Adventures in why you should never do contract work while getting unemployment insurance

DH was offered the chance to do some contract work by some former colleagues who needed his skill-set to help with a grant proposal.  He would have done it for free as a favor, but they had money for it so they wanted to pay.  It also turned out to be more work than they initially said it would be.

Before he agreed, I was like, what will this do to your employment insurance?  And he said that he’d looked it up and they would prorate it and then give it back if he ran out of weeks (that is, he could stay on unemployment insurance a little longer up to the amount that he was prorated).  He would have to declare the weeks he actually worked, not when he sent in the invoice or when he actually got paid.  (He has not yet been paid.)

Turns out that they don’t ask for all of the information that they need on the form to declare contract work.  We found this out later.  Here’s how we got to that part:

So three weeks after he turned his stub in, I noticed he hadn’t been paid the week before like he should have been.  So he went on the online site and it said there was a problem with his unemployment insurance and they had stopped it and he needed to call some number.

So he called the number and it said leave your number to call back.  So he did.  Then he waited a few days and the weekend and a few days and nobody called back.  So he called again and was on hold for over an hour (maybe an hour and a half?) then that office sent him to another office and he was on hold for a while, but under an hour.  Then he got someone and was giving them his information and the other person’s phone went out (are they doing this from home? was it a cellphone?)  So DH was like, surely they will call me back (HAHAHAHA), but of course they did not!

So the next day DH looked up what to do on reddit, and they gave him the number for the place he’d been transferred to rather than the first place, so he would only have to be on hold for part of the time.  Except, that second number was overburdened so instead of being on hold, it would give a message that it was overburdened and to try again later.  Reddit says this is normal and to just keep trying.  So he did.  And eventually he got through, after maybe half an hour of continuously redialing.  Then they got his information, then got the information for the place he contracted from *which they could have requested online when he declared income,* but didn’t.  They didn’t even tell him they’d cut off his benefits.  He just … didn’t get them.  They have his email address and could have sent him something, but they didn’t.  They could have warned him this would happen when he submitted the form.

This is a hurdle.  This is not an accident.  They could fix it but have chosen not to.  Probably because they want people who can do contract work to give up on trying to get their unemployment benefits back and just to stay employed.  What it does instead, of course, is it keeps people from taking contract work because it’s just too much effort to declare (something I suspected when my sister’s boyfriend offered DH some contract work), and it causes people to get paid under the table or to just not report earnings.  (DH would never do that, but he would certainly do something for free instead of for pay because of the known effort cost!)  Since contract work often becomes full-time work, this could be costing people jobs.

This process is irritating to us and I was like, we need to pay someone to hit redial!  But imagine for people who actually need that money because they don’t have a high earning spouse.  How frustrating and terrifying.  And how many hours does it take away from actually looking for a job or getting education or taking care of kids etc.  Not to mention the time of the people answering the phones for something that could have been collected online when it was initially declared.

Stupid administrative burden.

Have you ever dealt with your state’s unemployment insurance system?  Did it work smoothly or did you have any problems?

Ask the grumpies: How to subvert the Tragedy of the Commons

Leah asks:

Is there any way to subvert the tragedy of the commons, or are we doomed to that fate? I seem to remember learning some examples way back when I took environmental economics but they all escape me . . .

I just happen to teach a class on this!

The first way we learn about is with government setting property rights and facilitating costless Coasian bargaining.  In the canonical example, there’s a river and a factory and a fisherperson.  The factory pollutes the river which kills some fish.  If the factory owner owns the river, then the fisher can pay it to pollute less.  If the fisher owns the river, then the factory owner can pay them to allow some pollution.  There’s problems with this solution when there’s not costless bargaining, when there’s multiple fishers (that can cause a holdout problem) or multiple factory owners (and they don’t know which ones are causing the pollution), but that’s the “preferred” government intervention when it works because it leads to the least amount of deadweight loss.

Fancier versions of this solution include things like the government setting a specific number of pollution credits and allowing firms to bargain over them.  That’s the idea behind Cap and Trade.

