Thursday, June 10, 2010

Game Theory and Census Workers

I'd like to make a short thought exercise which might be an example of economic problems which the US census might ultimately cause. And, no, I am not trying to say that the census will cause problems but there might be unintended consequences.

Consider you are either an individual who has been unemployed for a long period of time or a new graduate just trying to enter the job-market. You have had a very difficult time finding stable work, but have found an opportunity to work for several months. This job offers you the chance to work from twenty to forty hours per week, and the choice is entirely yours. Along with hundreds of thousands of others in your situation, you've decided to take this job opportunity.

Being a person who is in need of money who would like a full time job, instead of working about twenty hours a week you would likely decide to work towards the forty hour mark. You do your work eagerly and try to get as many hours as possible to maximize your income. Much like you, the other hundreds of thousands of people likely decide to follow a similar course and work as many hours as possible.

So, here we are. Individuals who are working for the census have every incentive to maximize their hours worked. Unfortunately, there is a limit to the amount of work these people can do since most census workers were hired to go door-to-door and count those who have not filled out their forms. There were only so many people who failed to return their documents, so there is a upper limit to the trips census workers must take. With employees attempting to work as many hours each week as they are allowed, they will quickly visit all of those who's forms are outstanding.

The unfortunate consequence to this exercise is that census workers will likely complete their door-to-door visits well ahead of schedule. As the documents are gathered in each area, the workers will be released from their employment earlier than they were expecting. The census has caused a major boost in hiring and has helped to lower the national unemployment rate. As the newly hired census workers finish their jobs, they will be released from their employment and will reverse any positive effects from their hiring. The unemployment rate will likely again spike as many hundreds of thousands of former census workers file new claims.

In the coming months, the unemployment rate will increase even though the economy is improving. Potentially, as these people again lose their jobs there can be severe negative effects on the national economy. Companies get scared when unemployment rises and consumers spend less when they lose their jobs. The ultimate loss of employment may cause these concerns to return and output to decrease. The census jobs, once lost, can potentially damage the fledgling economic recovery for these reasons.

1 comment:

  1. I think encouraging government workers to be a little less zealous, and a little more, shall I say, lazy, is a terrible precedent. Let's hope they don't take any game theory courses anytime soon.

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