Sunday, June 19, 2005


"Unfair" dismissals help the unemployed: "First, less employment protection will mean more hiring and more firing and, hence, more job churning. For those with jobs, this may not sound like a particularly enticing prospect. But for the unemployed, it matters a lot. The flip side of greater certainty that those with jobs will remain employed is greater certainty that the unemployed will remain unemployed. With decreased hiring, those without work are likely to remain jobless for longer. Indeed, cross-country evidence shows a robust relationship between employment protection and higher long-term unemployment. Making hiring and firing easier will help spread the burden of unemployment across the workforce. Since we know that the worst results of unemployment come from the de-skilling and depressing effect of prolonged joblessness, this provides a powerful equity argument for reform. Moreover, this also yields an important efficiency argument: if adverse macroeconomic shocks cause long-term unemployment to rise, it can take decades for the economy to recover.... Research by Olivier Blanchard and Justin Wolfers finds that countries with less strict firing laws recover more robustly following adverse economic shocks. Those who benefit most from a rapid recovery are the most disadvantaged in Australian society".

Economics at work on births: "Tough child support laws may dissuade men from becoming unwed fathers, a new study shows. Researchers at the University of Washington and Columbia University found that states with the most stringent child support laws and strict enforcement have up to 20 percent fewer unwed births. Child support laws' power to prevent single parenthood is an unintended consequence of a policy designed to help children and cut public welfare costs, the researchers said Friday. "Often the unintended effects are bad, so it's refreshing to see that," said lead study author Robert Plotnick, University of Washington professor of public affairs. "Women living in states that do a better job of enforcing child support are less likely to become an unwed mother."

The names of Smoot and Hawley will live in infamy: "Only a few economic historians are likely to notice June 17 marks the 75th anniversary of the signing of the Hawley-Smoot tariff bill.... the same kind of thinking that led to the Hawley-Smoot tariffs is still alive and well -- and in full youthful vigor -- in the media and in politics today. At the heart of past and present arguments for restricting imports that compete with American-made products is the notion these imports cost American jobs.... If 9 percent unemployment was troublesome in 1930, when the Hawley-Smoot tariff was passed, it was nothing compared to the 16 percent unemployment the next year and the 25 percent unemployment two years after that. The annual U.S. unemployment rate never got back down to 9 percent again during the entire decade of the 1930s. American industry as a whole operated at a loss for two consecutive years. Farmers, who had strongly supported the Hawley-Smoot tariffs, saw their own exports cut by two-thirds as other countries retaliated against U.S. tariffs by restricting imports of American industrial and agricultural products. The economists' appeal had warned of "retaliatory tariffs" setting off a wave of international trade restrictions that would hurt all countries economically. After everything these economists had warned of came to pass, tariffs began to be reduced. But throughout the 1930s they remained above the pre-Hawley-Smoot levels -- and so did unemployment".


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