“Right-Wing Unemployment Myths Debunked”: When You Look At The Data, It’s Just Not There
Surprising many supporters, a three-month unemployment extension bill survived an initial Senate test Tuesday, with six Republicans joining 37 Democrats in voting to let the bill proceed to debate. But GOP members in both chambers have suggested they’ll withhold or withdraw their support unless Democrats offer up conservative concessions – be they parallel budget cuts, deregulation measures, new requirements for the unemployed or an Obamacare mandate delay. Others have argued that unemployed people would be better off without unemployment benefits.
In a Sunday CNN interview, Wisconsin governor and potential presidential contender Scott Walker argued that “the federal government doesn’t require a lot” of the unemployed, and urged that rather than “just putting a check out,” Congress tie unemployment extension to tightened eligibility requirements.
“Making them jump through more hoops will definitely increase administrative costs, but it’s not going to generate more jobs,” Economic Policy Institute economist Heidi Shierholz countered in a Tuesday interview with Salon. “Unless he’s looking at it as a jobs program to hire more public sector workers.”
Shierholz, a former University of Toronto professor now at the progressive Economic Policy Institute, panned several of the right’s other diagnoses and prognoses for the unemployed. A condensed and edited version of our conversation follows.
Some of the same Republican senators whose votes were necessary for unemployment extension to move forward Tuesday are implying they could still vote against final cloture if it isn’t offset with cuts. Is insisting on budget cuts to “offset” the cost of unemployment extension good policy?
It isn’t in this context. And I say that sort of carefully. Because if we were at full employment, and the economy was humming along, and fully utilizing all its potential, then if you’re going to spend a big chunk of money, you might want to think about offsetting it, because the economy doesn’t need any more demand.
We are so far away from that situation that this is exactly the kind of time where you do not have to worry about trying to do offsets like that.
It’s not a bug of the UI system, it’s a feature that it actually costs money. Because at a time like this, when the labor market is so weak, the economy is so weak, and we know that the overwhelming factor behind that weakness is just weak demand, we’re operating way below our potential. People don’t have the income, so they’re not spending. Businesses aren’t investing as much as they would if we were in a strong labor market. Weak demand for goods and services means businesses don’t have to ramp up hiring, they don’t have to ramp up to meet the demand, because demand isn’t there.
So the fact that you’re spending this money on UI, you’re getting money into the economy, is actually exactly what we want to do at a time like this. So trying to sort of bend over backwards to offset it actually just undermines one of the key features of extending UI, which is that it increases economic activity at a time when the economy desperately needs it.
Scott Walker told CNN that “one of the biggest challenges people have who are either unemployed or underemployed is many of them don’t have the skills in advanced manufacturing, in healthcare and I.T. where many of those job openings are.” What’s your assessment of that claim?
You hear that claim made a lot: that the reason we have this weak unemployment, or high long-term unemployment, is that workers don’t have the right skills for the jobs that are available.
I think because you hear this anecdote a lot, there’s been a ton of research done on it — a ton. And economists have dug in, and looked at the data from all sides. The overwhelming consensus: People who aren’t just relying on anecdotes, but who are actually digging in and looking for any sign of a skills-mismatch in the data, don’t find it. The divide on who finds this is more those who are relying on anecdotes versus those who have looked at the data, not right-leaning or left-leaning. Because of those who have looked at the data, you just don’t find evidence that the problem right now is due to workers not having the right skills.
If it were due to workers not having the right skills you would have to see some evidence in some meaningfully sized group of workers of actually tight labor markets relative to 2007. [But] unemployment rates are higher now relative to before the recession started across every education group, across every gender, across every age group, across all racial and ethnic categories, in all major occupations, and all major industries.
If we were seeing tight labor markets, you’d see wages being bid up for the workers who can’t be found, people poaching from other companies. And that you also don’t find. You actually find basically no group that is even seeing wage growth keep pace with overall productivity growth. In any group meaningfully sized enough to be actually driving anything, you don’t see any sign of wages being driven up. Same story with hours.
