No Jobs – The Theory of “Structural” Unemployment

factoryIs there any hope for the unemployed? Apparently not. Many, says Chrystia Freeland, global editor-in-chief of Reuters news, are people “on the wrong side of history.” The comment came last Saturday during one of CNN’s innocuous chats about the state of the economy where people of note sit around and try to spell out what has gone wrong. Freeland, 32, a Harvard graduate and Rhodes Scholar, was explaining how the stubborn joblessness in the U.S. wasn’t necessarily the result of the recession but is rather “structural,” that is, the result of those looking for work and not finding it lacking the requisite skills for today’s economy. Her fellow panelists seemed to agree, one of them, Lakshman Achuthan, managing director of Economic Cycle Research Institute, saying that most of the jobs being wiped out daily “will not come back.” Then, the moderator read the words of some Republican politician putting responsibility for the jobs crisis on President Obama saying, “I smell the coming of midterm elections.” They all giggled.

Frankly, I couldn’t find anything funny about it. The actions of those in Congress that have held up the extension of benefits to the long-term unemployed are not only politically reactionary but also morally repugnant. It’s easy to understand their continued assault on the concept of empathy; they don’t have any and don’t think anyone else should. And, as far as working women and men being on the “wrong” side of history, well that depends on who’s making it. The fellow who said the jobs are not coming back failed to say where they went.

It’s all so cynical and so much hogwash.

Yes, some of the unemployed would have a better shot at finding work if they had great technical training, and yes there are vacancies in some skilled positions. But there are skilled workers in the ranks of the jobless. I recently ran across the words of one a 42-year-old Army veteran who used his GI Bill to get a Computer Science degree. After 12 years of working as a programmer, he told About.com, he was laid off. He said that for a year he had submitted resumes and been interviewed seven times but “sadly there are too many programmers who are also out of work, there are always more than 60 other computer programmers applying for the same job.”

“The unemployment benefits are a saving my life. I am also a diabetic. Without these benefits my diabetes and health would be out of control,” he concluded.

Last week, the New York Times ran a story on its business page suggesting African Americans are more upbeat about the state of the economy than others. It seems 53 percent of the black people polled by the Pew Research Center say they believe the economy is improving as opposed to 40 percent of whites. The report found the number “seemingly counterintuitive” but the writer, Floyd Norris, quickly came to the right conclusion as to why: wishful thinking. For the first time there’s a black man in the White House and we want him to succeed. It’s a hope against hope. But that doesn’t make the numbers looks any better.

“While nearly all Americans have suffered, blacks and Hispanics have borne a disproportionate share of both job losses and housing foreclosures,” says the Wall Street Journal.

Surveying the jobless statistics for June, economist Dean Baker of the Center for Economic and Policy Research observed, “The employment-to-population (EPOP) ratio fell to 58.5 percent, reversing gains from the prior three months; although this is still 0.3 percentage points above the low hit in December. This decline was concentrated among men who saw their EPOP fall by 0.3 percentage points, as their unemployment rate edged up from 9.8 to 9.9 percent. The EPOP for women was unchanged, with their unemployment rate falling from 8.1 percent to 7.8 percent.

“Black men were hit especially hard as their EPOP fell from 58.5 to 57.3 percent.

The EPOP for black teens fell by 1.8 percentage points to 14.4 percent, just above the all-time lows hit in November and December,” said Baker.

Another recent research finding the major media didn’t report on was spelled out June 30 by Sheree Crute and published June 30 on The Root. It was called “The Recession’s Long-Term Impact on Black Kids,” and said, “Our children may be most vulnerable to damage from the economic downturn.”

“As adults wrestle with rising foreclosure rates and disappearing jobs, child-development experts are reporting that children may end up shouldering some of the most severe, long-lasting consequences of the recession of 2008, according to the Foundation for Child Development (FCD),” wrote Crute. The foundation looked at seven key areas to see how the nation’s children are doing amid the recession and what it means for their futures. “The results show that kids from preschool to age 19 may have to fight the detrimental impact of America’s financial crisis for much of their lives. African-American kids will be “harder hit than their white counterparts because a larger proportion of children of color live in poverty.”

