewer whites because they believe whites may be less willing to work for black managers. Or vice versa. And indeed:
The study found that when a white manager is replaced with a black manager, the rate at which white workers quit their jobs increases by 15 percent. “We interpret this increase in the white quit rate as evidence of discriminatory sorting by white job seekers,” the authors write. “It implies that whites who dislike working for black managers often avoid working for black managers in the first place.” (source)
More on racism is here.
Article 23 of the Universal Declaration of Human Rights provides a right to work, as well as a right to “free choice of employment and to just and favorable conditions of work”. That right protects us against slavery, forced labor, unfair wages, and unsafe working conditions. The same article offers a right “to protection against unemployment”. That clause can be interpreted in two ways:
- it can mean that if we’re out of work through no choice of our own, we should get help to find work (either from the state or from our fellow citizens)
- or it can mean that if we’re involuntarily unemployed, we should get some monetary compensation for the loss of salary or income and the financial stress that we suffer as a result.
It’s the latter interpretation that is made more explicit in another article, number 25, of the Declaration which mentions “the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control”.
So it seems we have a right to unemployment insurance or unemployment benefits. The obvious justification for this right is material wellbeing: the absence of poverty is also a right. For a link between unemployment insurance and poverty reduction, take the case of the U.S.:
However, there are some other types of justification of unemployment insurance. Some call UI an “automatic stabilizer” in times of economic hardship: Keynes taught us that both unemployment and falling wages lower consumer demand and can lead to even greater unemployment. Stingy or absent unemployment benefits lower demand even more. In that view, which does sound plausible, unemployment insurance isn’t just a good in itself and for the individuals concerned (as well as for those who may someday suffer unemployment and who can suffer some amount of stress because of the risk), but is necessary for the periodic regeneration of capitalism and for the smoothing of the business cycle. Benefits are also efficiency enhancing because of another reason:
One of the possible advantages that is touted for more generous UI (including by Mike Konczal) is the idea that it allows for better job matching—people can wait to find the right long-term job opportunity instead of taking the first job that becomes available. (source)
It’s better to have people perform the jobs they prefer because they’re likely to be most efficient there. Hence, it’s better to give them more time to find the right job, and to give them unemployment benefits so that they have the time.
Others, however, call this right a foolish invention because it destroys incentives to work at the level of individuals, and reduces incentives to create wealth at the level of companies (because of the relatively high tax rates that come with the welfare state, that in turn comes with benefits such as unemployment insurance). It doesn’t enhance efficiency at all, on the contrary. But the evidence for this view is not so strong:
Evidence suggests that individuals do prolong their job search when they receive unemployment benefits, partly because they are looking for the best possible job. But the magnitude of this effect is likely to be small.
A recent study … compared lengths of unemployment among those eligible for unemployment insurance with those who were not eligible. Their statistical analysis suggests that extended benefits accounted for only four-tenths of 1 percentage point of the nearly 6 percentage point increase in the national unemployment rate over the last few years. (source)
Still others call the right to unemployment benefits a foolish invention, not because of reasons that have to do with overall economic efficiency, but because they believe that the unemployed have no one else to blame but themselves for their misfortune, and therefore can’t demand help from others. Those others can voluntarily decide to help the unemployed, in a spirit of charity that extends even to self-inflicted misfortune, but the unemployed don’t have a right based on moral concerns to demand such help. And indeed, there may be some logic to such a view: if we all believe strongly that we deserve what happens to us, we are likely to work hard, show discipline and self-control and hence achieve success. Conversely, those who think that the causes of their misfortune are always outside of their control, are not likely to invest much effort in their lives. However, morality and life are much more complicated than that. The best efforts can lead to disaster, and apathy can lead to success. People who are not the sole authors of their success can be required to help those who are not the sole authors of their misfortune.
More on unemployment.
First, if you’re wondering why unemployment benefits are a human rights issue, go here. In a previous post, we discussed the relative stinginess of unemployment benefits in the U.S., compared to other developed countries, both in terms of duration, amount and eligibility (the majority of Americans out of work do not qualify for unemployment insurance, and the average weekly payment is 36 percent of the individual’s average weekly wage).
Unemployment insurance in the U.S. is a complicated affair involving both the federal government and the states. The total number of weeks of benefits available in any particular state depends on the unemployment rate and unemployment insurance laws in the state where the person worked. In case of a recession, the duration of benefits is extended.
- Unemployment Duration (outsidethebeltway.com)
- Ruth Marcus: Is Congress subsidizing slackers? (commercialappeal.com)
- Extending Unemployment Benefits (freakonomics.blogs.nytimes.com)
Taxation is a recurring theme in political discussions between people of the left and right. People of the left see taxation as a tool for social justice. They tend to prefer rather high taxation rates and a progressive taxation system:
- High taxation rates bring in revenues that are large enough to enable the government to spend on programs and transfers that are designed to promote social justice: unemployment benefits, poverty reduction policies, education, healthcare etc.
- Progressive taxation rates are just because they impose relatively (and not just absolutely) higher taxes on people who are more able to pay, and, in addition, reduce income inequality and hence realize another goal of social justice.
People on the right usually favor low tax rates and a non-progressive taxation system (either a proportional system in which everyone pays the same share of their income, or a regressive system in which everyone pays more or less the same amount in taxes). Rather than on social justice, they focus on the economic effects of taxation.
- They reject high taxation rates because they claim that these high rates discourage people and are a disincentive to hard work, effort and investment. Because high rates limit effort and investment, they also limit productivity, innovation, international competitiveness and job creation.
- They also reject progressive tax rates because high tax rates for high incomes discourage those people who work relatively hard (they work hard supposedly because they earn a lot) and who are most likely to innovate, to be productive and competitive and to create jobs.
- However, they don’t necessarily favor regressive taxes because they are equally hostile to high tax rates for low income people, albeit for other reasons. High taxes for low income people discourage them from entering the labor market and hence inflate unemployment. Still, they claim that the worst damage is done by high taxes on the higher incomes, which is the reason they reserve particular scorn for progressive taxation systems. Because high tax rates for the wealthy punish the most productive elements in a society, the whole of society suffers. More productive people will limit their productivity because they don’t want to fall into a higher tax bracket, and the money they pay in taxes can’t be invested in the economy. High tax rates, especially for the rich, have an unacceptable cost in terms of economic efficiency. Keeping taxes low, on the contrary, and allowing wealthy people to use their money in the economy, will ultimately benefit everyone (this is the so-called Trickle-Down theory).
Of course, this distinction between left and right is a caricature. Most people on the left are also concerned about economic efficiency, and most on the right are not insensitive to questions of social justice. The extremes are hardly ever encountered in real life: no one wants to limit taxes to such an extent that economic efficiency is promoted but no money is left for justice, and no one wants to put tax rates at such a high level that there is ultimately no more economy to tax. (The latter concern is expressed in the famous Laffer Curve arguing that beyond a certain level of tax rates government revenues in fact decrease instead of increase. At very high rates there is no longer any incentive for a rational taxpayer to earn any income and hence tax revenues will decline while tax rates increase. However, it isn’t clear what “very” in the previous sentence actually means and where exactly the tipping point is situated).
