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Comment by irq11 | Hacker News Reader

On the other hand, the Danes have a system where the workforce is extremely mobile, precisely because every worker is guaranteed up to four years of unemployment benefits. Employers are under no obligation to retain employees, because there's a great safety net.

If we're going to talk about unintended consequences, we need to consider all sides: what is the unintended consequence of a system that provides no assurances to workers during economic downturns? I suspect the downside is quite harsh.

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You have a curious definition of "all sides" in which the solution space appears to be "Impose European-style levels of benefits" XOR "Unemployed people starve in the snow." I am missing anybody here seriously proposing the second option.

I suspect the downside to having employment-at-will, very modest unemployment benefits, and a liquid labor market exists. I also suspect that it can be measured in terms of objectively verifiable criteria, and compared with the alternatives. For example, I suspect that I can look in a US newspaper for a count of the number of cars burned last night by immigrants rioting over lack of economic opportunity. It will take me a whole lot of searching, because few newspapers publish articles titled "BREAKING! No riot today, either!"

Then I could look at the same number in a French newspaper. (100 a day on quiet days, spiking to over a thousand on New Years or during periods of mass unrest. You might think I'm exaggerating. http://www.time.com/time/world/article/0,8599,1869392,00.htm... )

Alternatively, if counting riots seems a little messy, I could look at unemployment statistics for those under twenty five. In the United States, for youths at large, it is about 11~12% right now. In France, it is over 20 -- down a bit from a few years ago when it hit 25%. For socially disadvantaged groups in America, for example black males without a high school degree, it is about 48%. For similarly situated folks in France (for example, uneducated immigrants), unemployment is close to total.]

I can go on if you want me to.

I don't assume that the options are mutually exclusive. That said, I'm pragmatic enough to know that someone has to pay for a system like the Danes'. It comes at the expense of high taxes for all.

But if we're talking about curious, all-or-nothing thinking, I have to wonder why you're so obsessively focused on the French? A quick Google search tells me that the unemployment rate in Denmark (horrible social welfare state and all), is only around 5%. Perhaps the problems in France are specific to France?

I generally assume Americans/Europeans are comparatively well-informed on the economies and present socio/political situations of America/Europe. I could have used Japan as the main example, but if I alluded to something like "90% of the foreign population from my town is either unemployed or has emigrated in response to a government policy which paid foreigners to leave" I'd probably have to give you the back story on why central Japan has lots of Peruvians/Brazilians and their social status, then give you a rundown on what the difference between a seishain and a hakkenshain is, then discuss the changing norms about lifetime employment, then explain why the Japanese benefit system makes it almost impossible to land a seishain job unless you look like the perfect applicant, and finally get to the actual numbers which demonstrate my point.

Which would be difficult because I have about five minutes left on my lunch break and then it is back to the web programming salt mines.

Do you see the discrepancy in your recognising that you need to give all sorts of specific details as to the background and circumstances leading to the immigrant employment problems in Japan, but you're willing to make broad generalisations about France? In truth the two situations are likely as mind-boggingly complicated as each other.

You have valid points, but you also must consider how different France is from the U.S. When their unions strike over compensation, for example, they close down roads and burn things. Our unions strike by marching in circles with signs. Most of the immigrants you speak of live in the equivalent to housing projects. America has housing projects, but much, much fewer. It's something the French have embraced, to the detriment of their society, because it keeps their immigrant population from integrating. America prides itself on it's diversity and France prides itself on it's "Frenchness." I think you need to consider all of these things when talking about the reasons the young, unemployed French riot.

One more thing. I don't know about the ethnic or age breakdown, but right now French and American unemployment percentages are same. The difference is the French unemployed have healthcare and other social programs, so they're better off, in many instances, than Americans.

Well, yes and no. The farmers will do that, year. Metro workers often "strike" by running a normal service but refusing to collect fares. That keeps the public on-side.

A friend of mine was at the last Santacon in Paris, they were mistaken for striking workers...

Incidentally, the banlieus of Paris are worse than "the ghetto" of any American city. Except maybe Detroit.

Absolutely. The ideal system would combine high worker mobility (at will employment, no non-compete agreements, etc) with a generous safety net to minimize the cost of losing one's job.

It seems like the issue here is the way unemployment is funded.

Are there not also cultural issues?

Some people see a safety net as just that, and use it as a stop-gap while planning on future employment.

Others may see it as sweet free ride to milk as long and as much as possible.

That is the problem we have in the UK. There is a whole welfare based subculture, often referred to as "chavs".

Personally I would like to see entitlement to the dole based on education... The taxpayer has paid to educate everyone up to the age of 18. If someone throws away that opportunity and leaves school without qualifications they're unemployable, why should the taxpayer support them in that case?

Well, just maybe because when they are under 18 they are deemed a "child" and the thing about "children" is they don't always act in their long term best interests. They may have been raised badly. They may have done badly at primary school and been left behind by the education system. Yes, some people are feckless scroungers. But punishing them for that is leaving things too late. We need, as a society, to find ways to help people become productive members of our society, wherever they start from.

To each according to his needs, from each according to his ability. Two sides of the same coin, Comrade.

