First, let's accept his assumption that citizens are rational decision makers and accept his claim that redistributive policies encourage people to stay unemployed. It appears his argument still overlooks the effects of unemployment on employment. Rational, calculating decision makers that have access to the same information as everyone else should be considering the effects of unemployment on long-term employability. Unemployment can dry up networks and deteriorate both soft and hard skills. Knowing government aid is not indefinite, it seems long-term employability might become a factor when deciding how hard to search for a job. Larry Ball has examined high unemployment and found that high unemployment causes higher levels of unemployment in the future- the phenomenon of hysteresis, "There is more evidence for stories in which the long-term unemployed become detached from the labor market. These workers are unattractive to employers, or they don't try hard to find jobs" (Ball, 2009). While it may be hard to measure "the degree to which one engages in job searching" it isn't difficult to figure out how may jobs are available to the number of applicants.
Second, another underlying assumption Mulligan makes (I haven't read the book, so I'm not sure if it is implicit or explicit) is that employers need workers. If employers didn't need workers, then it isn't sensible to say people lack proper incentives to work. For example, if there were 100 applicants for every 1 job opening, and the government distributed generous aid packages, could we claim the generous aid packages led 99 workers to be less rigorous in their job search?
Third, speaking to the title of the book, redistribution can definitely be observed, although not in the direction one might think. Emmanuel Saez’s work demonstrates the income redistribution during the recovery from the recession was in fact upward, “However, the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years of the recovery” (Saez 2013).
Fourth, if companies need workers and the opportunity cost to having a job is high, why can't wages be the adjustment? Raising wages would increase the incentive to work and decrease the opportunity cost to having a job.
Fifth, I’ve thought about how Mulligan's argument can be seen in terms of
historical debates. Take Kalecki’s
“Political Aspects of Full Employment” for example. In the most general sense, placing Mulligan’s argument within Kalecki’s
narrative is relatively simple.
Expanding redistributive policies during a time when employers don’t
wish to invest expands the government’s role diminishing the importance of business confidence.
Furthermore, a specific type of expansionary policy “subsidies for mass consumption” is even worse than possibly crowding out the business sector because workers must WORK for their livelihood.
“One might therefore expect business leaders and
their experts to be more in favour
of
subsidizing mass consumption (by means of family allowances, subsidies to keep
down
the prices of necessities, etc.) than of public investment; for by subsidizing
consumption
the government would not be embarking on any sort of ‘enterprise’.
In
practice, however, this is not the case. Indeed, subsidizing mass consumption
is
much
more violently opposed by these ‘experts’ than public investment. For here
a
‘moral’ principle of the highest importance is at stake. The fundamentals of
capitalist
ethics
require that ‘You shall earn your bread in sweat’—unless you happen
to have private means.”
Ball, L. (2009). Hysteresis in Unemployment: Old and New Evidence NBER Worker Paper No. 141818.
Kalecki, M.
(1943). The Political Aspects of Full Employment.
Saez, E. (2013).
Striking it Richer: The Evolution of Top Incomes in the United States (Updated
with 2012 Preliminary Estimates). http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf
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