If Only We Knew How to Decrease Unemployment…

6 Aug

Every month the jobs numbers come out, and every month we have the same conversation: Why is unemployment so high? How can we get it down?

While the entire political establishment continues to suck its thumb, this post from the Atlantic (h/t Bryce Covert) tells you all you need to know.

  • We have the lowest number of public-sector employees per population since 1968.
  • If we merely restored government employment to its 2007 levels, there’d be 1.7 million more jobs.

Remember last summer when the Atlantic asked a group of worthies, including Matt Yglesias, “What is the single best thing Washington can do to jumpstart job creation?”

I think we know the answer: First, stop firing people. Second, start hiring people.

30 Responses to “If Only We Knew How to Decrease Unemployment…”

  1. Vicky August 6, 2012 at 2:50 pm #

    Here, here. (But, um…hemorRHaging.) Feel free to delete this comment after correcting. :)

    • Corey Robin August 6, 2012 at 2:53 pm #

      Hah! I actually deleted that entire graf — it just didn’t work — before I saw your correction, which I wouldn’t have caught. So thanks!

  2. Dan Lynch August 6, 2012 at 3:05 pm #

    MMT economist recommend an Employer of Last Resort, paying minimum wage & full bennies to anyone who needs a job. Then unemployment would be zero.

    Meanwhile, the Humphrey-Hawkins Act authorizes the government to hire people at minimum wage, temporarily, to maintain unemployment at no more than 3%. That’s something Obama could do today, since the law is already on the books.

    Obama could pay for it by minting trillion dollar platinum coins, authorized by another law that is already on the books.

    Since we know how to fix unemployment and the laws to do it are already on the books, one has to wonder if the bad economy has been deliberately engineered in order to drive down wages and increase corporate profits. You know, like Naomi Klein talks about in her book “Shock Doctrine.”

  3. Brahmski August 6, 2012 at 3:40 pm #

    Your best post ever. For once I know what you are talking about.

  4. Islam Hussein August 6, 2012 at 5:51 pm #

    I was just at a Best Buy, there was only one person checking everyone out. We had a very long line. Customers are frustrated and the lady at the cashier getting impatient.

    Now I wonder, would Best Buy be happy to have customers unhappy, leaving the store swearing never to back there again? Possibly telling their friends of the horrible experience they have? Doesn’t make sense to me. BB wants to retain customers and have them leave the store feeling like they want to come back for more, and, yes, to make a profit and use that to hire more people.

    But why wouldn’t they? Just because they want to act like dicks?

    Meanwhile, outside in the Mountain West city that I live in, there are scores of people begging for work. They’d take a job even if it is sub-minimum wage. BB would love to give them the job (not because they’re benevolent, but because they’ll make more customers happy and have their business grow). But as things stand, hiring them is too expensive. BB would get into trouble if they violate the law. And the scores of people who would be more than happy with $5 or $6 or $7 dollars an hour will spend the day making $0.

    So if you want to reduce unemployment, lower the minimum wage. But, hey, NOT IN AMERICA! What kind of country would we be without minimum wage? Either minimum wage, or zero wage!

    Remove or lower MW, you will get more people to be able to work, business to flourish (and yes make profits) and customers happy.

    That’s only one solution that immediately came to mind while reading your post while standing in line at BB.

    My 2 cents. (good thing there is no minimum set wage on opinions, otherwise I wouldn’t have been able to post my 2 cents)

    • Dan Lynch August 6, 2012 at 5:57 pm #

      Islam, your suggestion to lower the minimum wage is the classic Neoliberal/Austrian solution.

      What actually happens when you lower wages is that people have less money to spend, so they buy less stuff. That reduces aggregate demand, so manufacturers have to lay off. It’s a downward spiral.

      Meanwhile, Australia’s minimum wage is $16.84 USD, and their sky is not falling. Though the Aussies have some other looming economic problems related to their Neoliberal policies — a housing bubble, an export slump, and an austerity budget.

      • Islam Hussein August 6, 2012 at 6:13 pm #

        “What actually happens when you lower wages is that people have less money to spend, so they buy less stuff. That reduces aggregate demand, so manufacturers have to lay off. It’s a downward spiral.”

        Dan- I see your argument. But it still makes more sense to me that $4 is more than $0. While MW helps those already with jobs make more money, those without ones have less chances of getting any job at all.

