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Obama Jobs Speech: Economists Look For Bold Ideas On Black Unemployment

Black Unemployment

First Posted: 09/ 8/2011 7:56 pm Updated: 11/ 8/2011 5:12 am

President Barack Obama will address a joint session of Congress tonight because of what many economists, pundits and politicians have called a jobs crisis. But the nation's current employment picture closely mirrors the state of black unemployment before the recession began.

Fixing the overall jobs deficit and addressing the way that the recession has ravaged black and Latino households will require bold, even controversial solutions, economists say.

“It’s funny that what we call a crisis now is actually a little better than where black workers were in the so-called boom times,” said Algernon Austin, a labor sociologist at the Economic Policy Institute, a Washington, D.C.-based think tank. “The fact that there was no targeted effort to address African-American unemployment before the recession is a large part of the reason that the jobs problem is so big now.”

In 2007, just before the recession began, black unemployment sat at 8.5 percent. In August, black unemployment reached 16.7 percent, a figure unseen since the 1980s. At the same time, the nation’s overall unemployment was 9.1 percent and job growth was zero. But in the depths of a jobs crisis that several economists say may portend a double-dip recession, white unemployment fell slightly to 8 percent.

Together, black and Latino workers make up nearly 40 percent of the nation’s unemployed.

To address a job crisis where black and Latino workers are being crushed but no one is doing well, the country needs a large influx of government spending and a commitment to create two major jobs programs, said Austin. One program should attempt to put any unemployed person back to work, and the other should target hard-hit demographic groups. Researchers at the Economic Policy Institute have found that the economy could support about $600 billion in government spending this year.

“A lot of people right now have gotten caught up in this debate about whether we need a targeted approach to address minority unemployment or whether something universal would work. I’m saying we need both," added Austin.

At a July gathering, the Congressional Black Caucus called on the White House to funnel extra job creation dollars to geographic areas with high rates of poverty. Unlike a jobs program that targets black or Latino workers specifically, geographic targeting is politically feasible, several members said.

“It’s time for this president to start proposing big, game-changing ideas that might address long-term joblessness and the growth and persistence of the black-white wealth gap,” said Darrick Hamilton, an economist at The New School.

A Works Progress Administration-like program could help to repair some of the recession’s economic scars, said Hamilton. It would put workers into jobs where they can develop, enhance or at least maintain their skills, and it would give unemployed workers income until the economy improves. But to address the persistent and growing economic gap between white and black households, those at the top of the income scale and those near the bottom, the president should also propose wealth-building accounts for every child at birth, said Hamilton. With interest and limits on the purposes for which funds could be withdrawn, eventually every adult would have a pool of funds to cover the cost of attending college, setting up a household or purchasing a home.

In 2009, the most recent year for which data are available, the gap between the median wealth of the nation’s white and nonwhite households –- that’s cash and other assets -- grew to an all-time high. The median white household has about $113,000 in wealth, compared to about $5,600 for black households and $6,300 for Latino households.

“The growing wealth gap in this county is the single biggest piece of evidence that an age of equality and meritocracy has not arrived,” said Hamilton. “That’s a controversial thing to say. But fixing it would go a long way toward solving a number of other social problems.”

The most important thing that the president can do tonight is shift the conversation away from the idea that American families are tightening their belts so the government should do the same, said Heidi Shierholz, a labor market economist at the Economic Policy Institute. That is not economically sound, she said. (The institute has identified 10 things that Congress could do to create jobs and spend effectively.)

The nonpartisan Congressional Budget Office periodically documents the economic effect of different types of government spending. Shierholz said that, according to the CBO’s most recent report in late 2010, the key to stimulating the economy and job growth is to spend those funds on things such as food stamps, unemployment insurance and a continued payroll tax holiday.

These funds tend to hit bank accounts and be quickly spent, which benefits the economy, said Shierholz. In the current economic climate, tax incentives that encourage hiring also produce more economic activity and job growth than those that encourage companies to buy new equipment or facilities, she said. Companies are flush with cash right now, but are not spending or hiring because of lax consumer demand.

The president should also propose financial aid for the states, said Shierholz. Such aid would likely stem the tide of black unemployment because nearly 25 percent of black adults hold government jobs. Right now, cash-strapped state and local governments are shedding about 30,000 jobs a month, she said.

"We have to stop that kind of hemorrhaging," Shierholz said. "I mean, not to prioritize workers, but we are talking about teachers here.”

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