Give them an opportunity to catch up. If they don't have a high school diploma, make them get one as a condition for getting benefits. Be flexible and offer night classes for people who work part time. I agree that punishing people whom either made bad choices or found themselves in a bad situation as kids is not productive, but it is equally unproductive to leave them in the situation they are.

The alternative is punishing those who made good choices, by taxing them to pay for the others. And it's not like those choices are even hard to make: ask any 10-year-old if he thinks he might need his education to get a job. People know this. But they know they get a free ride too. That's got to change.

If I had to chose between my tax money going towards letting people sit at home and watch day time TV or letting them get an education, I'll happily choose the latter every time.

Secondly, we're talking about 16 year old kids here. If there is one thing that is pretty much universally true about teenagers it's that they're not very smart. Ask your avg. 16-18 year old high school dropout about the connection between education and jobs and they'll no doubt give you a long list of people who did perfectly fine without a high school diploma. They turn on their TVs and see people making millions without any education at all. Those are their role models. Then they look out their window and see college educated people just as unemployed as they are. Many kids don't see the connection between education as jobs. Telling people who later in life realized they might have made the wrong choice "hey you had a chance when you where a kid, too bad if you missed it", is not doing anyone any favours.

This also happens to some extent in Denmark. Generally, they think that the cost is worth the benefit of the system.

The "safety net" should NOT be generous or minimize the "cost of losing one's job"; it should do no more than assure that losing a job is not a catastrophe; it should not be made less than seriously uncomfortable.

It depends on the reasons for the safety net--- one reason is a simple humanitarian one (don't want people homeless, etc.), for which the bare minimum suffices, but another reason is as an automatic business-cycle smoother, in which case you want reasonably generous unemployment benefits: http://www.nber.org/papers/w4750

This was also covered in The Affluent Society, which you should read.

what is the unintended consequence of a system that provides no assurances to workers during economic downturns?

It exacerbates the business cycle for very obvious reasons, and it also slows economic growth as it results in more conservative investment, and lower spending on the parts of both businesses and consumers alike.

The real world numbers seem to bear out that unemployment compensation of some sort is a good thing.

The real world numbers also seem to bear out that if an undue portion of that compensation must come from the former employer specifically, that it creates some unfortunate disincentives towards hiring in the first place, which reduce (or in extreme cases eliminate) the benefits.

In short, Patio1 is right in thinking that the French system has some drawbacks... but his claim that the French system is some sort of inevitable end result of worker rights is utter and complete rubbish. The problem is nothing to do with workers rights, and everything to do with the specific implementation.

Actually, a system that provides "assurances to workers" during a downturn might exacerbate the business cycle.

(This is the recalculation theory of business cycles.)

A recession is caused when resources are systematically devoted to suboptimal purposes. For instance, we built too many houses and we just discovered they aren't worth much.

A laid off construction worker, auto worker or buggy whip maker may think he can still get his old job back. Generous unemployment insurance allows him to wait around for a long time, hoping to get back a job similar to his old job. However, absent unemployment insurance, he would be forced to take whatever he could get, thereby shortening the recession.

(Note: this doesn't dispute your theory of more conservative investment/spending decisions, it's just another countervailing factor that must enter into the cost/benefit calculation.)

Generous unemployment insurance allows him to wait around for a long time, hoping to get back a job similar to his old job. However, absent unemployment insurance, he would be forced to take whatever he could get, thereby shortening the recession.

This isn't a cut and dry argument either. That said, it's the reason that some unemployment compensation packages include or are dependent on job placement services and/or retraining efforts.

If you simply provide people with moderate passive income, the likelihood that they'll use it to update their skill set and change the direction of their career depends on a whole host of variables (satisfaction at previous jobs, age, industry, amount and type of education, union membership, other cultural factors.)

As such, I'd agree that for some people, income without retraining or mandatory placement services has a deleterious effect, but this is in no way a universal phenomena.

The detroit auto worker is pretty much the poster child for the problem you cite. This is because they tend to be on the wrong side of every variable I mentioned (low satisfaction, high age, salaried employment, a contract industry, relatively low formal education, higher vocational education, union members, and likely to be part of a generation that feels they are "owed" jobs.)

That said, their existence doesn't demonstrate that the programs are an overall drain, because they aren't representative of the average unemployed worker. They're skewed negatively in every dimension that matters.

Their existence does, however, reinforce the value of retraining services and mandatory placement efforts as part of a maximally effective unemployment compensation program.

I wasn't trying to imply that unemployment is an overall drain, I was simply pointing out a countervailing factor. Overall, I really don't know how these various factors add up. I imagine the result varies widely from place to place, and it's a very difficult empirical question to answer.

In fact, ultimately I suspect that the variation from place to place is the exact opposite of what would be optimal.

As you say, Detroit auto workers are on the wrong side of every variable. I expect that they also vote for generous benefits. In contrast, a place with a hard working "get off your ass and get a damn job" culture will probably vote for stingy unemployment benefits even though generous benefits would not be (locally) harmful.

It's a bit of a flaw with a democratic system.

However, a proposed solution which addresses both aggregate demand and disincentives would be to make unemployment benefits as unpleasant as possible while still providing monetary benefits. For instance, we could create a social stigma around receiving unemployment benefits. Or we might require unemployed people to submit to weekly adversarial interviews about their job search at 3AM in a cold/hot building with no chairs.

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