        Secondly, when unemployment drops (with loosening wage standards) and businesses prosper, as long as we still have a relatively liberal (i.e., free market economy) competition drives prices down. Along with that, inflation drops too. So under that regime, it is not like prices of goods and services will remain the same. They too will change, very likely dropping. Except that you will have more people earning more than $0. Even if little, better than nothing.

        Honestly, I think the MW argument is inherently a product of a national pride notion. I.e., nationalism. Or it helps some portion of society (those with work) sacrificing a much more vulnerable portion of society (the unemployed, the unskilled and poor).That to me is all bad and truly selfish.

        As for Australia, I will not claim that I know much about the inner workings of their economy. Maybe $16.84 is already lower than the average actual minimum wage. Also, I know that their economy and society is inherently different then the US’s. Look at the population size if nothing else. Very difficult to compare apples and oranges.

    • Islam Hussein August 6, 2012 at 6:01 pm #

      And for those who say the corporations are making bug bucks in profits, what will they do with the big bucks? If they store it under the mattress (which they don’t) that helps reduce $$ in circulation, resulting in increasing its value and lowering inflation (which best helps the least fortunate of us). If they re-invest it, well they are re-investing it in something profitable (to the best of their ability to assess risk, etc). Profitable things are usually productive in one way or the other, and productivity requires labor. Hence less unemployment. If they send the money abroad, we have to as why they do so? Shouldn’t we question our laws on the books and may be fix them so that wealth is retained in this country? But no, rich people are evil (which I am not denying they are) and we should screw with them. Problem is, we’re screwing with ourselves and our poorest along the way.

      • Chatham August 7, 2012 at 3:49 pm #

        Islam –

        Many are storing it under their mattresses, or the equivalent – doing things like in low yield treasury bonds (which is why the rates are so low now).

        Yes, deflation is good for your savings – but I don’t know if you looked around, a lot of American’s are in debt. And just as deflation increases the amount your savings are worth, it also increases the amount your debt is, meaning people are going to get deeper and deeper in debt. Deflation’s also problematic because things like wages tend to be relatively sticky (it takes a while for them to adjust downward) and it discourages people from investing in higher yield/higher risk enterprises (they end up stuffing the cash “under the mattress”, like what we’ve been seeing).

        If you want to see a country that has experienced the miracles of deflation, look at Japan.

    • jonnybutter August 6, 2012 at 7:13 pm #

      BB wants to retain customers and have them leave the store feeling like they want to come back for more, and, yes, to make a profit and use that to hire more people.

      But why wouldn’t they? Just because they want to act like dicks?

      No. It’s because BB is going to go out of business, and it won’t be all that long before they do. Lots of other retailers too.

      • Islam Hussein August 6, 2012 at 8:13 pm #

        And the cause (and solution) to that would be?

      • jonnybutter August 6, 2012 at 8:49 pm #

        The cause is the looming end of that kind of retail due to the internet. I don’t know that there is a ‘solution’.

      • Dan Lynch August 6, 2012 at 9:01 pm #

        The cause of BB’s problems is a lack of aggregate demand.

        Many internet companies have seen slower sales, too, so it’s not just an internet vs. brick&mortar thing.

        The solution is more aggregate demand, which can only come from government spending at this time. Either government needs to buy a bunch of stuff, or else government needs to give the unemployed jobs so they can buy a bunch of stuff.

      • jonnybutter August 6, 2012 at 9:48 pm #

        @DanLynch

        The problem with the overall economy is indeed lack of aggregate demand, but I’m pretty sure that certain kinds of brick/mortar retailers are never coming back even if the economy does.

    • Donna Gratehouse (@DonnaDiva) August 11, 2012 at 11:10 pm #

      Why don’t you try to survive for a month on $5 an hour and tell us how that goes.

  5. Arker August 6, 2012 at 8:55 pm #

    I have been following your blog for awhile, and usually like your entries (even, perhaps particularly, the ones I dont agree with – they can be thought provoking.) But this one is definitely not up to your standards. Your simplistic “solution” would result only in (further accellerating) the destruction of the economy and national bankruptcy – surely not the outcome you are shooting for.

    I have come to expect better of you than that. Even when you are obviously wrong you usually make a good argument.