Graphically, we can represent this in the following image:
Normal political discourse takes place in the light-gray area.
Personally, I believe that the concerns of both right and left are justified and need to be balanced, and that too much focus on either the element of efficiency or justice is detrimental to the other element. On the one hand, there’s only so much money a government can raise without wrecking the economy, and justice isn’t only about spending money (there can even be perverse effects such as unemployment traps, welfare dependency etc.). On the other hand, there’s only so much an efficient economy can do to realize social justice all by itself and quasi-automatically (remember the invisible hand…). To quote Matthew Yglesias’ sarcastic comment on the skyrocketing incomes of the U.S. top 400 earners in the decades leading up to the 2009 recession:
As is well-known, the Top 400 are considerably more talented than the rest of us. And [the] decline in their tax rates has created exciting new incentives for them to apply their talents. And that, in turn, is why the 2000s were a so much more economically successful decade than the 1990s, not just for the Top 400 but for the rest of us as well. Thanks to their skyrocketing incomes and falling tax rates, we’re currently [during the 2008-2009 recession, FS] all enjoying the fruits of prosperity, rapid growth, and low unemployment. Thanks rich guys! (source)
A similar sentiment is expressed in this clip from the Daily Show (I’m unable to embed it; skip to the 4th minute or so).
Here’s one very specific example of the way in which taxation can promote social justice:
Again, personally, if I lived in the U.S., I would probably be on the left side of the arrow in the efficiency v justice graph above, since I believe taxes in the U.S. are relatively low and can be raised without too much harm to economic efficiency. The resulting government revenues could then be spent on improving the social safety net and promoting social justice. It’s difficult to imagine for a European that a country such as the U.S. doesn’t offer health insurance to millions of its citizens. Also, unemployment benefits are quite stingy in the U.S., both in terms of eligibility and duration: only one third of the unemployed qualify for benefits and only for 26 weeks (extendable during recessions if the Republicans don’t object, as they infamously did beginning of 2010):
The system of unemployment benefits could easily be improved without perverse effects or harm to economic efficiency. And there are other areas of possible improvement as well.
However, as a European in Europe, I think I’m probably more to the right of the graph since there’s a strong argument that the social safety net in Europe (at least in some countries) has harmed European competitiveness, labor market participation and innovation.
Still, is there evidence of this? What do the data say about high tax rates harming economic efficiency, in Europe and in general? Is the conservative case against taxes as strong as it seems? I’m afraid not. In this previous post, I already presented some evidence that the effect of reasonably rather than extremely high rates on economic efficiency is minimal at best. I now present some more evidence from Lane Kenworthy about the U.S. and other affluent countries (always keeping in mind that correlation doesn’t imply causation and that the absence of a large negative effect of high taxes doesn’t preclude the possibility that lower taxes would have had a large positive effect). One measure of economic efficiency is economic growth. If we plot economic growth rates for the U.S. against tax rates for the wealthy we get the following picture:
If anything, higher tax rates lead to more growth. But of course there can be catch-up effect: higher rates producing their effects only years later. That’s taken into account in the following graphs, which also show that an international comparison doesn’t prove that countries with higher tax rates have lower growth:
If we have a look at the data about the effect of high tax rates on unemployment (another conservative concern), we also see that we shouldn’t panic about taxes:
Now, if there is no good reason not to tax at a moderately high level, based on concerns about economic efficiency, the question remains whether there is a good reason to tax based on social justice reasons. Given the caveat that social justice isn’t all about government spending (I argued here that it is primarily about something else) and that such spending can in some cases have perverse effects (see above), I do believe that some spending is necessary in some cases, and that relatively high tax rates are necessary to produce the revenues required for this spending.
Again following Kenworthy, I believe that relatively high tax rates are acceptable and even necessary to create the revenues required for social justice policies, but that progressive tax rates in themselves don’t do the job of reducing income inequality, contrary to what is often claimed as a justification for progressive rates. That doesn’t mean that we shouldn’t reduce income inequality (it’s quite high in the U.S.) – there are good reasons to try. It just means that progressive taxation in itself won’t do the job. The important thing is to have high tax revenues which can then be spent in transfers and services that reduce income inequality and achieve other goals of social justice. Yet, I still think a progressive system is required, not because of its supposed effects but simply because it is just in itself, compared to proportional or regressive systems. A person with more income can afford to pay, not merely more in an absolute sense but more in the sense of a larger share of his or her income.
More posts in this series are here.
Decades of racial progress have led some researchers and policymakers to doubt that discrimination remains an important cause of economic inequality. To study contemporary discrimination we conducted a field experiment in the low-wage labor market of New York City. The experiment recruited white, black, and Latino job applicants, called testers, who were matched on demographic characteristics and interpersonal skills. The testers were given equivalent resumes and sent to apply in tandem for hundreds of entry-level jobs. Our results show that black applicants were half as likely to receive a callback or job offer relative to equally qualified whites. In fact, black and Latino applicants with clean backgrounds fared no better than a white applicant just released from prison. Additional qualitative evidence from our testers’ experiences further illustrates the multiple points at which employment trajectories can be deflected by various forms of racial bias. Together these results point to the subtle but systematic forms of discrimination that continue to shape employment opportunities for low-wage workers. (source)
I’ve argued many times before that poverty is a human rights issue, so I won’t do that again (you can read this or this for example). For those who are not convinced, just assume arguendo that I am right, otherwise the rest of this post won’t make a lot of sense. I’ve also presented my views on the types of duties produced by the human right not to suffer poverty, and on the moral agents that carry those duties: is it a face-to-face thing, or does the government have a role to play by way of redistribution and the welfare state? Etc. You can read about this here and here for instance, so that’s something else I won’t repeat.
I do believe the welfare state is an important institution because it can fill the gap left by deficient private charity. But my view is that private charity should come first and should be promoted. The welfare state should be a fallback option rather than the starting point. So I guess I don’t think it’s as important as people from the left usually think it is. In order to bolster my view, I can point to some problems with the welfare state. In fact, it can be argued that the welfare state is another case of a self-defeating human rights policy, in the sense that it reduces poverty but at the same time produces poverty. Tyler Cowen, in a very interesting paper, has argued that while the welfare state does indeed reduce the levels of poverty of those people currently living (at least if we focus on the level of the state and forget the global impact of the operation of a welfare state in a particular country), it also has a negative impact on the poverty of future generations.