You’re not seeing any sectors of meaningful size where there’s more job openings than people actually looking for those jobs.
You hear anecdotes a lot about people saying, “I just can’t find the workers that I need.” This may be some interesting sort of psychological stuff about the echo chamber of how those things get so much play at a time like this. When you look at the data, it’s just not there.
One of the senators who voted against proceeding with the unemployment bill, Jeff Sessions of Alabama, said, “First and foremost, unemployment insurance is treating the symptoms of the problem. It’s an aspirin for a fever, but the fever has been raging for weeks now.” Is that a revealing analogy in any way?
It’s treating the symptoms and it helps actually be part of the cure.
They actually are a lifeline to the people that were most hurt by the downturn — people who lost their jobs through no fault of their own, and have not been able to find another one in the period of weakest labor market we’ve seen in 70 years. The fact of the matter is that the labor market is still extraordinarily weak. It’s way weaker by far than at any time we’ve ever allowed extensions to expire.
So it definitely is part of dealing with the symptoms. And then it is absolutely part of the cure: You get money in the hands of the long-term unemployed.
Those are people who are almost by definition cash-strapped. They are going to spend that money. It goes straight into the economy and generates demand for goods and services, which generates demand for workers. So it helps strengthen the recovery.
You put out an estimate that not extending unemployment benefits would cost 310,000 jobs this year. How?
Around $25 billion would be spent if the extensions were continued [for a year]. Some spending is actually more stimulative to the economy, and it has everything to do with how fast and how completely that money goes into raising and creating demand. So unemployment benefits are consistently the second most efficient way that a government can spend money — either through direct spending or through tax cuts to support an economy, to generate economic activity. The only thing that consistently comes in ahead is food stamps.
You have that [unemployment] money spent on rent and groceries and clothes. So you increase demand for goods and services. Then there’s the fiscal multiplier. Then from there, that’s where you get the total amount of economic activity generated — the boost to GDP. And then from there, there’s a direct walk to jobs created.
It’s a rough measure. But that’s an idea of the scope.
Scott Walker also argued that instead of “just putting a check out,” the government should require more from people on unemployment, in terms of entering job training and looking more often for work. What do you make of that argument?
We do know that it’s already keeping people in the labor market, looking for work. There’s good evidence that receiving benefits actually keeps people looking for work.
A helpful bit of information, to know if the reason people are long-term unemployed is because they’re not looking hard enough, is the following: You’d want to know if our long-term unemployment situation is somehow weird, if it’s unexpected, if there’s something going on with our long-term unemployed, like they’re not looking as hard as they should, or they’re not being as flexible as they should. Like, is there something about these benefits that’s keeping them from doing those things? And that you don’t find.
So there’s a paper by Jesse Rothstein that looks very carefully at today’s long-term unemployment situation in the historical context. And he found that what we’re experiencing now is exactly what you would expect given three things: given how deep the period of economic weakness has been; how long it’s been as bad as it’s been; and then a little bit of this longer-term trend in long-term unemployment share. Which has to do with declining incidences of temporary layoff and stuff like that — but that’s not a big component.
We’re not seeing something abnormal right now in the long-term unemployment situation, except for an incredibly abnormally weak labor market that’s been incredibly abnormally weak for a very long time. Once you have that, then what’s going on with long-term unemployment is exactly what you would expect.
So it’s not like, “if we just get them to look harder, they’re going to find jobs.” The real problem, why we have this long-term unemployment crisis, is that the labor market has been so weak for so long.
So making them jump through more hoops will definitely increase administrative costs, but it’s not going to generate more jobs. Unless he’s looking at it as a jobs program to hire more public sector workers to deal with more administration. But I don’t think that was probably his angle. The real problem right now is weak demand for workers, and this won’t touch that.