When the Coasian solution is difficult to implement, generally because of bargaining problems or informational aysmmetry, the government can step in a bigger way.

First:  The government can mandate that firms not be allowed to pollute more than a certain amount or fish more than a certain amount or hunt more than a certain amount.  Associations can also take the role of government in order to say, prevent over-fishing, though it’s often harder for a non governmental association to enforce these kinds of mandates.  Mandates are most enforceable when there’s jailtime associated (not just a shell company going bankrupt), though that tends to be unpopular.

Second:  The government can tax things like pollution or things that cause pollution.  Think gasoline taxes or hunting fees.

Third:  The government can subsidize companies to not pollute or to not fish etc.  This option tends to be the most popular with industry.

All of these methods have situations in which they work better or worse than the other solutions.  With nuclear waste, you want a mandate because even a little bit of waste is bad.  With air pollution you might want a tax or subsidy or cap and trade system.  The government can make money with taxes or by selling property rights in a Coasian situation.  Companies tend to lobby for subsidies which makes them more politically feasible.

So the short answer is:  yes, government can subvert the tragedy of the commons.  Market failure is why there is an economic role for government and the tragedy of the commons is one of the causes of a main source of market failure (negative spillovers).  But we need political will for it to work.

Ask the grumpies: Privatizing nation’s air controllers?

Crone asks:

opinion on privatizing our nation’s air controllers. I oppose but was told the whole system should be moved to computer based GPS system and then Highways in the Sky for planes could be free form making flights faster and private industry can do this more rapidly than government. (I was in social situation so could not say I have never known a single computer system that did not ‘go down’ or ‘have ‘undocumented features ‘ so how would that work…) The topic of pipelines that ‘will not fail but ALL LEAK at some time’ had already come up.~~ I had been assured I was wrong on that point and ignorantly female. SO, back to air controllers: If this would be profitable for private companies to do why isn’t it done profitably or better by public government?

OMG, the WORST IDEA. OMG OMG OMG.

Well, it’s only the WORST IDEA if you think that airplane passengers are more important than prisoners. If you think prisoners are people too and should have rights, then privatizing prisons is actually the worst idea and this is only second worst. I guess there’s also privatizing foster care systems… if you think all people are equal then that might be slightly above air traffic control but still below prisons in potential harm done by privatization. (Foster care systems empirically aren’t as bad as prison systems, even though the potential is there to be as bad. This has to do with better state oversight.)

I had a section on privatizing public systems in one of my classes last semester and students brought in stuff– if I’d known it would come up as an ask the grumpies I’d have taken a picture of the whiteboard commonalities of when it works and doesn’t that we came up with. It can be ok, but it depends on a lot of stuff and it really shouldn’t be something where you know, people could die.

Ugh, so no, not you being ignorantly female. There’s a reason there’s a role for government for various systems.

We generally think that there is a potential role for government intervention when there is market failure in the competitive markets.  One form of market failure comes from monopolies.  Something like air-traffic control is what we call a “natural monopoly”– natural monopolies occur when it just doesn’t make sense for more than one company to be in one market.  A lot of utilities are in this kind of situation– where it doesn’t make sense for two companies to lay down pipes or what-have-you.  (You can also have government-private partnerships, where, for example, the government owns the rail-lines but allows different companies to pay to use them.)  Air traffic control is an example of a natural monopoly.  At an airport, it makes sense for only one company to do the air-traffic control.  Any more could lead to planes, for example, hitting each other.

The government in this situation could still allow private contractors to bid on the ability to be that one company doing all the air traffic controlling.  Unfortunately, air traffic control benefits a lot from experience and there are switching costs when an old company leaves and a new one takes its place.  Those switching costs could lead to not just inefficiency but also death.   Finally, oversight is really important with privatization.  Unlike the government, companies can just go out of business when they cut costs so much that people die, so they don’t have as much of an incentive to stay safe when it means cutting into profits.  Government can combat that by making it costly for them to cut corners before someone ends up dead, but that oversight comes at a cost.  Those costs could be large enough (and the possibility of bribes could be high enough) that it makes sense for the government just to do it itself.