Gloomy and Unemployed
Despite averting what could have been Great Depression Redux, a huge rain cloud still looms over America. Her name is unemployment. Her raindrops are the middle class, and she’s collecting higher and higher concentrations of sulfur, given off by the chimneys of the millions of unemployed. Acid rain stains. Especially white buildings.
In case you haven’t read, the unemployment rate in America is over 10% and expected to stay at abnormally high levels for several more years. What’s worse is that the Obama administration isn’t doing anything to address this major domestic problem. There has been no concentrated effort at job creation. No incentives for employers to hire or hold onto employees. No support for the beleaguered state and local governments. No remedy to the suffering state-education systems. And no public-service employment initiatives. There’s an odd attitude in Washington that the economic recovery Wall Street recovery will soon trickle down to the workers on Main Street. However, as Paul Krugman points out, trickle-down economics is the wrong idea, especially following financial crisis. Not to mention it’s an odd attitude for Democrats to advocate, given their traditionally bottom-up policy advocacy.
Historically, financial crises have typically been followed not just by severe recessions but by anemic recoveries; it’s usually years before unemployment declines to anything like normal levels. And all indications are that the aftermath of the latest financial crisis is following the usual script. The Federal Reserve, for example, expects unemployment, currently 10.2 percent, to stay above 8 percent — a number that would have been considered disastrous not long ago — until sometime in 2012.
High levels of unemployment for sustained periods of time tend to have severely damaging effects, especially in America. Other than a loss of income, those who are unemployed lose valuable skills. They essentially get hit twice. They lose money and they lose their marketable skills. So, once employers start hiring again, those who were unemployed are considered less-valuable, poor-risk workers. The other demographic that gets hit hard is those just entering the workforce – namely, recent college graduates. Students who enter a suffering labor market start their lives at a huge disadvantage. Studies have shown that generations who enter poor job markets make considerably less money for their entire lives. Negligence towards the weak labor market isn’t just short-sighted, it’s bad governance. The sort that gets you evicted from power.
Despite the weak and worrisome status of the current labor market, and the shortcomings of the stimulus bill (namely saving jobs), there are several things Obama could conceivably do. Since the likelihood for another stimulus package is pretty much nil, there won’t be anything grandiose coming across Obama’s desk. However, a jobs creation/sustainability program is a plausible policy prospect. There should be some sort of jobs creation program, either funded by or directly with the federal government. Also, there has to be more incentives provided to businesses to keep/hire employees (much like Germany did during their recession). Lastly, there must be some sort of aid given to the struggling state and local governments. Although a New Deal era WPA program isn’t likely, something similar but smaller is feasible. If there’s to be any serious attention given to the serious job market malaise, it’s more than do-able, it’s necessary. Some might say a contractual obligation.
The failure of Obama to properly address this wound in America’s side could land him in a serious political-economic trap. I’m not the most loyal democrat out there (notice the small “d”), and I typically loathe judgments derived from polls, but we do live in a democracy and peoples’ opinions and feelings most definitely matter. If the following comments taken from Krugman’s most recent article, although not an accurate sample size, are anywhere close to a reflection of the average American’s opinion of the current administration, then 2012 could be quite worrisome time for the historical president.
Paul, Obama doesn’t care about jobs for working people. Obama cares about the happiness of too-big-too-fail bankers. His actions have made that perfectly clear.
The Democrats know they can count on the hypocritical pampered rich for money and the largely uneducated poor ,who depend on government programs ,for votes. That is why President Obama and this overwhelmingly Democrat Congress have done nothing for the middle class or the working class. Don’t expect that to change, with or without a showy , meaningless jobs ” summit “.
President Obama has a jobs program, Paul. He is announcing it Tuesday night. It is called the Obama I’m-sending-your-sons-and-daughters-to-Afghanistan-to-do-a-job-for-my-ego. Evidently, he plans to put 30,000 or more to work right away.
Do you honestly believe that we will trust this President and this Congress with another round of taxpayer money for another so-called stimulus? President Obama guaranteed that if he could have the first trillion dollars that unemployment would not exceed eight percent.
What happened to that first trillion dollars? Where are the large shovel-ready public works projects with their tens of thousans of workers? Where did that unfathomable amount of money go?
No more taxpayer money for stimulus or anything else until the last trillion has been accounted for. Not one dime.
Unemployed and insecure workers tend to be rather emotional and willing to cross the political isle. Despite best intentions, an unemployment rate over 8% won’t be stomached for long. Enter: a sense of urgency for domestic “Nation Building.” Time to stop worrying about a failed state in the middle of the the desert Asia. A government’s duty is to its people first. Grandiose visions of eradicating terrorism and transforming backassward nations into model states need to be set to the back burner, or perhaps the trash can.
“There has been no concentrated effort at job creation. No incentives for employers to hire or hold onto employees. No support for the beleaguered state and local governments. No remedy to the suffering state-education systems. And no public-service employment initiatives.