The reason we have elevated unemployment is not that workers don’t have the right skills for the jobs that are available. It’s just that we don’t have jobs available. It’s not like training can never help an individual, but that’s not why we have high unemployment right now.
By: Josh Eidelson, Salon, January 8, 2014
“An Intellectual Hollowness”: Why Republicans Have No Ideas About Mass Unemployment
Last Saturday, the extension of unemployment benefits originally passed at the outset of the economic crisis expired. The position of Democrats in Washington, backed by a growing mountain of economic research, is that macroeconomic and humanitarian considerations alike both argue for an extension of unemployment benefits.
The position of Republicans in Washington is rather strange — less a moral or economic argument than an expression of indifference. “These have been extraordinary extensions, and the Republican position all along has been ‘we need to go back to normal here at some point,'” argues Representative Tom Cole. “[W]hat we did was never intended to be permanent. It was intended to be a very temporary solution to a very temporary crisis,” echoes Representative Rob Woodall. Of course nobody intended for the crisis of mass unemployment to last five years. Nobody intended for the crisis to happen at all. It is simply weird to argue that, since the problem has gone on longer than intended, the response to the problem must end as well. The fire trucks don’t shut off the hoses simply because the fire should have been put out by now.
Yet the weirdness, far from being random, reveals something deeper at work. The most obvious thing, of course, is a general lack of concern for the fate of the unemployed — or, at least, a casual assumption that the unemployed themselves must be to blame for their plight. But even a more generous reading of the Republican position, taking its most serious defenses at face value, reveals an intellectual hollowness. Half a decade into the economic crisis, the Republican Party has no serious ideas about the Great Recession.
One of the few Republicans to directly defend his party’s refusal to extend unemployment benefits is Rand Paul. Unfortunately, as is so often the case, Paul’s ideas about unemployment insurance are cracked. Paul has repeatedly cited studies that show that employers discriminate against job candidates who have been out of work a long time. Paul simply assumes that people are staying unemployed so they can continue collecting unemployment benefits. But the economics paper Paul cites, according to the economist who wrote it, suggests the opposite of his conclusion.
Meanwhile, The Wall Street Journal editorial page gamely defends the Republican stance:
The Administration claims that every $1 of jobless benefits creates $1.80 in economic growth, based on the notorious “multiplier” in Keynesian economic models. This is the theory that you can increase employment by paying more people not to work, and that you can take money out of the private economy by taxes or borrowing without cost.
The argument here is that there’s a “cost” to “taking money out of the economy” to pay for unemployment benefits. What is that cost? Well, in normal conditions, higher deficit spending will cause interest rates to rise. But these are not normal conditions. Interests rates are as low as they can be. The zero bound is the policy dilemma of the moment. The Journal editorial page has been warning for years that rising interest rates are on their way, or already occurring. The utter failure of these predictions has not even slightly dented its jaunty confidence.
It is true that some research has shown that cutting off unemployment benefits can force the unemployed to search more aggressively (or desperately) for work — say, an out-of-work machinist might take a job for lower wages at the 7-11. But those studies all take place in the context of a normal economic cycle, not the mass unemployment we see today. The conditions of mass unemployment from the Great Recession dictate that cutting off benefits from the unemployed simply immiserates them because there are no jobs.
Republicans in North Carolina proactively demonstrated their party’s stance by cutting off benefits to the unemployed before it was tried elsewhere in the nation. The result was dismal: The state’s labor force is shrinking. Rather than getting jobs, the unemployed have simply stopped looking for them, because they don’t exist.
Sharp conservative ideas about the recession can be found on the margins of the political debate. (See, for instance, Michael Strain in the Weekly Standard.) It’s certainly possible to reconcile conservative doctrine about the size of government with specific plans to address mass unemployment. But Republicans in Congress have not bothered to adopt any of these alternative proposals. Nor have conservatives in general displayed much of an interest in the topic of unemployment benefits. There’s an asymmetry of partisan interest on the subject somewhat akin to Benghazi, which obsesses the right and bores the left. Republican thought on mass unemployment is a restaurant with tiny portions that taste terrible.