The argument goes as follows. It’s reasonable to accept that economic growth lifts people out of poverty (see also here) and that the welfare state lowers the rate of economic growth, perhaps not by much annually but small reductions of economic growth over several years may amount to a large cumulative reduction. Now, how does the welfare state lower the rates of economic growth? There are at least four effects:
 A welfare state will cause some people to substitute welfare dependency for private work, thus lowering the number of individuals in the active work force or causing them to work less hard. … The poor could be engaging in more productive exchange with other individuals in the economy, but to some extent they desist, for fear of losing welfare benefits. …
 The taxes used to support the welfare state discourage taxpayers from working or otherwise creating economic value. …
 The extensive welfare states of Western Europe typically are bundled with labor market protections and interventions. It is not politically or economically feasible to give the non-working significantly more risk protection than the working. Western European welfare states therefore tend to create a privileged class of working “insiders,” with high real wages, high benefits, and near-guaranteed positions of employment. This practice, of course, lowers the number of new jobs that are created, limits labor market mobility, and raises unemployment.
 [The welfare state] causes the economy to develop new technologies and new ideas at a slower rate. … A welfare state will plausibly have a negative effect on innovation. By withdrawing individual labor from the productive sector of the economy, the rate of discovery is likely to fall. Both the poor and the taxpaying non-poor will work less when a welfare state is in place [see 1 and 2 above]. If we think of research and development, broadly construed, as one kind of work, we can expect the rate of growth to decline. Even if the poor do not participate in ideas production directly, they do so indirectly. To provide a simple example, to the extent it is harder or more costly to hire good janitors, and other forms of cheap labor, fewer research laboratories will be opened. … The welfare state permanently discourages various individuals from contributing to technological development and thus lowers the rate of economic growth in lasting fashion. (source)
One can argue about the importance or even the existence of these four effects, and there may even be counter-effects (welfare recipients may move in the underground economy, unemployment may lead to better parenting and hence better education etc.). But even if the effects are small, it’s sufficient to spread them towards the very long term future in order to produce a lowering of the economic growth rate and an increase in future poverty. Given that the future contains an infinitely large population, the welfare state will always produce more poverty than it eliminates (given that the current population and hence also the current poor are a limited number). That would mean that the concept of the welfare state is doomed. And if that’s the case, it would seem I have proven too much (I merely wanted to buttress my argument that the welfare state should come second, after private philanthropy).
However, I don’t think it’s obvious that we should value the rights of future people the same way as the rights of existing people. After all, these future people may never come into existence. If we try to protect their welfare by giving up the welfare state, we will harm real people for the rights of people who may never exist. Furthermore, the future may bring a novel solution to the poverty problem.
I know that talking about national or international economic models should be avoided because it’s highly simplistic, but I’ll do it anyway because I want to show that people who do sincerely talk about such models make some assumptions about them that are, in my view, incorrect. The Anglo-Saxon economic model, when compared to the mainland European model, is believed to focus more on individual responsibility than on social support. It imposes lower taxes and delivers a less developed social safety net. It’s more “liberal” (in the European sense of the word, meaning less social) and free market oriented. (Anglo-Saxon means English-speaking countries such as the United Kingdom, the United States etc. but there are large differences between the UK and the US, the UK being less “Anglo-Saxon” than the US; and some mainland countries – like some Eastern European countries – are more “Anglo-Saxon” than they are ”mainland”. This goes to show that we’re being simplistic; see also here).
The mainland model is often believed to be better at poverty reduction, job security, social services, and income equality. The Anglo-Saxon model on the other hand is said to be more flexible, less state dependent and more competitive (because of lower taxes and less labor regulation) and suffers less unemployment (because of the less generous social safety net; see also here).
For the same reasons, the Anglo-Saxon model is also believed to be less equal and more open to social mobility – social mobility being defined as the difference between the socioeconomic status of parents and the status their children will attain as adults. When the focus is on individual responsibility and when people can keep a larger share of their income after taxes, they are incited to do well, to work hard, to develop their talents, and to innovate. This not only creates a more competitive economy, but also one in which people can be socially mobile and rise in status and wealth. Countries that impose high taxes and offer generous safety nets don’t give the same incentives.
However, we see that the UK and the US aren’t characterized by relatively high levels of social mobility:
A father’s income determines his son’s to a greater extent in Britain than in any other wealthy nation, with half of a high earner’s “economic advantage” being transmitted to their children, a study by the Organisation for Economic Co-operation and Development has found. … In Britain … background determines a person’s success to a far higher degree than in almost any other rich country. “Education is not as important for social mobility in Britain as for other countries. Class, to be honest, is the most likely explanation,” said Romain Duval, head of division in the Paris-based OECD’s economics department. (source)
Something similar is the case for the US.
It appears that the United States has less intergenerational social mobility than many other industrialized countries. (source)
(source, the height of each bar shows the extent to which children’s earnings when adults reflect those of their parents)
It’s true that the UK and the US (especially the US) are highly inegalitarian, and increasingly so, but high levels of income inequality do not necessarily go hand in hand with high levels of social mobility. In fact,
social mobility between generations tends to be lower in more unequal societies. (source)
So if you care about social mobility – and I think you should because high levels of social mobility indicate equality of opportunity, something no one objects to – then you should care about reducing inequality rather than promoting it through “Anglo-Saxon” tax and welfare systems (to the extent that there is something like it in the real world).
Some more information related to racism in employment in the U.S. (see this previous post on racism in employment decisions, employment rates, education levels and poverty levels). This study shows that black men without a criminal record are less likely to be called back for a job interview than white men with a criminal record:
These data were collected during an experiment in which different testers applied for the same jobs advertised in newspapers. The testers had fake credentials that made them equivalent in terms of education, job experience, and so on. The testers were either black and white. Some testers from each group were instructed to indicate that they had a past non-criminal drug possession offense. The data would undoubtedly have shown an even more dismal picture had the testers faked a record for a property or violent crime.
Whites with a criminal record are more than 3 times more likely to get a callback than blacks with a criminal record. If you combine this blatant discrimination in employment decisions with the racially disproportionate rates of incarceration in the U.S., you have a recipe for economic exclusion of blacks. More on the stupidity of U.S. prison policy here, here and here. More on racism here.
I don’t think I need to spell out the ways in which terrorism is a human rights issue (beyond the obvious violations of the human rights of the direct victims of terrorism there are serious human rights implications of the so-called ”war on terror“).
Some time ago, I linked to a paper claiming that poverty and lack of education do not, contrary to common belief, contribute to terrorism. If this claim is correct, then it has major implications for counter-terrorism efforts. There’s another paper here making a similar claim, looking at the correlation between violent insurgencies and levels of unemployment, specifically in Iraq and the Philippines. One often assumes that unemployment and the economic and social alienation resulting from it, are elements causing or facilitating political violence, and that efforts to promote employment can have a beneficial effect on social cohesion and political loyalty. The unemployed are believed to have the mindset (frustration etc.), the time and the opportunity to radicalize and be radicalized, whereas people who are employed have a lot to lose, economically, from political instability. Positively stated,
insurgency is a low-skill occupation so that creating jobs for the marginal unemployed reduces the pool of potential recruits.
