Saturday, February 27, 2010

Employment and satisfaction with standard-of-living

In February 19th's Radio Derb podcast, John Derbyshire commented on a recent Gallup poll concerning the percentage of adults in a state expressing satisfaction at their individual standard-of-livings (explicitly, "all the things you can do and buy"):

Here's a new Gallup poll on how satisfied people are with their standard of living. Guess which state came out top? Yep, it's the Flickertail state. ... North Dakota also had the nation's lowest unemployment rate last December, 4.4 percent.
I'm always interested in state-by-state comparisons, as there is an enormous amount of data available at that level for which relationships are waiting to be discovered and causations to be suggested. So I was eager to find the actual poll and get to work. However, the regulars correlate tepidly with the Gallup measure; with IQ at .40, the percentage of the population having attained a bachelor's degree or higher at .11, average credit score at .45, average monetary standard-of-living (imperfectly) measured by both income and average cost-of-living at .12.

Turns out there's a simpler explanation for the results, and the Derb was intuitively all over it. The share of the SoL-satisfied population inversely correlates with a state's December '09 unemployment rate at a vigorous .78 (p = 0). The poll was based on interviews conducted throughout 2009, after the long-term consequences of the recession had become clear (ie, Phoenix and Las Vegas are not going to be booming again anytime soon). The higher the percentage of people out of work, the lower the statewide level of satisfaction with personal standard-of-livings. The range for the unemployment rate by state is 10.2 percentage points (Michigan on the high-end at 14.6%, North Dakota on the low-end at 4.4%); the range for SoL satisfaction is 13.3 percentage points (North Dakota on the high-end at 82.3%, Nevada on the low-end at 69.0%). It's almost as though we're looking at the same thing measured in a different way.


This is entirely sensible--those who have no steady source of income (government transfers excepted) are virtually guaranteed to be unsatisfied with their abilities to buy and do the things they want to buy and do. I just finished a book by Henry Hazlitt and am now reading Murray Rothbard's America's Great Depression. While I've long since become more inclined toward the Austrian school than any of the other major economic schools of thought, the Austrians' position on the presumed irrelevance of employment levels strikes me as lacking a needed subjectivity (the presence of which otherwise separates the Austrians from others)--unemployed people are unhappy people.

Economic self-sufficiency is an important ingredient in the recipe for enjoying a satisfactory existence. There is much to the argument that giving primacy to the goal of protecting employment leads to retarding effects on technological innovation, and I do not mean to suggest that full employment be perceived as society's ultimate objective.

But this does have obvious implications on immigration policy--expanding the supply of unskilled laborers simultaneously increases the native unemployment rate (bad) and decreases the incentives for innovation (also bad) by reducing the long-term cost savings of mechanized alternatives to menial labor.

6 comments:

robertwiblin said...

Immigrants don't increase unemployment: http://robertwiblin.wordpress.com/2009/10/18/immigrants-dont-steal-your-jobs-any-more-than-your-own-children-do/

Also discussed here: http://www.youtube.com/watch?v=bB1hRNMGdbQ

Their impact on wages is ambiguous and probably small.

What's more, the high level of labour saving technical innovation that is the perverse result of labour market distortions: http://www.cgdev.org/doc/books/Labor_Mobility/Chapter_One.pdf (read pages 39-41)

Audacious Epigone said...

Robert,

The specific concern here is unskilled, illegal immigration. The libertarian presumption that there are no meaningful differences in human populations is incorrect. Hispanic immigrants in the US earn less than natives do, and consume far more in public 'benefits' than they produce. They are not comparable to the children of natives.

The restriction of unskilled labor has been beneficial in creating the impetus for labor-saving mechanization in agriculture, manufacturing, and other sectors of the US economy.

silly girl said...

Robert,

Illegal immigrants sure don't take my job. I am a middle class housewife. However they do take jobs that unskilled people on welfare could be doing instead of sitting. Also, those low end jobs pay more than welfare and have the added benefit of reducing obesity because a laborer gets some exercise.

Nanonymous said...

@robertwiblin: said...

Immigrants don't increase unemployment

Bollocks. Of course they do! (And I don't care what those economists and their models say; there is exactly zero evidence that all of them has ever had any practical value). I am an immigrant (naturalized by now and legal from day one). I was part of the army of well-educated foreigners hired here in the USA because we were 1) available, 2) perfectly competitive, 3) willing to work for a relatively small compensation. If not for this legal immigration, there would be no other choice but to significantly increase pay, availability and prestige of scientific jobs. If this were to happen, smart kids in the USA would still go into science careers (like they did in 1950s) and the USA would not have lost its huge competitive age at the cutting edge science and technology.

Exactly the same thing has happened with IT-related jobs, so the whole process is not that much different from roofers and landscapers and whatever other unskilled job market.
Illegals are only different in that they don't pay taxes.

The way I see it, there is no way that any individual country can ever derive long-term benefits from open borders in any job market.

silly girl said...

Nano,

Legal educated immigrants unlike illegals are not a net burden because they are not likely to be criminals or welfare bums. They will have educable kids who will also contribute. Educated immigrants may indeed lower wages, but that is minor compared to the profound burden of criminals and welfare bums.

Ross said...

North Dakota has a State Bank, which operates like Benjamin Franklin intended. During our recent banking Crises, North Dakota was one of two States that had a budge surplus (Wyoming was other state). North Dakota also wins in the IQ department relative to other states. ND people do not have private banks siphoning off their wealth, which goes a long way toward satisfaction with standard of living. ND status is especially remarkable considering the cold climate.