Remember that unemployment problem we used to have? The one that politicians, pundits and policymakers used to talk about on a regular basis, debating how we might fix it? Well, forget about all that, because the problem is structural, meaning nothing can be done. So sayeth a loud slice of the econo-pundit class.
Rather than traditional cyclical unemployment, which reflects a weakness in demand for goods and services and can be goosed with additional government spending, structural unemployment is impervious to traditional economic solutions. It results from a mismatch between available workers and needed jobs. But skip the academic definitions. In what passes for the national conversation, the essential meaning of "structural unemployment" is that people with money need not bother fretting over those who are out of work and are struggling to pay their bills, because fate and globalization and forces larger than any institution have rendered so many jobs obsolete. No point making the wealthy pay more in taxes to support government spending, because this will not deliver jobs.
Structural unemployment is functionally a euphemism that allows its adherents to claim the imprimatur of professorial authority while condemning millions of people to long-term joblessness -- all this, without having to feel mean or heartless. People are out of work, but nothing can be done. What a pity! Please pass the paté.
For many months, two prominent New York Times columnists -- Paul Krugman, the Nobel laureate economist, and David Brooks, the controversy-loving dilettante -- have been debating the root causes of high unemployment, while unleashing thinly veiled attacks on one another without the indelicacy of naming names. The latest flare-up came this week as Brooks described his belief that joblessness is mostly structural. This prompted Krugman to produce a chart on his blog showing that manufacturing, services and construction have all seen job losses since the beginning of the Great Recession.
"Maybe people have some other structural story in mind -- except that's the one they like to tell in popular articles," Krugman wrote in his umpteenth obvious dismissal of Brooks. "So why are these people so sure that it's structural? I know that it sounds wise and Serious to say that it is, but there is this matter of actual evidence; that evidence is strongly inconsistent with a structural story, and quite consistent with a demand story."
The day after Brooks' column landed, the Wall Street Journal's Justin Lahart delivered a pertinent piece of analysis: Absent government job cuts since the financial crisis of 2008, the unemployment rate would today be at 7.1 percent, a full point lower than its current level. If state and local governments had more money to spend, that would mean more jobs for everyone -- and presumably more government revenues.
We do have structural problems, to be sure. We have let our basic educational infrastructure decay, and we have made it difficult for the vast majority of Americans to afford higher education, while shoveling more and more of the profits to people with advanced degrees. We still have way too many people working in finance, an area of the economy that has very little to do with producing goods and services of intrinsic value -- products that human beings can use to solve a problem, or make their lives more productive -- and a good deal to do with making money change hands so Wall Street can exact a cut. We would all benefit from a restructuring, moving the economy away from dependence on financial innovation and toward real innovation in productive areas such as renewable energy, information technology and the life sciences.
That's all long-term stuff. But in the meantime, there's a good deal that can be done to more quickly alleviate the broad suffering attendant to an employment crisis that remains so widespread and persistent that it has insinuated itself into the basic fiber of American expectation. We can increase investment in infrastructure and education, and we can deliver aid to struggling states and local governments so they can hire people -- people who will then distribute their wages to private businesses. We can pay for these things not by adding extravagantly to our deficits, as some alarmists would have you believe, but rather by lifting tax rates back to where they were when that tax-and-spend socialist subversive enemy of free enterprise Ronald Reagan occupied the White House.
This may not be a sexy story. It may deprive us of the opportunity to impress cocktail party-goers with exotic concepts like structural unemployment. But it will improve our economic lot.
Follow Peter S. Goodman on Twitter: www.twitter.com/petersgoodman
The Arab Spring erupted over unemployment in Tunesia.
As far as I am concerned the current worldwide unemployment problem is part of the population bomb exploding. As long as you declare this the taboo part of the topic, nothing will change.
I assure you that the current worldwide unemployment problem has nothing to do with overpopulation. It has to do with increasing productivity, where you need fewer and fewer people to produce the same amount of goods. Reducing the number of people would reduce the amount of goods needed, which would reduce employment proportionally, and the unemployment rate would remain unchanged.
That said, working in and building businesses in the tech industry, I do see technology replacing huge swaths of employees and I find it disturbing that there doesn't seem to be new emerging businesses/industries to make up the gap. There are other ways of solving this problem, but I think they are currently political and cultural non starters (shorter work weeks, for example) Unfortunately, we have been cutting investment in base R&D for decades which I am pretty sure slows the emergence of new areas for industry. We also have a shortage of entrepreneurs. The low cost of entry for many businesses should allow many more to take risks, but there don't seem to be enough risk takers. Of course, part of this is chicken/egg...no demand, so why go into business? Sigh, no fast magic bullet solutions.
In related news: its structural because the DOHA round is currently hung up.
Time to leave this country.
What I found is that construction employment rose steadily since 1962, then began to plummet in 2007. From 2007 to 2011 the construction sector lost 28% of its workforce. That's consistent with the cyclical model; this is the effect of the recession.
But manufacturing and mining employment peaked in 2000, and has been dropping ever since. The downturn in those sectors began seven years before the recession. From 2000 to 2007, these industries shed 20% of their employees, while construction employment GREW by 12%.. There's your structural change.
So in the 2000-2007 period we traded 12 million manufacturing/mining jobs for 1.3 million construction jobs, a loss of 10.7 million jobs where average American workers made good wages.
Renewable energy, information technology and life sciences are all great industries, but they aren't going to create ten million middle-class jobs for people with high school diplomas and no special skills. Outsourcing manufacturing has left our economy with a structural void that used to be the backbone of the middle class.
It is possible to parse structural, but the real root cause is that the return of Social Darwinism has morphed (metastasized) into Financial Darwinism with the ethic: survival of the richest. The genre of socipathic greed has never been concerned with balancing the common good with private needs and the past is prologue.
Krugman does not deem this is a "great recession" but a "Depression." And our last one was caused by the laissez faire - maximize profits no matter what economic practices of robber barons in the era of Social Darwinism.
How We Got Swindled is the only book about the root cause, and the underlying cause of the manifestation must be identified to attempt a cure. Goodman is right about what can be done now to apply a tourniquet but the gaping wound will remain. To know what Congress and Wall Street do not want you to know: www.howwegotswindled.com
We don't accept collapsing bridges: we carefully analyze what went wrong and build a better bridge, taking every practical measure to reduce the chance of a repeated disaster. Unemployment is a serious and fundamental problem for any society. Why would we do any less in the case of a collapsing economy?
Unless someone doesn't want it fixed.
The kind of tremendous investment Goodman is talking about can only be brought about today by a significant borrowing of even more money, ie Simulus ll. And he knows it.
Democrates= "They're frustrated and given up looking for work"
Republicans/Gov.Lepage= "Get of the couch and get a job!" One can bet, Governor Lepage of Maine, took the words right out of Romney's mouth when he made the comment.