In Australia successive governments (Labor and conservative) have refused to lift the unemployment benefit in line with inflation. As a result the real benefit has fallen dramatically and the unemployment benefit recipients now live well below the accepted poverty line. There have also been attacks on those who live on single parent pensions, disability pensions and other forms of income support associated with disadvantage and dislocation from the labour market. In the US, the Congress cut entitlements to unemployment benefits long before the damage from the crisis was over. In Britain, both sides of politics talk tough about cutting welfare benefits and the Conservatives has indicated that it will cut benefits significantly to force people to find employment. In the Eurozone, massive damage is being inflicted on the most disadvantaged workers as the austerity mavens hack into welfare payments. All these policy ventures are informed by the intellectually bankrupt profession that I belong to. In universities around the world, mainstream economists prattle on about ‘corner solutions’, which in English means that the provision of income support associated with unemployment subsidises the same and leads to less search effort and welfare dependency. The claim is that if benefits are cut people will search for jobs and ‘fiscal stress’ will be relieved. There is a sanctimonious moralism about it all as well buttressed by terminology such as “lifters and leaners”, “dole bludgers”, “job snobs”, “cruisers” as if those in disadvantage without work have chosen that state as a deliberate strategy to bludge on the rest of the population. The problem for all of this is that the credible research comes to the exact opposite conclusion: employment commitment is highest where the generosity of the welfare state is the highest. The neo-liberals need to go suck that for a while.



I have written about this topic in the following blogs (among others):

1. Changes to unemployment benefit entitlements – the work of sociopaths.

2. Australian government now engaged in psychological torture of its citizens.

3. Our pathological meanness to the unemployed is just bad economics.

4. Why are we so mean to the unemployed?.

5. US unemployment is due to a lack of jobs whatever else you think.

6. Cutting US unemployment benefits is cruel and stupid.

7. Cutting US unemployment benefits is cruel and stupid – Part 2.

8. The unemployed cannot find jobs that are not there!.

There is no solid research to support the view that people deliberately en masse skive off from seeking work when they are receiving income support as a result of their unemployment or other related disadvantage.

The economists make up that story because they can draw neat graphs with lines intersecting at corners (no work and all income support). They make up that story because they want to deny that there can be systemic failures to create enough work to meet the desires of all those seeking it.

The myth fits their claims that individual choice drives economic outcomes – so that unemployment becomes a choice between work and leisure and leisure wins out. The provision of unemployment benefits just subsidises the leisure and makes it easier to choose that option.

According to this view there are spontaneous outbreaks of laziness (leisure preference) whenever we observe a major rise in mass unemployment and significant reductions in economic growth.

It is all supply-side. The demand side – spending etc has no part to play in creating employment and hence reducing unemployment.

Within the profession there are various versions of these theories but they all point to one conclusion – the provision of welfare benefits undermines the incentive to work.

Over my career I have had the opportunity and privilege to work with sociologists, psychologists, and other social scientists who have a much better grasp of the human condition that economists. The latter work with their ‘stylised’ conception of human motivation – the so-called representative agent.

This ‘person’ is a shallow being – selfish to the core, only concerned about their own welfare, individualistic, perfectly rational and calculating, and always able to predict (on average) the future.

In other words, not like humanity at all.

The other social scientists I have worked with understand the nuances of human existence in a social setting – the importance of collectives, interdependencies, self esteem, sharing, co-operation, frailty, etc

They generally can understand that an unemployed person cannot find jobs that are not there. They have a better intuitive grasp of recession and unemployment than most economists especially those economists who influence policy design.

Which brings me to an excellent study that has just been published in Work, Employment & Society, a publication of the British Sociological Association by two Norwegian academics, Kjetil Van der Wal and Knut Halvorsen.

If you have database access through a library you can get it via Sage On-Line. Here is the – LINK – to the abstract.

If you cannot access the paper, here is a summary of its findings.

[Reference: Van der Wal, K.A. and Halvorsen, K. (2015) ‘The bigger the worse? A comparative study of the welfare state and employment commitment’, Work, Employment & Society, February, 29: 99-118]

The paper was entitled – The bigger the worse? A comparative study of the welfare state and employment commitment – which, as you will appreciate, is relevant to the topic of today’s blog.

First, their major findings:

1. “welfare generosity is associated with higher non-financial and non-job specific motivation to work. This is in line with previous comparative articles on employment commitment”

2. “welfare generosity … [is] … not detrimental to employment commitment at an aggregate level or among the non-employed, for instance via lock-in effects or dependency cultures”.

3. “in all groups investigated that traditionally have a weaker labour market attachment, i.e. people in poor health, women, ethnic minorities, the non-employed and those with shorter education, employment commit- ment was higher if they lived in a more generous and activating welfare state.”

4. “the results also showed decreasing educational inequalities with higher spending on ALMP and higher welfare generosity, contrary to the expectations of￼the welfare scepticism approach and in particular the disincentive model. ”

5. “the analyses do not support the hypotheses that ethnic minorities may be particularly prone to be embedded in cultures of dependency”

6. “there was no uniform indication that non-employed people were increasingly different from the rest of the population at higher levels of social spending, as would also be expected if dependency cultures were more widespread in more generous welfare contexts”.

7. “Regarding women’s employment commitment, there was not much support for the welfare scepticism perspective: if anything women were even more committed to work than men at higher levels of welfare generosity … The article does not support the notion that women’s employment commitment would be weakened by the pressure towards employment in ‘bigger’ welfare states.”

