From Paul Krugman's column today:
Mr. Ghayad then did an experiment, sending out résumés describing the qualifications and employment history of 4,800 fictitious workers. Who got called back? The answer was that workers who reported having been unemployed for six months or more got very few callbacks, even when all their other qualifications were better than those of workers who did attract employer interest.
So we are indeed creating a permanent class of jobless Americans.
And let's be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we've been doing exactly what basic macroeconomics says you shouldn't do — cutting government spending in the face of a depressed economy.
I'm no expert on the scientific method, but it seems to me that the experiment Professor Krugman describes doesn't prove what he suggests it does. To do that you'd have to run the same experiment involving the 4,800 fictitious workers in either two different countries — one with high government spending and one with lower spending — or at two different times, one with high government spending and one with lower government spending — and see if the results differed. Maybe Professor Krugman is correct, and if the government spent more money, employers faced with a choice between a worker who had been unemployed long-term and one who hadn't been would instead choose the one who had been unemployed long-term. But I'm skeptical of that.
Maybe what Professor Krugman means instead is that if the government spent more money, the economy would be so hot that there wouldn't be any long-term unemployed people. But if that is the case, how is the experiment even relevant?
The description of the experiment to which the Krugman column links includes the sentence, "Extended unemployment benefits appear to be contributing to the long-term unemployment challenge, and the rolling back of extended unemployment benefits should increase incentives to work." But the Krugman column ignores that aspect of the issue. It blames joblessness on "cutting government spending," rather than on the perverse incentives of paying people not to work via long-term unemployment benefits.
Finally, I'd like to know (the Krugman column doesn't say) what committee on human subject research approved mailing out 4,800 fictitious resumes? Were the hiring managers to which the phony resumes were directed compensated for the time they spent reviewing them? If I were a shareholder in a company, a taxpayer in a government, or a donor to a non-profit, I'm not sure I would want my employee's time wasted reviewing job candidates that turn out to be the product of the imagination of some experimenting economist. Maybe the whole thing was carefully approved and the participants were volunteers who signed informed consents, but it would be nice to know more about this. The Times article doesn't help.