Friday, January 31, 2014

Maybe the economy doesn't need full employment any more

Instead of arguing whether raising the minimum wage will destroy jobs—which it won’t*—let’s consider a new International Labor Organization report that tells us that, globally, the labor market is not likely to come close to recovering before 2018. That's not even counting the catchup needed to employ the workers added each year.

This brings me to the thought that has been haunting me since 2008: What if we don’t ever get everybody back to work again right here in the good old U.S. of A.? It seems more likely every year.

This is a prospect looming over workers everywhere, and particularly in the technologically advanced United States since the 1970s. It was then that premature predictions of the Luddites—the textile artisans who protested against newly developed labor-saving machinery in the 1810s—began to come true.

Since then a long slump in average wages, from which we have yet to recover, has occurred despite enormous productivity gains, sucking profits to the investing class in the now popularly known top 1% income bracket (I would include the top 20%, but that).

In 1978, President Carter signed the Humphrey–Hawkins Full Employment Act (formally the Full Employment and Balanced Growth Act), which set full employment as a national goal, defining that condition as 3% unemployment for adults and 4% for youths.

Those rates were never reached. For three months in 2000, national rates for the civilian labor force slipped below 4% and the national average for that last year of the Clinton Administration was 4%. But the complete goal, which coincided with the well-known view of economist William Beveridge, was never reached.

What if the modern economy doesn’t need full employment to function?

For five full years in United States, which has the world’s largest economy with the world’s largest functioning internal market, has been able to chug along with roughly 1 in 10 workers idled or involuntarily employed part-time. Growth has not been great, but profits (and the stock market) have soared.

The plutocracy (which comes from the Greek for “the wealthiest rule”) has been perfectly content to effectively toss into the garbage the 30% to 40% of the American human beings directly affected by this (assume one worker per roughly three people, including children and the aged).

Unemployment insurance and food stamps have been cut in a time of continuing need; welfare didn’t need to be cut because it’s been effectively frozen since 1996 (that’s 18 years ago).

Welcome to the United States of Brazil or Argentina ... or even Greece.

Next: an immodest proposal ...

* Every respectable piece of research since the 1994 “Ur” study by Card and Krueger has proven—contrary to the repeated argument of the restaurant industry’s fake “Employment Policies Institute” plastered in a full page ad in The New York Times this week—that increasing minimum wage has no negative effect on employment. Some have suggested there may be a positive, job-generating effect.

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