This is not to say that the GOP lacks any ideas about economic policy. Both parties have fairly well-defined ideas about the general role of taxes, spending, and regulation. The difference is that the Democratic Party also has a policy agenda that is specifically related to the special conditions of high unemployment and low interest rates. The Republicans are still merely asserting that their normal agenda applies just as well now as ever. The unique, dire conditions of the Great Recession shouldn’t be expected to undo all the party’s program, or to alter its general long-term ideas. (Democrats have not, and should not, given up their preference for universal health insurance, reduced greenhouse gas emissions, and so on, nor should Republicans have to abandon their preference for the opposite.) What they lack is any legislative response to the economic crisis. They just want to get back to normal, and since normality has not arrived, they’d just as soon pretend it has.
By: Jonathan Chait, New York Magazine, December 31, 2013
“The GOP’s ‘Jobs’ Hypocrisy”: Their Own Party Is The Biggest Obstacle
I bring good news this new year! Conservatives have a jobs agenda, one that isn’t built around merely cutting taxes and regulations and getting the government out of the way so the free market can strut its stuff.
No—this includes… are you ready?… infrastructure investment, and a monetary policy less obsessed with keeping inflation under 2 percent. It’s new, it’s exhilarating, it’s brilliant! And it’s the same stuff that Barack Obama and most liberal Democrats have favored for years.
When David Frum, whom I respect a great deal, tweets that a new article should be thought of as “a ‘95 theses’ moment for the reformist right,” he gets my attention. So I clicked immediately and read through “A Jobs Agenda for the Right,” by Michael Strain of the American Enterprise Institute, from the new issue of National Affairs. I liked the essay and even agreed with a respectable percentage of what Strain had to say. But reading it was far more infuriating than reading something by a conservative and disagreeing with every syllable, because articles like Strain’s refuse to acknowledge, let alone try to grapple with, the central and indisputable fact that the contemporary Republican Party—his presumed vehicle for all this pro-jobs reform—has opposed many of these initiatives tooth and nail.
The first big measure Strain touts in his essay is infrastructure. “Anyone who has driven on a highway in Missouri or has taken an escalator in a Washington, D.C., Metro station knows that the United States could use some infrastructure investment,” he writes. He doesn’t lay out a specific program, but clearly he favors fairly broad public investment.
Um, OK. There are people who’ve been trying to do just that. And not only Barack Obama. John Kerry led this effort in the Senate, and he was joined by Republican Kay Bailey Hutchison (who’s since retired). Their attempts to fund a modest infrastructure bank were supported by the U.S. Chamber of Commerce. But it could never get anywhere because of rock-solid GOP opposition. Does Strain not even know this? Or is he pretending it never existed so he doesn’t have to deal with the political reality of Republican obduracy?
I think, of course, it’s the latter, and there’s further evidence for my guess in the way Strain talks about recent history. The 2009 stimulus was not a failure in infrastructure terms at all (has he read Michael Grunwald?). But even if you believe it was an infrastructure failure, or have to say so for political reasons, should you not acknowledge in fairness that it was Democrats and liberals who wanted it to have more infrastructure spending, and that nearly 40 percent of the bill took the form of tax cuts because that’s what Republicans demanded (before they decided en masse to vote against it anyway)?
From there, Strain turns to monetary policy, and this is even more comic. The Federal Reserve, he writes, should relax the 2 percent inflation target to get the unemployment numbers down. Uh, yes. It should. But it’s not as if Strain just originally thought of this. Liberals have been saying this ever since 2009, or 2008 even. And in response, conservatives have been saying that doing so will produce galloping inflation and destroy our economy. You’ve seen Ben Bernanke get badgered about inflation by Republicans from Paul Ryan on down for years. Inflation could have been 1.2 percent, or lower, but if Bernanke was up on the Hill, Republicans tore into him as if he were unleashing the mid-’70s on us again.
