Bad Incentives

The long-term unemployed have far more incentive to work than fat cat CEOs.

This image released by Paramount Pictures shows Leonardo DiCaprio as Jordan Belfort in "The Wolf of Wall Street."

Why work for the betterment of the company when there's always a big check just waiting for you?

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Congress is (again) considering whether to extend unemployment benefits for the long-term jobless, and (again) the battle is uphill for advocates of extending the program. Foes worry about adding to the deficit and debt, and some have opined that people won’t be incentivized to look for jobs if they are getting government checks.

This leads to a whole new set of questions and face-offs, with companies (the so-called job creators) hoping to convince out-of-work people that they should accept jobs at much lower pay and paltry benefits just to have a job, any job at all. Yes, it’s hard to find a job these days, especially a good-paying job. But it’s also understandable that job-seekers, especially those who had decent-paying jobs at firms which treated them decently, would not bow in gratitude to a company offering minimum wage – especially since the federal minimum wage stands still at an unlivable-on $7.25 an hour.

[Vote: Should Congress renew unemployment benefits?]

The mistake the jobless are making is not that they aren’t looking for jobs, or aren’t willing to be flexible. It’s that they chose the wrong kind of job to begin with. The only real financial security out there belongs to big-time corporate executives.

Remember the uproar, during the recession, when wage-and-hour people realized that Wall Street financiers – the same people who helped drive the economy into the ground by playing video games with other people’s pension funds – were getting huge salaries, bonuses and golden parachutes when they left their companies? And that senior corporate executives were getting big payouts, no matter how troubled the firm was or what the executive did or didn’t do to affect the downturn? Remember thinking that the financial services overhaul law, Dodd-Frank, would clamp down on such excesses? Not so much: as the Washington Post’s Jena McGregor reports this morning, the massive severance packages endure.

For instance, if Comcast’s acquisition of Time Warner Cable goes through (something that already has customers worried about already high cable costs), Time Warner’s chief executive will get $80 million. It’s a mind-boggling amount, and utterly without any kind of justification. Who needs that much money? Who can really be said to have earned that much money – especially when the “work” being performed for it is merely leaving the company? It’s true that Dodd-Frank allows shareholders to suggest that companies rein in such outrageous payouts, but as McGregor reports, it’s rarely done – and even then, the board can simply refuse.

[Read blogger Pat Garofalo on why we still need to worry about Wall Street CEO pay.]

If we want to talk about the incentive to work, where is the incentive for corporate executives? Unemployment checks don’t come close to covering someone’s basic expenses, and the minimum wage is so low that workers paid at that rate end up getting government benefits anyway, in the form of food stamps and Medicaid. Is there any incentive for high-level executives to work at all – let alone work in a manner that brings prosperity to the company and its employees – if there’s always a big, fat check waiting at the end?

Critics who worry about creating an incentive to work have a point. They’re just directing it at the wrong people.