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Does the U.S. Need Full Employment? And Other Questions

Watch ‘Can America’s Jobless Fill America’s Jobs?’

Paul Solman answers questions from NewsHour viewers and web users on business and economic news on his Making Sen$e page. Here’s Friday’s query:

Making Sense

The flood of responses to our story on structural vs. cyclical unemployment deserves some response. Here goes:

Name: Tzar Igor

Question: “Structural unemployment” can explain today’s unemployment. But, is there a current theory regarding “end of growth”? What if we do not need to have “full employment” to meet society’s needs? What if consumer demand does not grow because consumers are satiated? With technology fewer people are needed to satisfy world’s needs and hence sustained growth in the number of unemployed worldwide?

Paul Solman: Then the world would work less, Tzar Igor. In theory, that should be a good thing, no? Only problem is, who gets the fruits of technology’s “labor”? That’s why we’ve been focusing on economic inequality of late: if it isn’t already, the distribution of income and wealth may be an immense problem in the coming years.

*Also see:

The Great Stagnation: Why Hasn’t Recent Technology Created More Jobs?*

Americans Facing More Inequality, More Debt and Now More Trouble?

Name: Dan Swinney

Question: The skills mismatch story was very good. We have a very practical effort in Chicago to address this–Austin Polytechnical Academy www.austinpolytech.org. It’s a public high school premised on the assumption of the mismatch and doing something about it with 65 manufacturing companies as partners and 89 students now with 125 National Institute for Metalworking Skills certifications, and a standard college prep curriculum supplemented by four years of a pre-engineering program. APA would be a great illustration/followup.

Paul Solman: Glad to hear it. We did one such story a few years ago not far from you — in Milwaukee.

Name: Carl Gambs

Question: One of the advantages of being a 68-year-old economist is that you can recognize when the nonsense you’re hearing has been repeated before. Last night’s story on structural unemployment was such nonsense — a repeat of arguments we’ve heard every time unemployment has risen since the 1950s. When unemployment comes down, employers realize they actually have to train workers — something none of them think they should have to do when unemployment is high.

Paul Solman: Oh, these arguments have been around a lot longer than the 1950s. Unfortunately, that doesn’t mean they aren’t true now.

Of course, you may be right. Then again, you may not be. Knowing more than a few 68-year-old economists, I would say without prejudice that neither your credentials nor your vintage clinches the argument.

There is, however, another 68-year-old who agrees with you: Richard Epstein, the libertarian jurist known for helping found the “law and economics” movement at the University of Chicago. He’s now Laurence A. Tisch Professor of Law at the New York University School of Law.

Recently, I interviewed him and asked this question:

“It could be that machines have simply replaced the jobs that were here 10 or 20 years ago, no?”

Professor Epstein was even more outraged than you, Mr. Gambs:

“That is a grotesque argument. The argument about automation has been made in every era from the beginning of time. When they put in automatic telephone exchanges, they say: Aren’t you doing a terrible thing when you get rid of those operators? President Obama made the same argument with respect to ATM machines. No! What happens is the last thing you want to do is to have huge wages for people who produce modest amounts of goods, depressing the total size of the economy. What you want to do is to have a flexible workforce such that it’s easy to hire and fire so that when it turns out that people are no longer productive in doing some jobs, there are other jobs that are opened up to them.”

It should be noted that Professor Epstein’s main point was that the minimum wage (and various benefits to lower-wage workers) was the problem, not the lack of jobs.

Name: Patti Maloney

Question: Have you got your head in the sand? It’s not structural or cyclical. It is not the fault of the American worker not having skills. I will illustrate with a simple example. Apple is now the richest U.S. corporation. Have you EVER asked how it got that way? It went to China where it can pay workers 15 cents an hour instead of $15 an hour. It’s profits soared by paying slave wages. Does this not strike any of you in the economic world as maybe somewhat unjust to U.S. and the Chinese worker? NO ONE talks about the starvation wages U.S. corporations pay in China by shipping the jobs American
workers use to have overseas. THAT IS WHY 15 MILLION U.S. WORKERS HAVE NO JOBS. CORPORATE GREED on a GLOBAL scale and the best you can do is remain silent on the subject and blame the U.S. workers for their lack of skills. NO ONE BRINGS THE U.S. CORPORATIONS TO TASK FOR WHAT THEY HAVE DONE TO THE PEOPLE. The greed grows and they get rich and probably will get their taxes lowered. FOR GOD’S SAKE LOOK AT THE FACTS. OUR JOBS WENT TO CHINA and until we acknowledge that simple fact and impose trade tariffs on all goods made by cheap foreign labor 15 million of our people will remain unemployed. Please use your brain and look beyond the talking points that we American workers brought this on ourselves. Get your head out of the sand. Report on the number of jobs sent to China, what the wages are there compared to what they were in the U.S. and then tell me how much the profits have grown for the corporation while our workers become 3rd class citizens. THE GREED IS DISGUSTING AND IMMORAL. REPORT ON THAT.

Paul Solman: This email is reproduced in full upper case wrath to share with readers the agitation of Americans with respect to today’s labor market. For the response to the argument that, in the words of one interviewee years ago, “I went to lunch and my job went to China,” see our stories ‘One World, One Market’ and ‘The Politics of Trade’ with Harvard’s Robert Lawrence, an economist in the Clinton administration.

My own view is that technology has probably replaced a lot more jobs of the past than cheap labor abroad. And even if that’s wrong, I ask myself two questions:

1) Having preached open markets to the world for decades, are we really going to close ourselves off now that they’re threatening the United States?

2) Will an autarkic United States, cut off from world trade, remain competitive in the long run?

Name: expdx2011

Question: Sure, sure. I am an employer too! I want to hire a Human Resources Director, but I can’t find anyone with the skill set that I require. A competitive candidate would own his/her own corporation; have a Ph.D in Human Resources, be able to report, direct and produce a news segment on jobs, be able to make me a profit of 8 to 10 times the amount I invest; and be willing to relocate anywhere I want for about an annual salary of around $40K! WHY CAN’T I FIND ANY CANDIDATES???

Paul Solman: Yup, that’s the problem with a labor glut, from labor’s point of view. In a buyers’ market, employers can hold out till they find just what they’re looking for. As one unemployed Chicago-area executive said to me last week: if employers are looking for ten attributes in the ideal employee, they won’t take anyone who doesn’t score ten out of ten.

Name: Mrt_buena

Question: $3,000 a month in tips? Robo Mike should stay just where he is. He makes what I make before taxes as a high school principal and teacher, and I have a Master’s degree.

Street performre Robo Mike and Paul Solman

Paul Solman: Given the pace of his act, I don’t think Robo Mike is going anywhere fast.

Photos, from top: a graphic of recent technology by the PBS NewsHour; ‘help wanted’ photo by Justin Sullivan/Getty Images; Chinese workers by the PBS NewsHour; Robo Mike and Paul Solman by the PBS NewsHour.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._

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