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There should be some sort of jobs creation program, either funded by or directly with the federal government. Also, there has to be more incentives provided to businesses to keep/hire employees (much like Germany did during their recession). Lastly, there must be some sort of aid given to the struggling state and local governments.”
Why is the focus on having the government or existing businesses provide job creation/retention and not on individual Americans?
A possible cure for unemployment and underemployment is to start your own business. If you want to be employed, hire yourself.
Perhaps the federal/state government(s) could provide some additional tax incentives for those self-starters, which would likely involve limited government intervention and no great long-term burdens. But I’m not sure that growing government payrolls or increasing the tax burden on those currently employed is a true solution, long-term or otherwise, to the current (un)employment problem.
Although individual responsibility and rugged individualism are virtuous ideas, they aren’t viable solutions to an anemic economic recovery, especially one that is marked by an unemployment rate of over 10%. The reasons are manifold.
For starters, starting your own business isn’t an economically viable option for, I would venture to say, the vast majority of Americans. Start-up costs and all the barriers to achieving economies of scale make starting a personal business an economic non-starter for most.
Also, for most people, they have very limited or specialized skills. For those that have limited skills, what type of business would you propose for them to start up? A restaurant? A bar? An ebay re-sell shop? The average service-sector worker doesn’t have the skills and managing skills necessary to start his or her own business.
As for the specialized skills worker, much the same applies. What type of business would they start? Let’s assume that the unemployed person is an electrical engineer. Should he start up his own home improvement business? How is he going to compete with home improvement giants like Home Depot and Lowes? I think it’s obvious, he can’t. Aside from problems of competition and other barriers of entry, specialized skills workers experience the same problems that most others face: they don’t have the proper skill set to manage a business.
I think the impracticality of self-employment as an ameliorating step for high levels of unemployment is pretty obvious to most. The idea that the solution to the current employment crisis is through promoting self-employment and tax breaks sounds like a Sarah Palin talking point. It’s typical paranoia of big(ger) government and the conventional hands-off approach to employment issues. It sounds nice and easy, but is simply impractical. It’s more a conservative’s chimera than a practical policy solution.
What is overlooked in opposing direct government intervention is that doing too little (or nothing at all) does more harm than good, in both the short-term and long-term. The short-run harms are obvious, but perhaps the long-term harms need some pointing out.
As I alluded to in my article, high unemployment hurts peoples’ current skill sets and their future skills. Long periods of unemployment results in a less-skilled labor pool of older workers and a higher percentage of unskilled and inexperienced new-workers. Both are types perceived by companies as high-risk employees. Add this to the huge disadvantage that recent graduates face when entering weak labor markets, and you’ve got 2-3 generations of low(er) quality workers.
I haven’t even touched upon the worsening of general education at the state and local levels due to strained state budgets. Suffice it to say that when education budgets are cut and curtailed, people aren’t going to be more educated. So, in sum, what you have is a less educated, less skilled, and lower paid labor force.
The idea that self-employment can correct the current state of the job market is borderline absurd. There isn’t any other entity with the power and resources to help correct high levels of unemployment. The failure of the government to act, is a failure of it to hold up its end of the social contract. Providing stability, security, and a decent standard of living is the government’s job. A withered job market and high levels of unemployment do anything but provide stability, security, and a decent standard of living.
“Start-up costs and all the barriers to achieving economies of scale make starting a personal business an economic non-starter for most.”
And yet, thousands of people create their own business every year. And some of them even succeed.
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“For those that have limited skills, what type of business would you propose for them to start up?”
Whatever type of business that they feel comfortable creating.
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“Let’s assume that the unemployed person is an electrical engineer. Should he start up his own home improvement business?”
Actually, it seems more realistic to me for an electrical engineer to become a licensed electrician, but, in any event, it really is up to the electrical engineer to do what they feel most comfortable doing.
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“Aside from problems of competition and other barriers of entry, specialized skills workers experience the same problems that most others face: they don’t have the proper skill set to manage a business.”
Three points: 1) You imply that competition is a bad thing; 2) barriers to entry are not as great as you are seemingly making them out to be (unless you are trying to build a refinery, a nuclear power plant, a hospital, or the like); and 3) there are plenty of schools (and some free resources, as well) that offer traning in business management.
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“The idea that the solution to the current employment crisis is through promoting self-employment and tax breaks sounds like a Sarah Palin talking point.”
Is this supposed to be an insult? A compliment? I really can’t tell.
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“It’s more a conservative’s chimera than a practical policy solution.”
The idea that people should be responsible for themselves and their own economic well-being is a “chimera”?
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“What is overlooked in opposing direct government intervention is that doing too little (or nothing at all) does more harm than good, in both the short-term and long-term.”