    • Dan Lynch August 6, 2012 at 9:04 pm #

      Arker, Corey’s “simplistic” solution agrees with most Keynesian and post-Keynesian economists.

      As for “national bankruptcy,” a monetarily sovereign nation can never go bankrupt.

      • Arker August 6, 2012 at 10:18 pm #

        @Dan Lynch – You are correct, that it is Keynesianism in a nutshell. It never made sense to begin with but was a great example of politics corrupting academia from the very start, but put that aside – at this point we have about a century of empirical proof that it is dangerous nonsense as well. So advocating more Keynesianism as a solution fits Einsteins definition of insanity to a tee.

        But more the point I was trying to get at was Corey didnt even bother to try and give any sort of an argument for why such an obviously crazy and counterproductive course of action would be good – but seems to have just taken it for a given that his readers would of course understand and agree that the only reason the fire is still going is because we havent poured enough gasoline on it yet.

        Perhaps the blog attracts a more diverse readership than Corey realises.

      • Arker August 6, 2012 at 11:09 pm #

        I am sorry for the double post. No edits apparently.

        @Dan Lynch – “As for “national bankruptcy,” a monetarily sovereign nation can never go bankrupt.”

        This is a great example of what I am talking about! As long as you can print money you can never go bankrupt so dont worry about it. That is what Keynesians say and that should have disqualified them from even being taken seriously from the start. That’s just a word game, it may make a fat well-fed intellectual feel smug and superior to say it, but it isnt going to put any food on the tables of the hungry. It’s sophistry at best.

        Gold isnt very nutritious, and paper currency even less filling. Money is only money because it functionally represents real value – real things that real people need and will pay for, like food. Money isnt value – money represents value.

        If we took the Keynesians seriously, then we should just give everyone in the country a printing press and a license to print currency. Like giving the unemployed no-show federal jobs, this would be perfectly legal if it were authorised by Congress, and then we would all be rich right? If anyone was short of money one week, they wouldnt have to go talk to people and explain and fill out forms and all that degrading nonsense, just fire up the printing press and your good to go!

        In the real world we would all starve of course because no one would be left farming or doing all the other real productive work that actually creates the value we use the money to represent. We would all have plenty of dollars – but they would be worthless.

        When countries go bankrupt, they dont normally admit it, you are right. Not much consolation to the people who lose everything in it though. Greece is a recent example. Think it cant happen to the US? We are so close already… when the rest of the world quits taking our dollars what good will that printing press be then?

        Only the same “good” it has always been, an easy and convenient way to tax the poor and provide for the wealthy.

    • Chatham August 7, 2012 at 4:04 pm #

      Bankrupt. Huh. You know that 11 years ago people were saying that the big threat to our finances was that we were about to pay off all of our debt, and that would make it difficult for us to conduct monetary policy?

      http://www.thesignalwire.com/2012/06/lest-we-forget.html

      Of course, we’re in more dire straights because of the spending spree we’ve had over the past 11 years. But as bad as things have been, I don’t think anyone is prepared to say that the past 11 years destroyed any chance we have to get back on track.

      There are very few people saying we should just ignore the debt. But some are saying that this depression should be a priority. And that’s doable.

      Let’s imagine an enormous stimulus program – two trillion dollars. With current bond yields of 2.6%, that will cost us, what, 56 billion a year to finance? Once we get out of this mess, all we’d have to do is repeal the Bush tax cuts to get three times that every year. When you add in the extra revenue we’d get from a recovered economy, plus the fact that inflation would shrink the debt from the stimulus while rising the amount we get from the repeal of the Bush tax cuts, then this really isn’t going to be a problem at all.

  6. cdrfuzz August 6, 2012 at 9:42 pm #

    ELR/job guarantee scheme, now. And in the UK, too please. Full employment with price stability.

    But it won’t happen, because our goverments think they’re broke. Their tax revenues have collapsed. What they don’t realise is that sovereigns don’t tax to spend. They spend to tax.

  7. Gerry Staack August 6, 2012 at 9:52 pm #

    We need lower profit expectations before we experience healthier job growth and economic recovery. Low oversea labor rates still offer unparalleled profits. If a widget is built in one hour by $8.00/hour, minimum wage U.S. labor and sold in the U.S. at market value for $25.00, a 212% profit is realized. If one takes only labor into account, a $3.00-a-day, 12 hour-day, foreign labor built widget, sold at the same $25.00 value, brings 9900% profit… a whopping 45 times more profit. No great wonder jobs stay away. Back in grandfather’s day, 17% seemed a reasonable profit for his business, but now greed has taken over with a vengeance.
    Hell will freeze over before businesses bring back jobs from overseas. (No matter who is in the White House or in congress.)

