Why the persistent high levels of unemployment?

World map showing countries by nominal GDP per...
Image via Wikipedia

by Duane Campbell

In a recession businesses downsize and create unemployment.  Usually in a recovery, businesses invest, hire more workers, and contribute to the recovery. This time we are stuck with high levels of unemployment.

There has been a huge increase in the number of unemployed, and they are remaining unemployed for a longer period of time.

Some 95,000 jobs were lost in September, fueled by a loss of government employment, which declined by 159,000 jobs, and minimal hiring in the private sector, which added 64,000 jobs.  September unemployment rate remained unchanged from August at 9.6 percent. Public-sector job losses include 83,000 lost at the state and local level, of which 58,000 were in education.

The 64,000 new jobs is about half of what is required to absorb new labor force entrants. To lower the unemployment rate to 6 % by 2013, the economy needs to add 350,000 jobs a month.

A No Growth Economy

The number of workers who are underemployed, which includes those who are too discouraged to look for work or are working part-time out of economic necessity, worsened to 17.1 % from 16.7 % in August. More than 26 million U.S. workers are without jobs or full-time work.

One unemployed worker who spent 35 years in the construction trades has this to say:

I’m 52 years old, and I’ve been kicked to the curb with no job, no insurance and no unemployment left and I could loose my home.  And yet I still believe in this country’s democracy. When will this end?  Hopefully Congress can get off their butts and do something for the working  people of the United States.

Unemployment increases dramatically depending upon your level of education.  Persons with a college degree have about a 4.6 % level of unemployment.  In September the unemployment rate for Black workers was 16.1 %. For whites it was 8.7%, for Latinos it was 12.4 %.  For each group those under 25 years of age would experience double these numbers, that is 32 % for blacks, 17.4 %, for whites, and 25% for Latinos. These racial disparities are in part a consequence lower levels of education and in some cases a higher level of incarceration.

There was a federal government stimulus of about 787 billion dollars that was to increase employment, but more than 40% of that money was directed at tax cuts and another large amount went to state and local governments.  Without this stimulus investment an additional 1.5 million jobs would have been lost.  The collapsing economy produced  massive layoffs in state and local governments — firefighters, police,  etc.  adding to the economic problems of the nation, not resolving them.

So, what can be done?

The U.S. has an aging, or mature capitalist economy.  As Steve Max well explains in “Riding Capitalism to the Bottom: Why Republicans Gain as the Economy Falters,” the normal tendency in such economies is  for a falling rate of profit and slow economic growth – or stagnation.  The dynamic growth that once characterized the U.S. economy is now taking place in countries such as China, Brazil, and India where industrial capitalism is still in its growth pattern.  In the U.S. we have moved more toward finance capitalism which produces great profits for some, and fewer jobs.  (See my Talking Union post, “The best way to rob a bank is to own one.”)   To create significant jobs we  need a federal jobs program on a significant scale.  The 2009/2010 stimulus was too small to truly improve the economy, in significant part because the Republicans blocked efforts to increase the stimulus.  However, now we remain in a jobless “recovery” and it is past time to grow jobs.

In August the administration passed a $26 billion stimulus to hire teachers, fire fighters, and other public employees.  Some 15,000 teacher jobs were saved nation wide and the schools were improved.  We need many more of these targeted job growth programs.  We should use public money  to invest in important programs.

Spending additional money to build roads, schools, etc. generates new jobs for millions.  For example, road building requires construction workers, and  grading and paving equipment, gasoline or diesel to run the machines, raw cement, gravel, and asphalt, surveyors to map the site, engineers and site managers, and even accountants to keep track of costs.

One part of a needed jobs plan is public investment. This includes building roads,  bridges, hospitals,  and refurbishing bridges, tunnels, and public facilities.  We also need to expand the number of teachers, nurses, medical workers, elder and child care workers.  These programs should put new people to work or in training programs.

Creating new jobs in construction or in public sector such as teaching, fire and police creates jobs for the presently unemployed.   This was the basic insight of Keynesian economics.  Creating jobs, even with deficit financing, causes the economy to grow.  These new workers in turn earn incomes and spend their  incomes, creating additional jobs in service industries, sales, and paying additional taxes.

These new employees will not receive unemployment benefits. Instead they will gain income and pay taxes.  Economic growth comes from people going to work. We are wasting time and resources.  Each month that we fail to create jobs, the economy gets worse for us all.  The Republicans should stop blocking job growth.

The Economic Policy Institute calls for 4.6 million jobs in the next year at a cost of $400 billion.  That is a good start.  The impact of new hiring and retention in the public sector (teachers, nurses, firemen, cops, etc.) will in turn stimulate employment in the private sector.

Targeted investment in jobs could produce as many as 18 million new jobs in the next three years.  Public investment should create at least 400,000 jobs per month to provide the kind of stimulus needed to get this economy growing .

Remember what caused this jobs crisis – it wasn’t the government. First came the housing bubble and the selling of near fraudulent home mortgages by corporations such as Country Wide.  To make a profit major banks and corporations looted the economy creating an international meltdown.  Now, they have been rewarded with bail out money.  The crisis was not caused by students, teachers, public employees  nor recipients of social security.   Now we have cuts in parks,  in universities, in nurses, libraries.  School children did not create this crisis. 
The major bankers, finance capitalists in the U.S. robbed the bank last year  – and the federal treasury.  They took hundreds of billions of dollars  – Goldman Sachs alone took $10 Billion.  For example,  Ken Lewis of Bank of America received an $ 81 million dollar pension.  They have not even been punished.  One thing we should do is arrest the top 100 executives and CEO’s of these companies, give them a fair trial, and throw them in jail.  Until we arrest some people there will be no real changes. 
Our financial system as a whole crashed not because of one bank. Goldman Sachs (with Meg Whitman on the Board) certainly played a major role as did JP Morgan Chase, Morgan Stanley, and CitiCorp, along with the many corporate finance institutions  like Bear Sterns, Merrill Lynch, Lehman Brothers, WaMu.  We had a systemic breakdown because nearly all of our policy makers, academics, politicians, and pundits promoted  a failed, self serving  ideology of self-correcting financial markets. Finance  profiteers walked off with big bucks while contributing to the crash of the system.

California Senate candidate Carly Fiorina opposes the past stimulus spending and future spending, except for tax cuts for corporations, as do most of the Republicans running for office.

The next step is organizing for jobs.  More to come on that.

Enhanced by Zemanta

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: