Thursday, June 16, 2011

More on unemployment

Both All Things Considered (NPR) and Nightly Business Report (PBS) on Tuesday were selling this idea of structural unemployment, with the Business Report suggesting that we should get used to a "new normal" of seven percent unemployment. So the campaign continues.

I think there are two sources of this push to normalize excessive unemployment rates:

1) The business community likes the idea of government taking over more of the funding of worker training programs. It saves them money, straightforwardly. It also means they don't have to worry as much about turnover. They don't have to put in place expensive programs to promote worker retention and loyalty. (By the way, David Leonhardt's column in today's Times suggests that business opposed a payroll tax holiday because they want to get the money without having to hire more people.)

2) Politicians of both parties have reached the conclusion that there is no popular support for additional fiscal stimulus, so they are making the best of a bad situation. Convincing people that nothing can be done about unemployment removes any responsibility they might bear for not doing everything they can, particularly the thing that might be effective.

This is the opposite of leadership, of course. Rather, it is rank opportunism. A few lonely voices in the media are making the case, notably Paul Krugman, but it's a long wait for the politicians or business leaders to take it up. The language itself has been poisoned by all the talk of "failed stimulus," as if that had anything to do with the truth.

Tuesday, June 14, 2011

Current unemployment

The President (in his NBC interview today), his Jobs and Competitiveness Council (in yesterday's Wall Street Journal), and the media generally seem fixated on the idea that the current unemployment is structural rather than cyclical. The President cites automation, and gives ATMs as his example. The Council talks about a lack of workers with "advanced manufacturing skills", whatever they are. Others have cited offshoring as part of the problem.

Surely this is not the case. ATMs have been around for at least 20 years. (The President's use of this example recalls Pres. Bush Senior's amazement at supermarket scanners, a good 10 years after the rest of us were used to them.) Advanced manufacturing skills have always been needed by industry, and industry has provided the training when it was profitable to do so. People have been complaining about offshoring and competitiveness since the 1980s at least. None of this accounts for the huge increase in unemployment since 2007, or its stubborn refusal to improve.

This unemployment is cyclical. We have (by the Council's count) two million unemployed construction workers who are victims of the housing collapse. This won't change until all the foreclosed, underwater, and short-sale properties are cleared from the market. The financial industry doesn't want to put in the work necessary to restructure mortgages, stage foreclosed properties, and approve short sales. They need to change their attitude. State and local governments are laying off large numbers of teachers, police officers, firefighters, park rangers, and others, and that won't change without more federal stimulus money or a general recovery. Retail stores and restaurants are closing every day, and those workers are stuck too. Measured productivity increases in manufacturing, retailing, health care and elsewhere are often the result of overworking a limited number of employees. This is not a sustainable strategy, and needs to change. Training workers in job-specific skills is a business responsibility, not government.

The Council's recommendations have some merit, but they will not make a big difference in the basic numbers. Speeding up construction permits and tourist visas doesn't buy you much demand. Overall decline in unemployment requires additional fiscal stimulus, in the form of federal aid to local governments and spending on infrastructure and public works. Too bad our politicians don't get it.