The overall conclusion is presented as:

… there are few signs that groups with traditionally weaker bonds to the labour market are less motivated to work if they live in generous and activating welfare states. The notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support. On the contrary, employment commitment was much higher in all the studied groups in bigger welfare states and social differences were mostly smaller or did not vary across welfare states. Hence, this study’s findings support the welfare resources perspective over the welfare scepticism perspective.

These are incendiary research findings and obliterate the credibility of economists who claim to have deduced otherwise. I use the word deduced deliberately because much economic reason is of this variety:

1. Make some weird assumptions about human behaviour.

2. Prod the human with a policy change.

3. Deduce from the assumptions the changes in decisions that the policy change would elicit.

The Norwegian study is based on a sound research design, uses standard and acceptable investigation techniques, and its conclusions are determined by the evidence adduced rather than a priori reasoning conditioned by a ideology that wants to believe that welfare states undermine individuals rather than provides nurture to them.

One of the hallmarks of broad social science research relative to the way economists conceive of work (a bad that you do for money) is that it recognises, according to the authors of the study:

People do not only value work for its material rewards, the so-called ‘manifest function’. People are also ‘motivated by a concern to make use of their abilities’ … and the opportunities to achieve personal goals, self-respect, time structure, etc. associated with paid work … often referred to as the ‘latent functions’ of work. Furthermore, social rewards, such as appreciation, social network and social support, can be added to the list of potential non-monetary factors that may influence employment commitment. Finally, motivation to work may be spurred by social norms regulating employment and welfare behaviour. Social norms may influence employment commitment either as an internalized duty towards society (‘work ethic’), or as avoidance from social sanctions that follow from violating the work norm.

In other words, we are humans not the shallow, rational, maximising pavlovian automatum that economists begin with.

Why might employment commitment be enhanced by the generosity of the welfare state?

The authors suggest that:

1. “Employment rates are high in generous and activating welfare states, particularly among disadvantaged groups” and that the “pursuit of employment stimulating policies … may play a crucial part in this effect, as more people are exposed to employment or work-like settings and receive valuable training that may have a favourable long-term effect on labour market attachment”.

In other words, where there is hope there is motivation. If a society creates a culture of opportunity and ensures there are sufficient jobs available, people do not become scarred by unemployment and the berating that accompanies that state.

Training programs can then be conducted within paid-work environments to give them context and relevance rather than being seen as punishments for being in receipt of income support.

2. “welfare states that provide generous benefits to the non-employed, to the sick and disabled and to families and which actively invest in increasing skills and motivation among unemployed citizens may induce reciprocal relations between individuals and the state, to which individuals feel obliged.”

One of the buzz concepts that the neo-liberals use to hassle those on income support is mutual obligation. However, there is usually nothing mutual about the interaction between state and the individual involved.

The state provides a pitiful income support payment (below the poverty line in Australia), then forces the recipient to participate in a pernicious and onerous set of activities (interviews, dole diaries, minimum applications for jobs per week, withdrawal of income support, threats, coercion, oppression etc).

A true mutuality requires the state to live up to its obligations under the Declaration of Human Rights, which includes a responsibility for providing enough work for all those who desire it.

Then if the recipient refuses to take an acceptable employment opportunity the state is entitled to withdraw income support. That is reciprocation and mutual obligation.

3. “a high level of decommodification that weakens the link between work and income emphasizes the non- monetary properties of work, i.e. that employment commitment may be enhanced by the relative disconnectedness of work from the tyranny of necessity”.

Another researcher (Esser, 2005) suggested that:

… at the macro level, countries could be argued to gravitate towards either “work-oriented” or “money-oriented” value systems …

In other words, if there is a generous income support system and unemployment does not lead to almost immediate poverty and the state ensures there are sufficient jobs, people will be motivated by the non-monetary characteristics of work (outlined in part above).

[Reference: Esser, I. (2005) ‘Why work? Comparative Studies on Welfare Regimes and Individuals’ Work Orientations’, Doctoral Dissertation Series, 64, Stockholm: Swedish Institute for Social Research, Stockholm University].

I won’t go into the details of the research design the Norwegian academics employed. In summary, they used data from the European Social Survey, with 18 European nations formed the sample (inclusion was based on the availability of related data that could be used as “contextual variables”.

Various techniques were used to “adjust for non-response in the national data-sets” and “over- or under-representation of persons of certain types of addresses or household”.

The ages of the respondents varied between 25 and 59 years.

They constructed an index of employment commitment using the responses to the ESS question:

I would enjoy having a paid job even if I did not need the money.

Strongly agree or Agree were assigned a value of 1 and others 0. The “reliability of the measure is high”.

This categorical variable (1 or 0) allows sophisticated statistical analysis to be performed (in this case logistic multilevel random intercept models). All standard and well established in the research literature. I have a large project on at the moment (just starting) where we use these techniques.

The paper is motivated by the oft-repeated claim:

… that generous social benefits threaten the sustainability of the welfare state due to work norm erosion, disincentives to work and dependency cultures.

The conclusion again:

… employment commitment was much higher in all the studied groups in bigger welfare states and social differences were mostly smaller or did not vary across welfare states.

Conclusion

We will wait and see what the research community response to this study will be. In all studies, one can find limitations etc and the authors of this study acknowledge some problems.

But the limitations of this work do not, in my view, provide any basis for doubting the strength of their findings. After all, there is a mass of literature than in one way or another provides consistent evidence to support their findings.

The problem for the neo-liberals is that there is a paucity of highly questionable research literature that they point to.

In a pugilistic context, the referee would have called “No Contest” long ago. But then we are dealing with an ideological hegemony here and that is not easily broken.

Groupthink doesn’t respond to evidence or facts.

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.