Wednesday, June 27, 2007

Market Reforms? No, Rather ALMPs and Social Spending

The point of this document is that ALMPs work. specifically, that a welfare state can provide a fair level of equity, while not running into unemployment. Detractos say "Social democracy is "old" "rigid" and "outmoded", evidenced by the high unemployment in some european countries, which could be solved by "efficient" and "cutting edge" [read destructively capitalist] market reforms"

What we should ask is, "What are the Swedes doing right?" Here is the way it can work: a social democracy has to have policies that will address unemployment. Specifically, herein is employment subsidy. That's what will work.
Here is a study supporting the idea that Social Democracy is the way to go, and that market reforms are bullshit. The point here is that this document includes emprical evidence demonstrating that that the more a state spends on social spending, the better the standard of living is. The Washington Concensus, and market reformers would have you belive the other way around. "The more we reduce social spending, the better standard of living there will be" BULLSHIT.

Sunday, June 17, 2007

Active Labor Market Policies

A common misconception that people have about welfare states, is that they produce high levels of unemployment through their social policies. While comparing the US and France might tell you this. Comparing the US and Sweden won't.

The welfare state does not, in principle, create unemployment. It can however, give the tools to mitigate unemployment. Nonetheless, these are policies that a responsible welfare should enact to keep unemployment figures in check. These are Active Labor Market Policies.

1: Life-Long Learning Policies (LLL's) such as publicly-funded workshops and tranings

2: The trational New-Deal-style expansion of employment within public service, civil service, or public works projects.

3: Job creation or extension subsidies to businesses, such as German employment subsidies, Work-study in the US, or a winter construction subsidy

4: Public job-search services that reduce frictional unemployment.

The main aim of these policies is to get people out of the unemployment pool and into the employed workforce.

Frictional unemployment, unemployment while one is between jobs can best be addressed by job-search services. The point that it takes time to find a job. This is time which could be producing income, and encouraging consumption and growth, which is good for everyone. A policy which reduces this time is needed. This is where job-search service policies can play a role.

Seasonal unemployment usually manifests itself in the winter months and can best be addresse by seasonal winter subsidies, and winter public works, such that unemployment in the winter months is mitigated.

Structural unemployment is more difficult to address in that it is more permanent in nature, and implies that only so many workers are needed. Here is where hiring subsidies in particular can improve the situation, while creating the right incentives, and also creating/improving job competencies and skills.

Overall, it is this third part which is most important given the static and potentially all-encompasing nature of structural unemployment.

Here is an interesting OECD meta- study on the Matter. It also lists different sorts of ALMP and presents study results on the effectiveness of individual policies. The study does remind us however that ALMPs are fundamentally supply-side policies, which require well-developed labor-market demand (and demand-side policies) to work well. In any case they make nice alternate policies when it comes to debating supply-side policies of wage-cutting and making lay-offs easier. Enjoy

Thursday, June 14, 2007

What is Needed in Order to Run a Fair Economy?

1: Health insurance provided to all citizens. Let no citizen be without a doctor again.

2: A functioning pension system. Let no one spend his golden years in poverty.

3: Active Labor Market Policies; lets make it easier for people to find work. Let's make it easier for employers to want to hire.

4: An Unemployment Benefits System, so that the people shall not starvge to death while they move from one job to the next.

5: Education Policy: Free and compulsory until age 18. Vocational Academies and Self-Employment Educatcion for Free. University Higher Education subsidized. .......Once we are educated, then we can stand on our feet. We can also build a knowledge economy.

6: The whole thing needs to be funded. Taxes. State-run Firms. Sound sovereign bond practices.

A Better Way Forward

The welfare state is the optimal economic system in terms of living standard, social justice, and economic performance. We owe it to ourselves to create one. Social Democracy is inherently superior in its performance because it:

1: Makes use of those human assets which would otherwise go unused.

2: Avoids the problems associated with huge wealth inequalities such as pollution, crime, and violence.

While there are naysayers who have been taught to believe that a decent and functioning welfare state is a source of unemployment, this does not need to be so. Active Labor Market Policies can curb and correct this. In fact, everything can be corrected, or at least mitigated.

What are these policies?.....They involve subsidizing hiring and work.