Too much government intervention can do a great deal of harm as well, whether from creating an electorate that becomes dependent upon funds that they themselves do not generate or remit, to bloated deficits and unstainable debts resulting in hyperinflation and worthless currency.
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“Both are types perceived by companies as high-risk employees.”
It all evens out in the end: If everyone has a low skill set, then everyone is equal, no?
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“Suffice it to say that when education budgets are cut and curtailed, people aren’t going to be more educated.”
The truly bright will always find/be given a scholarship. And there are plenty of student loans out there, at least a few of which are completely unsecured and offer very low interest rates. If you want to “be more educated,” finding funding for your goal is not a problem.
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“So, in sum, what you have is a less educated, less skilled, and lower paid labor force.”
Sure, if you are lazy and don’t want to find scholarship/loan money, or if you don’t want to take some initative and learn a new skill set, of if you don’t want to expand your horizons and go into a higher paying career field, or if you don’t want to specialize and become the “go-to” person in some field and, thereby, name your own price, or so on.
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“The idea that self-employment can correct the current state of the job market is borderline absurd.”
I’m not sure that I said that self-employment can “correct” the current (un)employment problem. It could help to reduce it, though.
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“The failure of the government to act, is a failure of it to hold up its end of the social contract. Providing stability, security, and a decent standard of living is the government’s job. A withered job market and high levels of unemployment do anything but provide stability, security, and a decent standard of living.”
At what point is it the people’s job to take responsibility for themselves and their own future? Is your social contract a completely unilateral document?
Lest I be misunderstood, let me clarify a few things. For one, I don’t disagree with your “personal responsibility” approach. Encouraging individuals to take responsibility for themselves and their own futures is a laudable virtue and a hallmark of the free-market system. Personal innovation, self-reliance, and an entrepreneurial attitude make great motivational speeches, but don’t provide a viable solution to anemic economic recoveries following severe economic crisis. In fact, I think rugged individualism is a great idea, given normal economic circumstances or even a slight economic downturn. However, we’re facing the residual effects of a major economic failure.
As for your caricature of the role government plays in civilized society, let me say a few things. Again, I don’t disagree that taking responsibility for oneself is one of the most important principles upon which a healthy free-market system is built. However, you seem to be adhering to the principle of personal responsibility almost dogmatically. Your absolutely correct that individuals must take responsibility for their own lives. But… and this is a big but (I’m talking a Big Mamma size ass), they must be given the opportunity to be responsible. That includes the ability to find work and make a respectable income, not simply the option of starting their own business.
The alternative to an exclusive reliance on individual responsibility is not, as you seem to assume, the reputed “nanny state,” where individuals are entirely dependent on the parent government. There is a significant difference between “babying” an individual’s choices and creating more opportunity for choice and for “substantive decisions” for individuals who can then act responsibly on that basis. This effort certainly doesn’t rest squarely on the government’s shoulders, but the Fed certainly carries a heavy load.
The only abrogation of responsibility apparent is the lack of government response. There are a whole host of available options to ameliorate the high levels of unemployment. None of which necessarily result in taking personal responsibility out of the equation. The Center for American Progress has some substantive policy suggestions that can help stave off high levels of unemployment through effective and productive policy solutions. Some of these recommendations include expanded unemployment benefits, creating community jobs such as those undertaken by nonprofit groups, creating jobs in needed infrastructure investment, and creating a “green bank” that would finance new green-energy projects and home and building green retrofits to conserve energy and create more jobs. These practical policy suggestions all aim at making America stronger and economically healthier through government aid and programs. It’s hard to imagine such solutions as taking the burden of responsibility away from people.
There is also an interesting debate going at The New York Times “Room for Debate” forum about public sector jobs provided by the government. Although opinions differ, there seems to be a consensus that the Federal government ought to take a more significant role in creating and sustaining jobs. Not, as you suggest, by a side-line cheerleader rooting those struggling to pull themselves up by their bootstraps and try harder.
Your proposed solution sounds easy and, if viable, would be an ideal solution. What would be better than the government having to do next to nothing to ameliorate the current unemployment problem? However, I’ve yet to come across any serious analysis of the current employment woes that suggests the problem is as simple as some tax cuts and encouraging self-employment. Your suggestion is a gross underestimation of the huge unemployment problems facing America. Your critique of the government-citizen relationship in a civil society also completely misrepresents what it means to be a free, responsible, and productive citizen.
The social contract I’ve alluded to is in no way a completely unilateral document. In fact, it’s quite a dynamic relationship that involves commitments and obligations from both parties.
In my view, your response is better than your original post.
And can I just throw in for a moment that it behooves any government to keep employment healthy because the situation that’s existed in the Middle East and mid-Asia for the last couple of decades–large swaths of young, unemployed, undereducated men without prospects–has contributed greatly to the social and political instability of that region, and lest you think it can’t happen here, think again.
Good points, I think I will definitely subscribe! I’ll go and read some more! What do you see the future of this being?