    • American living wages stand at around $16/hour. What would corporate profits be?
    — For the same widget, at this wage, corporate profit would be (25-16)(100)/ 16 = 56%.
    — But if the same widget is sold at $75, which is not an uncommon retail price for 1hour of American labor, (75-16)(100)/16 =368%
    • If profit expectations would only be 100%, and the widget is sold for $75, the American corporate wage could be:
    (75 – X)(100)/X = 100% which after solving for X calculates to = $37.50/hour. WOW!

    How do we get jobs back from overseas?
    Congress must choose between aiding the corporate profit culture obsessions or the work necessities needed by the American family for survival. Changes must occur which make it more profitable to hire American workers. One way to bring jobs back would be to use the ”carrot and stick” approach by taxing more if jobs go overseas…and rewarding more if jobs stay in America. Before that happens, the more likely new job sources will come from less profit oriented foreign companies that start hiring Americans to build their products in America.

    • Dan Lynch August 6, 2012 at 10:11 pm #

      I share your concern about low-wage foreign competition, but we can still eliminate unemployment at home despite that.

      Most American jobs are service jobs and that trend will likely continue as the population ages.

      There are so many jobs the unemployed could be doing. I went hiking in a National Forest recently and the trails had not been maintained for years due to budget cuts. Why not hire the unemployed to maintain our public lands, as they did during the Great Depression ?

      Class sizes are growing in our public schools due to budget cuts, yet qualified teachers can’t find a teaching job. Why not hire the unemployed teachers to teach smaller classes, or to provide tutoring to special needs students ?

      Our roads and bridges are crumbling — hire unemployed construction workers to rebuild them.

      Old farts like myself have to keep working despite bad knees and failing eyesight. Why not lower the retirement age to 55, and let unemployed young people fill those jobs, instead ?

      Much to do, and plenty of unemployed people to do it with. Just need some bold leadership in DC to make it happen.

      • Gerry Staack August 6, 2012 at 10:57 pm #

        All these are great ideas, but governments need revenues from payroll taxes so they can hire and pay for public service jobs, teachers, etc. Budget cuts in schools are a prime example of what happens when a country, state, or community runs out of money. All these little fixes are nice but none focus on the root problem. Corporate aristocracy and their supporters don’t want anyone to focus on it either.
        Congress must address the greed and bring jobs back from overseas!

    • Chatham August 7, 2012 at 4:13 pm #

      I’ve worked a little in trade, and to be honest I think the margins tend to be much thinner than is usually assumed. For one thing, there’s a lot that goes on outside of production. For another, there tends to be a lot of problems that occur when people try to change their suppliers to cheap overseas producers. If you go to China you’ll find tons of people that thought they could become rich by exporting cheap Chinese goods, only to discover all the issues with quality, management, deadlines, etc., and end up either losing their money or treading water.

      US workers are costlier, but you sometimes get more bang for your buck with them.

      Best way to bring back US manufacturing jobs? Let the dollar drop, and when US labor becomes (relatively) cheaper, it will be much more desirable.

  8. Islam Hussein August 6, 2012 at 11:18 pm #

    If only we understood the consequences of greed. Not for the greedy, but for all of society.

    • Gerry Staack August 7, 2012 at 12:54 am #

      Consequences are – 40 Million unemployed, formation of a two class society, loss of government representation & dependence on aristocracy, loss of freedom and a fall into bondage. Look around…we now have corporate tyranny and it’s spread to other countries in the world with millions unemployed.

  9. wisedup August 8, 2012 at 11:04 pm #

    Blodget’s take
    why Romney’s got job creation wrong

    • wisedup August 8, 2012 at 11:05 pm #

      sorry –
      here

Trackbacks/Pingbacks

  1. Links 8/10/12 | Mike the Mad Biologist - August 10, 2012

    [...] Adam Davidson If Only We Knew How to Decrease Unemployment… You Will Be Assimilated Marshall Auerback: Top 5 Reasons Why Raising the Minimum Wage Is Good for [...]

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