In the April 19, 2010 Wall St. Journal apprears the letter below.
This fellow confesses regurgitating orthodox myths to his students for years.
Sad and ugly in multiple dimensions.
Gene Coyle
Your article quotes Lawrence Summers's explanation that unemployment insurance
and other social insurance programs raise the reservation wage. Were it not for
these programs, desperate workers would lower their reservation wage, and this
would lead them to find employment faster. As a professor of economics, I
taught this to my students for years. But for the past year, having found
myself unemployed, I have learned that the logic of that statement is not
always correct.
When I offered my services at a lower wage to prospective employers, I was told
time and again that they were not interested. They said if they paid me less
than I was worth, I would be unhappy, and therefore I would be unproductive.
Moreover, they were concerned that I would leave their employ as soon as a
better opportunity presented itself. This shows that employers do not
necessarily react to lowered reservation wages. The implication that
unemployment is the fault of the unemployed for not having lowered their
reservation wage is wrong.
Joelle Saad-Lessler
Brooklyn, N.Y.
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