However, the authors find
a robust negative correlation between unemployment and attacks against government and allied forces and no significant relationship between unemployment and the rate of insurgent attacks that kill civilians. … The negative correlation of unemployment with violence indicates that aid and development efforts that seek to enhance political stability through short-term job creation programs may well be misguided.
Some of the reasons given in the paper in order to explain this negative correlation are:
- Counter-insurgency forces usually spend money to buy intelligence from the general population. More unemployment means that the available money can buy more intelligence, hence bring levels of violence down.
- Insurgents also need to live. If there’s a lot of unemployment, they need to spend more time on basic survival and hence can spend less time on violence.
- Efforts to enhance security—establishing checkpoints and the like—damage the economy.
The paper deals only with two countries, neither of which is perhaps a very typical case. Moreover, cross-border terrorism doesn’t seem to fit well into the analysis. But still, the findings are interesting.
We usually see human rights violations are zero-sum: a rights violation is a harm inflicted by one person on another, for the benefit of the former. I mentioned before that this isn’t always the correct way of viewing rights violations, but it’s adequate in most cases. One case in which it’s only superficially adequate is what I would call the boomerang human rights violation: you think that violating someone’s rights may produce some benefit for you, and it does so initially, but the actual and final results mean that you become worse off.
There’s the obvious and uninteresting example of the dictator using extreme oppression and causing revolt, but here are some other, more intriguing examples. The first one has to do with the right to work.
Gene Marks is … a small business owner (he sells customer relationship management tools), who is attempting to speak to other small business owners, all of whom, presumably, are also delighted that the potential hiring pool is so chock full of talent desperate to be exploited right now.
But one wonders who exactly is supposed to purchase all those products and services from the small businesses of the world, if unemployment creeps up to the 10 percent mark or higher? High unemployment means low consumer demand. Which usually means small businesses end up going out of business, or at the very least, laying off more employees, who push the unemployment rate even higher. And so on. (source)
If, as a “capitalist” (i.e. employer), you want to take advantage of unemployment – or the risk of unemployment – to put downward pressure on wages and workers benefits – and thereby violate workers’ rights (a fair wage is a human right, as are favorable working conditions) – you’ll end up shooting yourself in the foot because neither hard working laborers who don’t earn a lot nor the unemployed will consume many of your products or services. I can see the appeal of the statement that generous unemployment benefits discourage people from finding a job, but such benefits do have advantages that go beyond the mere self-interest of the direct beneficiaries.
An ideal policy … would allow people to collect unemployment insurance indefinitely, and let the unemployed borrow or save money. This way, unemployment insurance would not merely be a financial band-aid letting people take risks on the job market and endure some jobless spells, but a critical source of “liquidity,” allowing the unemployed to keep spending reasonable amounts of money — which in turn helps create demand, something sorely lacking from the economy at the moment. (source)
And here’s another example, related to gender discrimination. In many countries, there’s a son preference: male offspring is considered more valuable than female offspring, for reasons to do with gender discrimination and social, cultural or religious views regarding the proper role of women in society. One of the consequences is the “missing girls” phenomenon. The sex ratios in many countries – India and China stand out - are out of balance. Some estimates say that 90 million women are “missing” worldwide. In somewhat overwrought rhetoric this is called gendercide.* Girls are often aborted in selective abortions (a one child policy can make this even more widespread), and young girls are often prejudiced against when it comes to nutrition and health care resulting in higher mortality rates.
The son preference and the missing girls phenomenon have their roots mainly in cultural beliefs, but economic considerations also play a role. Some professions are open only to men; girls marry “into” other families and hence can’t continue the family business; there’s the dowry problem etc. However, these economic considerations don’t stand on their own and are often the result of discriminatory cultural beliefs.
When we accept that gender discrimination and the will to sustain patriarchy is the cause of the son preference and the missing girls phenomenon, then we are dealing with a human rights violation. And also this rights violation can come back to haunt those responsible for it.
A societal preference for boys here has become an unlikely source of power for Indian women. The abortion of female fetuses in favor of sons — an illegal but widespread practice — means there are more eligible bachelors than potential brides, allowing women and their parents to be more selective when arranging a match. (source)
Rather than cementing patriarchy, the son preference and the resulting unbalanced sex ratios give women more bargaining power.
These and other boomerang rights violations are variants of what I’ve called self-inflicted rights violations: people violate other people’s rights, and in so doing they ultimately violate their own rights. I guess I msut be attracted to self-destructive and self-defeating behavior.
* The word is overwrought in my view because, contrary to genocide, there’s no centralized plan to exterminate women.
A report released on Wednesday by Human Rights Watch on the human rights situation in Cuba takes the government of President Raúl Castro to task for, among other things, jailing those without jobs. The report cited the cases of dozens of people charged with “dangerousness” for being unemployed.
“A person is considered to be in a state of dangerousness due to antisocial behavior if the person … lives, like a social parasite, off the work of others,” the report quoted Cuba’s Criminal Code as saying.
Joblessness can be illegal in Cuba but, at the same time, losing one’s job is sometimes used as a punishment by the government, said the report, titled “New Castro, Same Cuba.” Those regarded as enemies of the state, the report said, are routinely fired from jobs, denied other employment and levied with fines, all of which put a significant financial burden on their families. …
On at least one point, however, the New York-based human rights organization and the Cuban government agree: the need to end the American trade embargo on Cuba.
While Cuba considers it a cruel policy by an imperialist government that makes its citizens suffer, Human Rights Watch called it ineffective in pressuring the Cuban government to change its ways and successful only in imposing even more hardship on everyday Cubans. (source)
More absurd human rights violations here.
From the Huffington Post:
A school employee lost his job after he posted a one-word vulgarity in the comments section of an online article at the St. Louis Post-Dispatch. The St. Louis Post-Dispatch ran an article asking readers what was the “craziest thing you’ve ever eaten” and invited them to submit the oddest foods they’ve consumed. …
The school employee, who later lost his job, posted an anonymous, one-word comment that referred, in vulgar terms, to a woman’s anatomy. The comment was deleted by administrators, then reposted by the reader. After it was posted a second time, the administrators didn’t just delete the comment, but took it one step further: Kurt Greenbaum, the director of social media at the St. Louis Post-Dispatch, found the commenter’s IP address and traced it to a local school. …
Using the information provided by Greenbaum — including the IP address, the time at which the comments were posted, and the Post-Dispatch website’s location — the school was able to identify the computer used to make the post, as well as the commenter who posted the obscene word. The school employee resigned immediately when confronted by the school’s headmaster.
Racism and racial discrimination are obviously human rights issues, but so are work and unemployment. If you have doubts about the latter, maybe this will sway you. Moreover, protection against unemployment is also a human right.