As I said, I agree with Strain. I agree when he writes: “In short, conservatives should see that there is a role for macroeconomic stimulus in getting the labor market back on its feet” and that “monetary policy with its eye on enabling growth can make a big difference.” Yes, they should. Well… how are they going to see that? Does Strain have some special pixie dust?
It’s astonishing that he can write this way, but it’s what they all do on the right. They maintain the fiction that their party is a party of rational people who will listen to rational argument and isn’t simply dug into a state of psychotic opposition to anything Barack Obama wants to do. Everyone watching our politics for the last five years knows that if Obama is for it, the Republicans will oppose it. Strain might say counting noses in the Senate isn’t his job. Well, OK. But at least he could acknowledge that his party has been preventing some of his own ideas from having any hope of becoming reality (he goes on to discuss other proposals, some of them more traditionally conservative, others that acknowledge a fairly strong governmental role in getting people back to work).
Usually, with regard to jobs and wage stagnation and poverty and so on, the problem is that conservatives deny empirical reality. This gives us people like Paul Ryan, for example, who genuinely seems to believe, in the face of the mountains of evidence about how the social safety net and federal entitlements have saved millions from lives of far worse destitution, that all government can do is make slaves of people. That’s bad enough.
But now, we have conservatives who accept enough empirical reality to agree that public investment is not a crime against nature, but who deny the political reality that the Republican Party stands in the way of progress. This may actually be worse. The only hope of changing Washington for the better is getting a Republican Party in which there are enough legislators who act like legislators again and who are willing to cross party lines occasionally for the sake of governance and the country. If conservative intellectuals keep pretending this isn’t a problem, there is no hope that it will change.
By: Michael Tomasky, The Daily Beast, January 3, 2014
“The Fear Economy”: The Economy May Be Lousy For Workers, But Corporate America Is Doing Just Fine
More than a million unemployed Americans are about to get the cruelest of Christmas “gifts.” They’re about to have their unemployment benefits cut off. You see, Republicans in Congress insist that if you haven’t found a job after months of searching, it must be because you aren’t trying hard enough. So you need an extra incentive in the form of sheer desperation.
As a result, the plight of the unemployed, already terrible, is about to get even worse. Obviously those who have jobs are much better off. Yet the continuing weakness of the labor market takes a toll on them, too. So let’s talk a bit about the plight of the employed.
Some people would have you believe that employment relations are just like any other market transaction; workers have something to sell, employers want to buy what they offer, and they simply make a deal. But anyone who has ever held a job in the real world — or, for that matter, seen a Dilbert cartoon — knows that it’s not like that.
The fact is that employment generally involves a power relationship: you have a boss, who tells you what to do, and if you refuse, you may be fired. This doesn’t have to be a bad thing. If employers value their workers, they won’t make unreasonable demands. But it’s not a simple transaction. There’s a country music classic titled “Take This Job and Shove It.” There isn’t and won’t be a song titled “Take This Consumer Durable and Shove It.”
So employment is a power relationship, and high unemployment has greatly weakened workers’ already weak position in that relationship.
We can actually quantify that weakness by looking at the quits rate — the percentage of workers voluntarily leaving their jobs (as opposed to being fired) each month. Obviously, there are many reasons a worker might want to leave his or her job. Quitting is, however, a risk; unless a worker already has a new job lined up, he or she doesn’t know how long will it take to find a new job, and how that job will compare with the old one.
And the risk of quitting is much greater when unemployment is high, and there are many more people seeking jobs than there are job openings. As a result, you would expect to see the quits rate rise during booms, fall during slumps — and, indeed, it does. Quits plunged during the 2007-9 recession, and they have only partially rebounded, reflecting the weakness and inadequacy of our economic recovery.
Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.
