What Do Rising Numbers of Welfare Claimants Really Mean?

As we know, food stamp claimants are soaring to new highs. But this just mirrors the numbers of people who are jobless:

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This isn’t a product of people getting lazy and choosing to live off the state. It’s a product of a weak economy that isn’t creating a large enough supply of jobs to meet the demand for work.

Because as we know, there are lots more job-seekers than there are jobs being created:

As I noted recently, solving the challenge of high unemployment is not a matter of job-seekers working harder to look for work. It’s a matter of the economy being able to create enough jobs and demand to absorb job-seekers.

I worry that we aren’t taking unemployment seriously even five years into a crisis that is defined by soaring unemployment. It may be hard for  policymakers and wealthy business people — the people who are in a position to spend to create jobs and seriously lower the unemployment rate — to have any idea what unemployment really means. After all, as a successful, wealthy person with a high quality of life, who has been successful in life from school, to university, to the workplace, then perhaps it is hard to empathise with the plight of people who are struggling to find a job. It seems easy to notice the rising costs of welfare, and the rising numbers of welfare claimants and jump to the conclusion that these things are caused by laziness or lack of discipline or immorality. Yet the simple, demonstrable fact that there are not at present enough jobs to go around entirely debunks this.

Trying to nudge unemployed people into looking harder for work seems like a futile exercise. If the government wants to get people off unemployment, the only real option is job creation.

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33 thoughts on “What Do Rising Numbers of Welfare Claimants Really Mean?

  1. It baffles me that some in this country (including politicians) cannot see the nexus between the rise in welfare/unemployment insurance beneficiaries, and the severe downturn in the job market. Of course, I often hear criticism lofted at the Obama Administration for failing to get people back to work out of one side of their mouth, and out of the other side of their mouth they talk of how the unemployed/welfare recipients are simply “lazy”.

    • Not lazy intially, but the victims of a poorly managed economy. The increase in government subsistence is, as Aziz correctly points out, a direct correlation with the lack of jobs.
      People who weary of seeking employment choose whatever is offered – whether that is part-time work or a government handout or a combination of the two. But when all of the government benefits combine to equal more than a minimum wage earner can hope to earn by working, there may be a quite natural tendency to give up. And that can lead to laziness.

      • Right, I agree the issue is more nuanced than my comment would suggest. Moreover, there are the long-term unemployed who become more and more unlikely to be hired for a position because they have been out of work for so long, and then eventually give up. This causes other problems in this dynamic; specifically the long-term unemployed creates downward pressure on wages, requiring lower earners to turn to government assistance to supplement their low incomes.

      • But when all of the government benefits combine to equal more than a minimum wage earner can hope to earn by working, there may be a quite natural tendency to give up. And that can lead to laziness.

        To get more than a minimum wage earner in Britain, you’d have to be on long-term disability and have multiple children. Just being on unemployment is a tiny amount of money I think around £4000 a year, and you have to prove you are looking for work. Getting on disability in the UK extremely difficult now, standards have been massively tightened to the extent that the only people who can get on are severely disabled and can’t work at all (e.g. people who are completely paralysed, etc). So in Britain people don’t have this option at all. In the USA and other parts of Europe, it may be more of an option, but remember that if there are not enough jobs in total it doesn’t even matter if a few people drop out of the labour force because welfare pays a tiny amount more than the minimum wage. If the unemployment rate was being brought down, the demand for labour would probably bring a lot of people back into the labour force as wages rise.

        • If anyone seriously attempted to tighten the requirements for benefits in the US they would be tarred and feathered, labelled as “not caring for the poor”. But making the poor dependent upon government largesse is causing more harm than good. “Give a man a fish and you feed him for a day, but teach him how to fish and you feed him for a lifetime”.
          In addition to unemployment wages there are other benefits that are granted to anyone qualifying for any assistance – food stamps and Medicaid to name a few. A family would be unlikely to give up free medical care in exchange for a minimum wage job.

        • The economy is bad but it is an oversimplification to blame the economy entirely. Welfare in America at least is misunderstood. First, there are multiple types of welfare– disability, unemployment, Medicaid, food stamps, energy subsidies, foster child payments, straight welfare. Combine these things with a bit of ingenuity, cash-under-the-table employment, and cross-training among the citizenry and you have an entire welfare class of people making FAR more than those working at or near the minimum wage. I see this in Nelson County, Virginia literally every day.

          We must also expect the unemployed to pursue every single avenue to get employed including changing professions, working two or more jobs, moving to another town or out-of-state. Moving to where the jobs are was a common practice in years past but no longer.

        • R.T. Greenwood, I see the same thing in Culpeper County, Virginia.

          Another tactic is for couples to avoid legal marriage so that the wife—acting as a single mother—can get massive state benefits for the children. All this would be nonexistent if we had constitutional term limits on debt like Thomas Jefferson wanted:

          “By reducing too the faculty of borrowing within its natural limits, it would bridle the spirit of war, to which too free a course has been procured by the inattention of money lenders to this law of nature, that succeeding generations are not responsible for the preceding.”

