By ASHER MEIRBusiness ethics 88(photo credit: )The Central Bureau of Statistics this week announced that the unemployment rate had reached a 20-year low of 5.9 percent for the second quarter of 2008. The particular rate in question counts only people who did not work at all, thereby hiding a great deal of underemployment. But a reduction in any kind of unemployment is good news. Let's examine the meaning of this figure in more detail.
A recurring theme of this column, which focuses on ethics in economics, is to examine the underlying consequences for human welfare behind the dry economic statistics. Why are we interested in the unemployment rate? Who is harmed by high unemployment?
In classic microeconomics, people are viewed as maximizers of economic welfare, which they get from both leisure and consumption. People really prefer to loaf, but the only way they can obtain prized goods like hamburgers and pizza (typical demand items in introductory microeconomics courses) is to give up some of that prized leisure and go to work, until the ever-increasing burden of work is so high that it no longer attains the attainable wage.
In this scenario, losing a job is a mixed bag. It's true you no longer have, say, the NIS 8,000 a month you had before to spend on goodies. But on the other hand, to get those 8,000 shekels you had to give up a ton of leisure, which was itself worth perhaps not much less. So your total economic loss may be only a couple thousand shekels.
Most people who lose their jobs get a few months of unemployment benefits, which according to Economics 101 are probably more than enough to compensate you for your actually loss of well-being.
If you are reduced from full-time to part-time work, the loss is even less. Your disutility of labor is supposed to be growing all the time, so you have been relieved of the most burdensome work hours - more than half or your disutility. And since you are assumed to have diminishing returns to your work effort, you have probably lost less than half of your income. (Though you will probably not get benefits.)
So what's all this fuss about the scourge of unemployment?
The first answer is that work is not merely a means to an income. Many, probably most, people enjoy their work; work is a pleasant social framework, a way to pass the time, a key to self-esteem. If a person is a breadwinner, then he or she may see it as a key to status in the family, which unemployment benefits can never substitute for.
The more nuanced answer is that it depends a lot on who you are. Based on the research I have found, young workers and especially women are very likely to fit the first characterization; middle-aged men are very likely to fit the second.
Of course, women with families don't actually loaf. When they lose their second jobs in the paid economy they find plenty of work waiting for them in their main places of employment - the home. Surveys confirm that a woman's work is never done. When women lose their jobs, they are most unlikely to be seen gazing listlessly at the TV screen, or playing backgammon in the street. (Honestly, when is the last time you saw ladies playing this game in the streets of Israel?) They have plenty of employment in home production - taking care of children, parents, spouses, friends, etc.
One study from Spain showed that unemployed women are about 50% more likely than employed women to have psychological difficulties. But among unemployed men, the prevalence of such problems is almost three times higher than among employed ones.
In my experience, most single mothers of young children would rather not work at all, and their well-being would be maximized by giving them an adequate stipend. But for husbands, loss of work can be a devastating blow to their self-esteem and status, and they are more likely to be a burden than a help in the home after the first few weeks (which can be devoted to pressing household projects).
Unemployment policy in Israel is made up of two complementary policies: giving a stipend to tide the worker over until a new job is found and help in finding work. This help is mainly through the employment office or through the private agencies who subcontract this work under the Israeli version of the "Wisconsin program," or, more rarely, through various subsidized training or retraining courses.
It is worth noting that both policies are weak. Israel has among the stingiest unemployment benefits in the advanced world, and the employment office has not been shown to be very helpful in helping the unemployed find work, though the private agencies do somewhat better. Courses are virtually unavailable.
I cannot comment on the legal aspects of having these policies discriminate based on age and sex. However, on theoretical grounds I suggest that discrimination is called for. Women, whose main loss from unemployment is the loss of income, should get more money than men.
Men, who suffer more than women from the loss of occupation and status, should get more help getting reemployed than women.
ethics-at-work@besr.org
Asher Meir is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute in the Jerusalem College of Technology.
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