Is there any evidence that this is happening? And how. The economic recovery has, as I said, been weak and inadequate, but all the burden of that weakness is being borne by workers. Corporate profits plunged during the financial crisis, but quickly bounced back, and they continued to soar. Indeed, at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by the fear factor — the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. In fact, it’s possible (although by no means certain) that corporate interests are actually doing better in a somewhat depressed economy than they would if we had full employment.
What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed. No, I don’t believe that there’s a secret cabal of C.E.O.’s plotting to keep the economy weak. But I do think that a major reason why reducing unemployment isn’t a political priority is that the economy may be lousy for workers, but corporate America is doing just fine.
And once you understand this, you also understand why it’s so important to change those priorities.
There’s been a somewhat strange debate among progressives lately, with some arguing that populism and condemnations of inequality are a diversion, that full employment should instead be the top priority. As some leading progressive economists have pointed out, however, full employment is itself a populist issue: weak labor markets are a main reason workers are losing ground, and the excessive power of corporations and the wealthy is a main reason we aren’t doing anything about jobs.
Too many Americans currently live in a climate of economic fear. There are many steps that we can take to end that state of affairs, but the most important is to put jobs back on the agenda.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 26, 2013
“Who Is For Growth And Job Creation And Who Isn’t”: The Biggest Thing Centrists Miss About The Inequality Debate
With the electoral victory of Bill de Blasio in New York City, an unabashed economic progressive, and the rising star of Elizabeth Warren, the issue of inequality has come to occupy center stage in lefty policy discussions. As Greg has been writing, it’s popular — something we see in reports today that Democrats are planning to use a near-certain GOP vote against a bill hiking the minimum wage against them in 2014.
But this has brought about a reaction from center-left types, who insist that the progressives have their priorities wrong. In the process, they mischaracterize the progressive view, and set up a false dichotomy between that and establishment positions. Progressives see inequality as a fundamental part of why our economy is not working as it once did, not a problem to be placed above job creation.
Bill Keller recently provided a representative sample:
The left-left sees economic inequality as mainly a problem of distribution — the accumulation of vast wealth that never really trickles down from on high. Their prescription is to tax the 1 percent and close corporate loopholes, using the new revenues to subsidize the needs of the poor and middle class…
The center-left — and that includes President Obama, most of the time — sees the problem and the solutions as more complicated. Yes, you want to provide greater security for those without independent means (see Obamacare), but you also need to create opportunity, which means, first and foremost, jobs. … The center-left … agrees on the menace of inequality, but places equal or greater emphasis on the fact that the economy is not growing the way it did for most of the last century.
First of all, this is a bit rich to hear from the center. The left has been howling about jobs and growth for five years now, for so long and so loud that our collective tonsils have about come unglued — and who were we arguing against? The centrists, who were a major bloc of support behind the premature turn to austerity back in 2010. Better late than never, I guess. Welcome to the party, guys!
In fact, this longstanding hair-on-fire panic about mass unemployment, which until now has been met with near-total indifference from the elite, is a big part of what motivates the inequality focus today. Because I have never met or even heard of someone concerned with inequality who is not also a fervent supporter of immediate monetary and fiscal stimulus to restore full employment as fast as possible. (That’s Item One in the inequality-reduction handbook!) The problem isn’t just mass unemployment — it’s the fact that we haven’t done anything about it since 2009. As Steve Randy Waldman has written, there are many economic strategies to create jobs now, of which we are trying none whatsoever. Inequality-driven discrepancies in political influence are a probable factor here.
What’s more, there is a compelling case that inequality is a major reason why our economy seems so prone to bubbles and why traditional policy remedies no longer have much purchase on job creation. A full recounting is beyond the scope of this post, but such arguments are worth taking seriously.
In any case, Keller is right to say that Republicans are now the major obstacle to any job creation agenda, so if centrists are now aboard the jobs train, I welcome them with open arms. They just shouldn’t kid themselves about who is for growth and job creation, and who isn’t.
By: Ryan Cooper, The Plum Line, The Washington Post, December 24, 2013
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