          19 years was Jefferson’s calculated number for a generation, the interval at which all debts would regularly expire:

          “Then 19. years is the term beyond which neither the representatives of a nation, nor even the whole nation itself assembled, can validly extend a debt.”

          7 years was the Divine limit in the Hebrew Republic.

          We have no debt term limits.

  2. An Australian friend living in the US, wants to return to Australia as she is fed up with the USU due to having to walk over vagrants, laying in shop openings everywhere (Too distressing and depressing to see the poverty rising). She is in California. She is an IT expert who builds databases and converts Excel to data base systems (Streamling and Process Improvement). From my experience people like this were earning $50-$75 ph in Australia as Contracts. Her wage is $16.50 and hour! If someone like her is a highly skilled “Knowledge” worker that the US government preaches, no wonder we have tent cities popping up everywhere. She says it is that bad over there.

    Can anyone in California confirm her reports? I trust here as she is a family friend, but I can’t believe wages are that low there.

    • I live in California. It’s is a big place with nearly 40M people. It is also a mecca for the homeless [nice weather and all].

      The United States, like all things, is a combination of opposites [equal amount of good and bad in everything]. With the increasing disparity in wealth this country has seen over the past half century, there are a large number of people who have been knocked down a class or two.

      I am not sure exactly where your friend is having to step over bodies to get anywhere, but this sort of thing does exist in some urban areas. I live in a fairly small [for CA standards] beach town and although we have our fair share of homeless, they are not laying on the sidewalks.

      You figure, out of 315M people, even under the best of circumstances, some are going to fall through the cracks. Formerly housed them in institutions [many of the homeless are mentally ill] until they threw them out of there and back onto the streets.

      Great wealth and great poverty have always been symbiotic.

      • “Formerly housed them in institutions [many of the homeless are mentally ill] until they threw them out of there and back onto the streets.”

        Agreed. Same thing happened in Australia. Perhaps we need roving nurses and carers? Putting them in boarding houses exposes them to violence. Give them their own home and they go awol. Better to just care for them as they are found on the street. Offer them assistance. Convinve them to see a clinic, and have a shower, fresh clothes. If they go Awol again, there is not much you can do. Sort of like picking up the relative from the pub/bar each night. It is what you have to do. They won’t change.

        • Nature seems to suggest that not all of Her children get to lead a privileged life. For those who do fall through the cracks, it would seem as if their best hope would be a society of individuals who have their act [somewhat] together and therefore have been able to cultivate compassion as a portal to their own contentment.

          Institutions are incapable of showing compassion [despite their best intentions], and eventually manifest its antithesis, dependency.

  3. Follow me on Twitter buddy4coranga

    I just announced that I will donate to charity, my salary as a Member of Parliament if I win the next Australian Federal election in the Seat of Corangamite.

    The Charity I choose will have to have very low administration overheads and most going to those who need it. I can’t stand fat cat Charity CEO’s drawing huge salaries

  4. Every game of Monopoly eventually needs a reset.

    “The question Whether one generation of men has a right to bind another, seems never to have been started either on this or our side of the water. Yet it is a question of such consequences as not only to merit decision, but place also, among the fundamental principles of every government.”
    —Thomas Jefferson

  5. Each and every topic we discuss here has the same etiology [how could it be any other way?].

    The name of the game is capitalism [or some variant thereof], so if you can not access capital for investment in productive [labor-producing wealth] economic activity/or there becomes an avenue where an alternative activity [that produces a higher return] is viable, then you’re [labor] screwed.

    So, just like the proverbial liquidity trip, you now have an unemployment trap, where it is LESS profitable to employ labor [productively] then it is to work the magic of outsourcing, tearing down/selling-off, financialization, cartelization, and all the other anti-free market practices that allow producers to gain great profits without employing productive [local] labor.

    This is one of the great paradoxes of capitalism, greatly magnified in this era of massive fraud and corruption. The purpose of the system has ALWAYS been the reproduction of capital, NOT the employment of people.

    • “The name of the game is capitalism…”

      Good observation!

      All games are dynamic, progressing toward a dominator—Bingo! Checkmate! Monopoly. We fail to acknowledge this, and instead imagine theoretical “perpetually balanced” systems. The Hebrew Republic in Scripture was different. Divine wisdom saw the necessity for short term limits on debt (7 years), and initial equality in the distribution of rural land, with prohibitions against perpetual sale of these allotments (all rural lands reverted back to original families very 50 years). These mechanisms were wisely designed to keep a free market environment in check, promoting widespread production and liberty. Without mechanisms like these, all economies will progress toward slavery—just like in games.