Racism expresses itself in different ways, one of which is discrimination in employment:
In 2004, Jean-François Amadieu, a sociologist at the Sorbonne, sent out 500 CVs replying to ads for sales jobs in the Paris region. The CVs were identical except in one regard: some applicants had north African names, and others traditional French ones. The white male French names received five times as many job offers as the north African ones. When Amadieu repeated the exercise in 2006, the ratio was 20:1. (source)
Such examples of racism in employment policy have an impact on unemployment rates across races. Here are some data for the U.S.:
And these numbers exclude those who are in prison. Given that there are 5 times as many blacks behind bars as whites in the U.S., including them in unemployment statistics would make the gap even wider. (And why shouldn’t we include them? They obviously don’t earn a living and can’t provide for their families).
Of course, this difference between the unemployment rates for blacks and whites isn’t entirely caused by direct discrimination in employment decisions. Other elements play a part:
- Jobs are often concentrated in white suburbs, difficult to reach for blacks without cars.
- Blacks can’t rely on networks of family businesses as much as whites or Latinos.
- Blacks ”have been relegated to precarious, low-wage work … at disproportionate rates” (source), making them more vulnerable to recessions, outsourcing and competition from immigrants.
- Indirect discrimination: if blacks receive substandard education, are less healthy and more poor, then this will affect their employment prospects:
First, why is this a human rights issue? Well, there’s article 23 of the Universal Declaration:
Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
And there’s generally the issue of the absence of poverty as a human right. A minimum wage is obviously intended to protect people from poverty. Economists disagree on the effectiveness of a minimum wage: some believe it helps to combat poverty, others say that it increases poverty because minimum wage level regulation creates job losses: the price of labor will be higher than the price that would be fixed by unhindered supply and demand of labor (read here why this is supposed to be the case). And job losses mean more poverty. However, the evidence for this is mixed, to say the least. See here, here, here or here for studies that show no adverse employment effects of a minimum wage.
In the U.S., when state and federal regulations differ, the higher of the two rates applies. Currently (2009), the “minimum minimum wage” is $7.25 per hour. A minority of states has minimum wages higher than the federal minimum.
An updated version of the map:
Another one in our series on intended and unintended mistakes in statistics. Take for instance unemployment or employment rates. (We’ve talked about this before in this series). Employment statistics usually measure the number of people at work or unemployed, the number of people claiming unemployment benefits, the number of jobs that are created or lost, etc. Especially during an economic recession, like the one we have now, people look anxiously at those statistics. However, during a recession, companies that are struggling may be unwilling to lay off people, either because they feel responsible for their employees, or because – less altruistically – they don’t want to lose valuable experience which they will need when the economy recovers. Many companies therefore choose to convince their people to work less hours, work part-time etc. Rather than dismissing some people, the burden of the recession is equally spread over all employees.
The phenomenon is called “labor hoarding” and it is attributable to the costs of finding, hiring and training new workers and the costs in terms of severance pay and morale when firing workers. Jeffrey Frankel (source)
However, a simple unemployment statistic composed of numbers of jobs or job losses will fail to notice this. In times of recession, such a statistic will underestimate real unemployment because it won’t include the partial unemployment in the companies that increase part-time work. So you think you are measuring unemployment, but actually you’re not, at least not completely or accurately. A better dataset is the average weekly hours worked. Or you could include the numbers of people who are involuntarily part-timers in the numbers of unemployed:
(source, marginally attached workers are persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months, but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey; discouraged workers are a subset of the marginally attached)
Strange as it may seem to some, unemployment benefits are a human right, and rightly so in my opinion. Poverty makes rights impossible, and unemployment benefits save many from poverty, especially during a recession in which unemployment isn’t just a phase between two jobs. Read for instance art. 22, 23 and 25 of the Universal Declaration:
Article 22: Everyone, as a member of society, has the right to social security.
Article 23: Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
Article 25: Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
Three times! They must have meant it.
Compared to many other industrialized countries, the U.S. usually adopts a very critical attitude towards social and economic rights in general, and hence also to the right to unemployment benefits. Which is apparent from its relatively stingy system, something I already discussed here. Some more evidence of this in the graph below:
At just under $300, the average weekly benefit is less than half the average private-sector wage. Mississippi’s maximum benefit of $230 is not much more than the federal poverty threshold of $200 for an individual. (source)
And it’s not just the total amounts of the benefits:
Compared with the systems in other industrialised countries, the American unemployment-insurance (UI) scheme pays lower benefits for less time and to a smaller share of the unemployed. … States often require beneficiaries to have worked or earned an amount that disqualifies many part-time and low-wage workers. They also disqualify people seeking only part-time work – even though many people now work part-time for family reasons. Benefits typically last for only six months, more than enough time to find a new job in normal times but not in recessions. (source)
This isn’t only a human rights issue. Especially in a recession it can mean making things worse. When people lose their jobs, you don’t want them to lose a large part of their purchasing power since economic recessions are made worse by falling consumer spending.
However, making the system of unemployment benefits more generous would almost certainly require higher taxes. And although the U.S. is a low-tax country (compared to other industrialized countries, see graph below) that seems pretty utopian right now (given the already hysterical fears about the fiscal consequences of the healthcare proposals).
Unemployment benefits are about “spreading the wealth around“, and we know that, for many Americans, this phrase sounds worse than “you have cancer and you only have 6 months to live”. So little hope of having a bit more of that.
The Economist called it the “unsurprising research finding of the day“, but I think it’s a useful confirmation of an existing intuition: this paper finds that the recession can have a beneficial effect on the health of some people who lose their job because of it, namely those people spending their new leisure time in a healthy way. Other people, however, spend their leisure time cultivating some of their pre-existing unhealthy habits, or find themselves depressed and without employer-provided healthcare (especially in the U.S.). Because their healthcare has become more expensive now that they are unemployed, they decide to go without treatment or tests.
Results showed the body mass of the average laid-off food-lover increasing by the equivalent of more than 7 pounds for a 5-foot, 10-inch man weighing 180 pounds during unemployment. Similarly, frequent drinkers on average doubled their daily alcohol intake after losing their jobs and before finding another one. (source)
Elsewhere in the world, and especially sub-Saharan Africa, it seems that the health consequences of the global recession are more dramatic:
The financial crisis will kill between 28,000 and 50,000 babies in sub-Saharan Africa this year, according to this paper. The reasoning here is straightforward. For people on subsistence incomes, a fall in GDP can be fatal. The paper’s authors, Jed Friedman and Norbert Schady, estimate that a one percentage point fall in per GDP across sub-Saharan Africa is associated with a rise in infant (defined as under-ones) mortality of between 0.34 and 0.62 per 1000. If we multiply this increase by the number of births this year and by the 2.4 percentage point difference between GDP growth this year and last (a reasonableish estimate of the effect of the crisis), we get a figure of between 28,000 and 50,000. … Of course, you can quibble with the numbers. But the general story holds. For the poor, income is a matter of life or death. Which brings me to my question. If one-in-seventeen British babies were to die this year because of the financial crisis, it would be the biggest media story for years and there’d be rioting in the streets until the government did something. So, why the silence? Chris Dillow (source)
Since health and life are human rights, we have another human rights problem thanks to the recession. Previous posts on the (possible) impact of the recession on human rights are
- here (a general overview)
- here and here (on poverty)
- here (on the recession and the death penalty)
- here (on the recession and development aid)
- here (on the recession and antisemitism)
- here (on the recession and unemployment)
- and here (on the recession and crime).
Median household income declined 3.6 percent in 2008 after adjusting for inflation, the largest single-year decline on record, and reached its lowest point since 1997. The poverty rate rose to 13.2 percent, its highest level since 1997. The number of people in poverty hit 39.8 million, the highest level since 1960. (source)
(source, adjusted for inflation)
Since the recession only started mid-2008 and became much worse in 2009, the data for 2009 - and perhaps 2010 - will probably be even worse. Unemployment is one of the main causes for falling income and rising poverty, and unemployment is a “lagging indicator“, meaning that employment only starts to pick up long after a recession has officially ended.
Poverty levels have been on the rise since a number of years.
The rise in poverty in 2008 followed a disappointing performance during the economic expansion that started in late 2001 and ended in December 2007. Poverty, which rose during and after the 2001 recession, never dropped back down to its pre-recession level. This was one of the worst records for poverty reduction of any economic recovery in decades. … The disappointing performance of the last economic expansion reflects, in part, the fact that the fruits of the economic growth during that expansion were heavily skewed to people high on the income scale rather than being broadly shared. Economists Thomas Piketty and Emmanuel Saez have found the top 1 percent of households received two-thirds of the growth in national income that occurred during the recovery, a larger share than in any other economic expansion since the 1920s. (source)
The child poverty rate rose to 19.0 percent, leaving nearly 14.1 million children under 18 (nearly one in five) below the poverty line. The percentage of all children who live in families below half the poverty line also rose, to 8.1 percent. Both the percentage of children in poverty and the percentage in deep poverty* reached the highest point since 1997. (source)
Compare this to other developed countries:
I made some critical remarks on the “poverty line” as the poverty measurement system in the U.S. here. If those remarks are correct, the picture would be even bleaker.
One could claim that declines in household income result from declines in household size. While it’s true that households are somewhat smaller now than 10 years ago, this doesn’t explain the drop in income. See here.
* “Deep poverty” = cash incomes below half of the poverty line
The U.S. Department of Housing and Urban Development issued its 2008 Annual Homeless Assessment Report. This report explores changes in homelessness nationwide (housing is a human right and has an impact on other human rights such as the right to property and privacy). HUD’s assessment concludes that while overall homelessness in America held fairly steady from 2007 to 2008 (in number of individuals), the number of homeless families seeking shelter, particularly those living in suburban and rural areas, increased (by 9% overall, and by more than 50% in suburban and rural areas). 516,700 families were homeless in 2008.
HUD estimates that approximately 1.6 million persons experienced homelessness and found shelter between October 1, 2007 and September 30, 2008 (this means that 1.6 million persons used shelters or transitional housing programs at least once during this period). This population has the following characteristics:
- Geographic – 68 percent are in principal cities – 32 percent are in suburban and rural areas. One in five people homeless on a single night in January were located in Los Angeles, New York, and Detroit.
- Household Type – 68 percent are individuals – 32 percent are persons in families with children.
- Race – 62 percent are members of minorities.
- Gender – 64 percent of all sheltered homeless adults are men and 36 percent are women.
- Age – 40 percent of all homeless individuals are 31-to-50 years old.
- Veteran Status – 12 percent of all sheltered homeless adults are veterans. (source)
Almost 20% of homeless people are chronically homeless.
However, useful as they are, 2008 data aren’t recent enough to measure the full impact of the current economic recession on homelessness, but given that the recession started in the housing market, one can assume that the high number of foreclosures has had a negative impact on homelessness. Rising unemployment should make things even worse. However, first estimates for the first quarter of 2009 only show a small increase.
I often see graphs that contain a time series of some sort, but the numbers are just plain numbers, not normalized by population. Here’s an example of a graph from the Bush-era, flaunting the supposedly beneficial effects of Bush’s labor policy on job growth (green line, “jobs on the rise”, number of jobs in thousands):
Just presenting the numbers of job without relating them to the population, is meaningless. Maybe the population grew faster than the number of jobs, in which case the growth exhibited here is in fact a decrease. Or the population shrunk, in which case the growth in the number of jobs was even bigger.
Here’s the correct graph, showing that employment did increase under Bush, but decreased during the last years of his presidency:
“Population” can mean actual population (i.e. people or residents), but can also mean any other relevant basis of comparison. For example:
The following statistics suggest that 16-year-olds are safer drivers than people in their twenties, and that octogenarians are very safe:
As the following graph shows, the reason 16-year-old and octogenarians appear to be safe drivers is that they don’t drive nearly as much as people in other age groups:
Another example is the national debt statistic. Often the graph shows just the national debt in dollar, without relating it to GDP. Whereas the absolute amounts do have some relevancy, it’s better to express the debt as a percentage of GDP because a bigger economy can carry a bigger debt (a poor household may go bankrupt with a debt of $10,000, whereas a rich household can live with a debt of perhaps $100,000).
Take this graph for instance:
Now compare it to this one:
Or this, slightly more recent one, including the latest recession:
And a final example: looking at the relative safety of air travel and road travel and the probability of dying in either a road accident or a plane accident, you can also find divergent data depending on how you divide: number of casualties per trip, per miles traveled, per hours traveled etc.
Statistics can be dangerous, as is evident from the previous posts in this series. People making them can make mistakes, or can use them to deceive. And people reading them can misinterpret them. Our treatment of human rights on this blog depends heavily on the use of statistics, and so the quality of those statistics is important. This blog series mentions some of the things that can go wrong.
Statistical mistakes or statistical lies occur in all kinds of fields, not only the field of human rights. Here’s one that is often made in discussions on climate change. It has to do with measuring growth rates (which we also do for human rights).
Kevin Drum has a quote from George Will, and replies with a graph:
George Will [claimed] that “If you’re 29, there has been no global warming for your entire adult life”. … If you’re 29, you became an adult in 1998, and average global temperatures last year were lower than they were in 1998. So: no global warming in your adult lifetime.
The earth is actually cooling! But as about a thousand serious climate researchers have pointed out, it’s not true. Global temps have been trending up for over a century, but in any particular year they can spike up and down quite a bit. In 1998 they spiked up far above the trend line and last year they spiked below the trend line. So 2008 was cooler than 1998.
Of course, you can prove anything you want if you cherry pick your starting and ending points carefully enough. For example: The year 2000 was below the trend line and 2005 was above it. Temps were up 0.4°C in only five years! The seas will be boiling by 2050!