      • I don’t know where you are but in Australia we not only have a Duopoly of Grocers, but a large % of “House” brands. It is like Communist Russia with standard products and wrapping, but only the wealthy own the shares in profits.

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  8. It truly is interesting how people ignore the most fundamental truths, be it in economics or anything else, for that matter. In my own profession, we see people all the time who believe that they can engage in behaviors that are incredibly destructive [to their health] and still have positive outcomes.

    The bottom-line in all of these matters is that there are those who understand that people [generally speaking] will do practically EVERYTHING to be relieved of the responsibility of having to take care of themselves. We live in a society of adult children.

    The people at the top of the food chain are there because they understand and implement those procedures, policies, rules, tools, dictum and law that create the environment where people can manifest this juvenile behavior while living an adult life.

    Be it in their engagement with any of the institutions, the average person is treated as no more than a child, a person to be pulled by the ear in the direction of compliance with TPTB, in whatever form they manifest, trading their independence for a worry-free ride through life, as the corporate-state assures them that they will no longer need any critical thinking skills. All thinking will be preformed in exchange for complete subservience

    As a reward, the people will be given access to cheap junk food, 500 tv channels of quality programming, women who can seek maximum pleasure at the mall of their choosing, and men, who can seek their every fantasy on at least 10,000,000 sites designed to keep them satiated and subordinate.

    Who cares about unemployment when you can live like a child in a fantasy world designed to distract you as the alchemists turn your labor-value into money, and money into the seeds of social destruction…and on and on it goes…

  9. Hi Aziz,
    a couple of points
    “It may be hard for policymakers and wealthy business people — the people who are in a position to spend to create jobs and seriously lower the unemployment rate” – this is great, but is it not the case that most new jobs are created buy small business or people going self employed?. Neither group i`d consider wealthy, and as we all know there is no help for this sector from the top.
    As for benifits v`s minimum wage, – I sat down with a friend a couple of weeks ago to work out the break point for him to be at least as well of in work as out (we used £7 per hour – more than the minimum wage) on a 35 hour week assuming running a car for commuting as he lives 25 miles from town after taxes rent electric etc he would have about £56 left for food et all, on the social he`s getting £71.70 per week (less council tax electric he has £46)
    http://www.nidirect.gov.uk/income-support-how-to-claim-and-how-much-you-can-get
    In other words working for roughly an extra tenner per week, this is not a comment on the fairness just that there is little difference between the two, and as far as an employer is concerened the minimum wage is higher due to NI, holiday pay etc.

    • That is common sense analysis. You should get a job in Treasury. You are very bright. But it is exactly the issue. Each person is very rational when it comes to money that they can get if they do their calculations.

    • My Father owns a business which he recently partially merged with a larger company. As such they had to redesign things like the Employee benefits plan. He told me after looking at it, that the amount of money it costs employees and employers to set up things like retirement plans and medical care is so much that it would almost be cheaper for all parties involved just to have that money going towards public retirement funds and public health insurance. And I have worked with benefit plans enough that I think such sentiment is true.

      The economy is different from the olden days. My grandfather was in the WW2 generation, he worked for the same company, at the same factory from the day he got back from war until he retired, they gave him healthcare and a pension when he retired. But things are different now, workers don’t work for the same company all their life anymore, company owned pension plans weren’t designed for people who only stay there for a few years and move on. As a result the defined benefit plan has been replaced by the defined contribution plan, and the result is really that it ends up costing more and giving less, especially for retirement benefits. We shouldn’t expect everyone to be investment geniuses, most people hardly manage their 401k or don’t know that they have the power to change the asset allocation or that large portion of their retirement accounts are staying at cash accumulating little interest when they could be in mutual funds. Now it would be helpful if more people knew about these things, I’ve met people with Phds who don’t even know what a mutual fund is! But I don’t think it is fair to expect everyone to be able to manage their funds in that way, you shouldn’t have to be a financial expert to have a decent retirement. And if working for your money and retirement is hardly netting you enough to justify it, that’s really a problem of the private benefits system. We could probably see many benefits if we established more public benefit plans that private companies could simply pay into or even be taxed on. You could manage large pensions easier if you have them being public and it would probably overall save more money for taxpayers, employers and employees than having a costly private benefits system, yet still having to use taxpayer money to make up for it when it fails to cover the costs of retirement and such. When you think about it, its really quite silly that we cling to these notions of rugged individualism and independence from the state if its not giving us any meaningful benefits.

  10. What I find interesting is the period between 2006 and 2007 where U6 dips below SNAP for a few months. Perhaps that is indicative of rising costs of living? Or that wages were falling. I’ve always thought that the commodities bubble (caused in part by high oil prices) played a role in fueling the entire thing by raising costs of living, perhaps it becomes harder to pay one’s mortgage when your costs of transportation and food and other necessities goes up. But to me that would indicate that nominal costs were starting to outpace nominal income, which would naturally lead to firms laying people off as this trend worked its way up the food chain.

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