Here’s another example of cherry picking start or ending dates in a time series so as to highlight or drown a growth rate (positive or negative), this time more closely related to the issue of human rights (more specifically the right to work).* Compare these two graphs (in the first graph, just look at the red line for “unemployment rate”, the rest isn’t important, for now – I’ll come back to it in a future post because there are other problems with this first graph):
The first graph makes the – honest? – mistake of starting in 2003, giving the impression that Bush’s economic policies brought down unemployment. The second graph, however, gives some more historical perspective because it starts earlier, and shows that unemployment was much lower before Bush (Bush took office in 2000) and that the decrease during his presidency wasn’t so spectacular as the first graph suggests.
Of course, you can’t hold a president responsible for unemployment, at least not exclusively. But then neither should you tweak graphs so as to give the impression that the president’s policies have a beneficial impact (read the title of the first graph).
* Technically, this isn’t a growth rate, just a time series, but the same logic holds.
I made a general point here about the consequences of the recession for human rights. One consequence is obviously increased unemployment (unemployment being a violation of the right to work). Just thought that these graphs would be a nice illustration (U.S. data):
(source, click on the image to enlarge)
How can outsourcing be viewed as a human rights issue? Well, first of all, the Universal Declaration gives us all a right to work:
Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment.
As well as a right to an adequate wage:
Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection.
Outsourcing can mean that people lose their jobs, and the threat of outsourcing can mean that people are forced to accept lower wages. Or course, none of this implies that there is or should be a right not to have your job outsourced to some foreign country. But outsourcing can still be viewed as a human rights issue. Even more so if we look at the receiving end. For people in India, for example, outsourced jobs can mean the end of poverty. And poverty is a human rights issue.
More on outsourcing here.
In mentioned in a previous post that the current economic recession (or is it a depression already?) has a number of adverse effects on human rights. One obvious effect is an increase in poverty levels. Many people lose their jobs and their homes, and producers and exporters in the third world may be hit by protectionist measures contemplated by developed countries.
We tend to forget that poverty is a human rights issue (see here). And poverty has a knock-on effect on other human rights. When you’re engrossed in the struggle for life you don’t have time for free speech or political participation, your health suffers, your education suffers (see also here) etc.
Hence the importance of unemployment benefits.
These are the best places in the world to be unemployed. In Scandinavia, for instance, you get 80-90 percent of your income for a period ranging — depending on circumstance — from 10 months to four years. Japan gives you 50 to 80 percent of your income for about a year. France gives you 57 to 75 percent of your income for about three years.
The place where you really don’t want to be unemployed: The United States. Here, most of the unemployed don’t qualify for unemployment insurance, and those who do can expect $216.17 a week for 26 weeks. Defenders of the system would say that it’s a spur to get people back to work. Critics would say that it forces people into jobs that present themselves quickly rather than jobs that are actually a good fit, depressing both productivity and happiness. And if you were laid off for no fault of your own and simply can’t find work amidst a sluggish economy — as is the case for many right now — it’s an undeniably stingy benefit. Ezra Klein (source)
Unemployment benefits protect people against poverty, but can also stop the downward spiral of the recession: if the absence or the lack of generosity of unemployment benefits drives people into poverty, they will consume less; hence companies will sell less products and services, which leads to more bankruptcies and more unemployment etc.
Unemployment benefits are both morally necessary (from the point of views of human rights) and economically expedient in times of a recession.
In a previous post, I have written about the ways in which the current economic recession has a detrimental effect on human rights. One obvious consequence is an increase in poverty levels. Many people lose their jobs and their homes. We tend to forget that poverty, work and shelter are human rights issues (see here and here).
(source, photo by Anna Gowthorpe, Associated Press)
Like any recession, the current one has a detrimental effect on human rights. Both the so-called economic human rights (the right to work, the right to a certain living standard etc.) and the more traditional civil rights or freedom rights suffer. In some countries more than in others, but no country will escape unharmed. It’s obvious that poor countries will suffer more, because they don’t have the means for stimulus measures or social security systems that can soften the effects of the recession, and because developed countries will turn their attention to themselves. In developed countries, the poor will suffer more, as will migrant workers, illegal immigrants, asylum seekers etc.
Here are some of the human rights problems provoked by the recession:
1. Unemployment increases:
(source, data for the U.S., click the image to enlarge)
(source, data for the U.S.)
2. Poverty levels increase:
(source, data for the U.S.)
3. Homelessness will increase
Because of rising unemployment and poverty levels, it’s likely that homelessness will also rise. The specific nature of the current recession, with high numbers of foreclosures, will increase this likelihood.
4. Prejudice and violence will increase
People will get angry and will misbehave. They may turn to crime more easily, or they will go on the streets and riot. Or they will turn their anger against foreigners, migrants, asylumseekers etc. Xenophobic political parties will profit, and, as a result, migration policy will tighten.
5. Public goods will receive less money and will under-perform
National governments will invest less in public goods such as the police force, the healthcare system, education etc. As a result, these institutions may under-perform, with detrimental results for people’s education, health, judicial protection etc.
6. International development aid and remittances drop
See here for data on the level of development aid during recessions. Remittances from migrant workers to their home countries also drop, because of rising unemployment which is likely to hit migrant workers harder than resident workers. And we all know the importance of remittances to the economies of developing countries (see here – they are often more important than official development aid):
I tried hard to come up with some positive effects of the recession, but apart from something vague and uncertain like increased solidarity, I didn’t have much success. I’ll give it some further thought.
economic downturns don’t necessarily stoke racial tension or violence. In fact, most economic research finds no correlation at all between hate crimes and the economy.
A 1998 study of economic motivations for hate crimes examined crime statistics for New York between 1987 and 1995, and found no correlation between the city’s unemployment rate and prevalence of bigoted violence. That same study, by a team of researchers at Yale, also found no significant economic link to patterns of lynchings in the pre-Depression American South.
Another study, by Swarthmore economists Philip Jefferson and Frederic Pryor, studied Southern Poverty Law Center (S.P.L.C.) data on hate groups in 3,100 U.S. counties, only to find, again, no correlation between economic conditions and the presence or absence of operational hate groups.
It’s not farfetched to assume that an economy in which women make up less than 50% of the workforce, is an indication of gender discrimination. And that the lower the percentage of women in the workforce, the higher the level of discrimination. Women can of course decide freely not to work, and to stay at home and take care of the children, without being coerced by prejudice and lack of opportunity. However, one can safely assume that women on average will take opportunities when they are presented to them, and that they will work outside of the house when their social environment more readily accepts this.So women’s rising participation in the labor force is an indicator of decreasing gender prejudice. This is also the case in a more indirect way. Higher labor participation is an indicator of higher education. And higher education for women is an indicator of increasing gender equality.
The graph below shows the evolution of the share of women in employment in different developed countries. Sorry for the small font, but that’s the way it is in the source page – the point is that there’s a real improvement over the years:
It would be interesting to see similar data for developing countries. I’m still looking.
The current economic crisis may push up the share of women, since most job cuts will be men’s jobs. Women are traditionally better represented in sectors that are more recession-proof, such as healthcare and education. However, data should normalize after the end of the recession.
People go to other countries to escape the – often combined – horrors of war, oppression, persecution and poverty. Wealthy and peaceful states that protect human rights within their borders, usually accept a number of the people looking for a more peaceful and just society. However, people looking merely for a more prosperous society and for opportunities to have a better life, are often not allowed to immigrate. Personally, I think this is wrong and unjust, because poverty is a human rights violation that is not essentially different from for example persecution on religious grounds. The reason governments give for refusing this kind of immigration are varied but mainly focus on the dangers of “importing poverty“.
One piece of evidence to substantiate this fear is the level of unemployment in migrant communities:
(source; solid line: unemployment among immigrants equal to unemployment among natives)
These data are not surprising because immigrants usually lack certain essential skills necessary to find their place in the labor market: language, networking, adequate education etc. Moreover, they often come to places that already have strained labor markets.
The following graph shows the hopeful fact that, in Australia at least, unemployment levels of immigrants drastically decrease after a number of years in the country, suggesting that once they have acquired some new skills and have learned the language, they integrate into the host society and economy. Instead of being a burden they can even contribute. (I didn’t find any similar data for other countries).
Some numbers on immigration can be found here.
Definition of discrimination
Discrimination, in its non-political and non-legal sense, simply means the recognition of differences. In the political and legal sense, it means unjustifiable differences in treatment between groups of people, most often the unjustifiable denial of the equal enjoyment of human rights.
Types of discrimination
Groups of people are discriminated because they have certain group-specific attributes that set them apart from the rest of society and that warrant, in the eyes of the people who are discriminating, less favorable treatment. One can make the following distinctions:
- Discrimination can come in different degrees, affecting large or small numbers of people to a large or small extent: from government policy to an unspoken mentality of a small part of the population, and everything in between (such as states not acting to counter discrimination, very active and outspoken discrimination in some parts of the community, entrenched cultural practices such as the caste system etc.).
- It can be exercised in different ways. People may be discriminated on the grounds of their race, gender etc. They can be discriminated in relatively harmless ways (denial of a promotion because of a likely pregnancy for example) or very brutal ways (slavery, denying of equal education etc.). They can also be discriminated in many different fields of life: education, employment, justice, health care etc.
Some people have the misfortune of finding themselves in a state which has an overt and active policy of discrimination, and in different discriminated groups at the same time (black lesbians in Apartheid South-Africa for example). As a result, they may also be discriminated in different fields of life at the same time (employment, family law, education etc.).
There are many types of discrimination, and the concept of discrimination is often linked to others such as racism, agism, sexism, xenophobia, intolerance, religious fundamentalism, genocide, ethnic cleansing etc. Whereas all these phenomena undoubtedly have a dose of discrimination, they are not the necessary result of discrimination. Discrimination can be much more limited.
One can distinguish between types of discrimination according to the groups that are discriminated, and the ways in which these groups are discriminated.
- racial discrimination
- gender discrimination
- discrimination based on one’s sexual orientation
- discrimination based on one’s language, culture or national origin
- discrimination based on one’s religion or one’s status within a religion
- discrimination based on one’s political convictions
- age discrimination
- health discrimination (e.g. discrimination of HIV patients, disabled persons or obese persons)
- etc. (when it comes to cruelty, man’s imagination has no limits I’m afraid)
- economic discrimination (e.g. persistent differences in poverty levels between groups)
- employment discrimination (e.g. discrimination in career opportunities, pay, “Berufsverbot” etc.)
- housing discrimination
- family law discrimination (e.g. the inability of homosexuals to marry or to adopt)
- education discrimination, different levels or quality of education for different groups
- discrimination of the access to public service or elected positions
- judicial discrimination, discrimination in the justice system
- health discrimination, different levels or quality of healthcare for different groups
- cultural practices such as honor killings, female genital mutilation,…
- legal discrimination such as Jim Crow or segregation
Causes of discrimination
- racism, sexism etc.
- a history of discrimination, creating a burden on future generations
- recession or economic scarcity
- cultural practices (e.g. the caste system)
- religious doctrine
- legislation (e.g. the Jim Crow laws or other types of legally enforced discrimination)
Article 2 of the Universal Declaration prohibits discrimination:
“Everyone is entitled to all the rights and freedoms set forth in this Declaration, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.”
The following graph shows that discrimination is a that also exists in countries with well-developed legal protection mechanisms. The graph gives information on perceived discrimination in minority groups in the Netherlands (click on the picture to enlarge):
(Perceived discrimination is not the same as real discrimination: people can believe they are being discriminated against without there being any actual discrimination, while actual discrimination may not be perceived as such).
The following graph show the perception of the worsening plight of African Americans in the U.S.:
However, when asked for the reasons, most consider discrimination not to be the most important one:
Discrimination and poverty
Although poverty has many causes, discrimination is undoubtedly one of them. Large differences in wealth between groups (for example racial groups) may indicate the existence of discrimination. Here are some data on the situation in the US:
Discrimination and justice
Statistics on the differences between races in incarceration or execution rates may indicate the existence of discrimination in the justice system, although these differences may have other causes besides discrimination, e.g. differences in poverty rates (see above), differences in levels of education etc. Of course, the latter differences may be caused by discrimination so that discrimination is indirectly the cause of the differences in the application of justice. Here again are some data on the situation in the US, showing that blacks, although they make up only 12% of the population, account for more than 1 in 3 of the prison population and of the executions. 5% of black men are in jail, compared to less than 1% of white men.
Blacks are also about twice as likely as whites to be a victim of a crime.
Here’s a post on affirmative action or positive discrimination, a common tool to counteract discrimination.
The public in most developed countries (or rich countries) is often opposed to immigration:
There are two main reasons for this opposition. Opinions about immigration are closely linked to perceptions about threats to a country’s culture, for example the language. We see a lot of anxiety in the US about English as the first language and the only official language of the country.
Another perceived problem is employment: some fear that the immigrants will take away jobs from local people. Immigrants are relatively poor and accept lower wages and less developed labor regulations, which gives them an “unfair advantage”. Especially illegal immigrants are tough competition. On the other hand, some state that migrants do the jobs local people are unwilling to do.
In any case, the discussions often border on xenophobia and almost always exclude the point of view of the migrants. For migrants, migration can mean the difference between oppression, suffering or poverty on the one hand, and freedom and wealth on the other.
When asked why people leave their country to live in another country, solid majorities in a Pew survey say it is for job opportunities. This is probably a correct assessment. But even if most migrants do not flee persecution, genocide, war etc., they still try to escape violations of their human rights, namely their economic rights and their right not to suffer poverty.