The Composite Child Well-Being Index reveals that “virtually all of the progress made in family economic well-being since 1975 will be wiped out for many,” as individuals, organizations and governments trim budgets. Kenneth C. Land, a professor of sociology and demography at Duke, who conducted the research and wrote the CWI report, explained, “In order to measure the full impact of the recession, we looked at trend data from 1975 to 2008, then projected what may happen through 2012.” The survey numbers revealed a host of challenges for children in middle- and lower-income families, “but in each category, the risks would be 1.5 percent to 2 percent higher for African-American children,” he says.

“This situation will be particularly hard on African-American children because they were already disproportionately affected by poverty before the recession began,” said Alvin Poussaint, M.D., an expert on children’s mental health and a professor at Harvard, after reviewing the CWI at The Root’s request. “What we have here is a series of tragedies waiting to happen.”

Crute writes, “One other deeply disturbing trend highlighted in the CWI is the increasing alienation of young people who see no clear path to economic advancement. African-American kids – who, the CWI reports, will experience an unemployment rate near 40 percent – are particularly vulnerable. “It starts with the cuts we are seeing in pre-kindergarten programs around the country and extends to adolescents,” Land says. “We are picking up increases in detached youth, teens who are not enrolled in school or employed. Without these social bonds, we may see upticks in violence and risky behaviors.”

Crute goes on to talk about the possible ways to ameliorate the effects of the economic crisis on African American youngsters, including the potential role of the church, mentoring programs and family and community connectedness.

Of course, nothing would help more than their parents having jobs.

Being unable to collect further unemployment benefits after being out of work for a long time is going to make life a whole lot rougher for the jobless workers and their kids.

Some have attributed the Right’s unconcern for the plight of the unemployed to ideology, a sort of tea party notion that a government that actually steps in to aid the victims of the economic crisis is too big. Another explanation is that it all flows from the cynical decision of the Republican Party of “no” to oppose anything proposed by the Obama White House, and possibly a motive of hoping for the worse economic conditions by the time of the November elections. A third, and quite plausible, suggestion has been made by AFL-CIO President Richard Trumka, who said the other day, “In a treacherous economy, our leaders should share the goal of creating sustainable, broadly shared prosperity. Instead, it seems congressional Republicans are determined to create a desperate workforce, willing to take any jobs at any pay rate under any circumstances. It’s a dream come true for corporations that have pushed for 30 years to turn America’s middle class into a demoralized, low-wage, and submissive workforce.”

Trumka went on. “How any member of Congress can head home for this July 4th recess and talk about the November election without having voted for jobs and extended unemployment aid is beyond me.”

Which returns us to Freeland and company and this “structural” unemployment and to the jobs that “will never come back.”

“Wall Street has a plan and a new logic that is quietly infiltrating the media and policy circles,” wrote Les Leopold on the Huffington Post last week. “It’s called ‘structural reform.’ Although it is likely to involve some additional pain and suffering, it’s being sold as the new magic bullet for our ailing economy.”

Leopold continues, “Structural reform is Wall Street speak for reducing what is often called the ‘social wage’ for working people in every way possible: increasing the retirement age and cutting Social Security benefits, government employment and benefits, funds for public education, defined benefit pensions, and health care expenditures….and of course, extended unemployment benefits as well. (The Senate’s refusal, yet again, to extend unemployment for 1.3 million laid-off workers comes straight from the ‘structural reform’ playbook.)

“Allegedly, the net result of these ‘reforms’ is to reduce public debt while making the labor market more “supple” so that employment and wages can rise and fall quickly in response to shifting supply and demand. This ‘freer’ labor market reduces the employer’s cost of hiring workers, which is supposed to trigger a major jump in private sector employment.”

“In truth, ‘structural reforms’ doesn’t even touch the heart of the crisis – tragically, they’ll only make it worse. The real heart of the problem is too much wealth in the hands of the few and too much power and wealth controlled by Wall Street,” concludes Leopold, the author of The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity-and What We Can Do About It. (Chelsea Green Publishing, June 2009).

“There is little basis for a hope of an improvement based on the establishment data,” says Economic Policy Institute economist Heidi Shierholz. “With state and local governments cutting back to deal with deficits, house prices falling again, and wages not keeping pace with inflation, there is little hope for a robust growth any time soon. It is likely that the unemployment rate will rise in the second half of the year,” she continues, “With a 9.5% unemployment rate and the private sector not yet able to provide a robust recovery, Congressional inaction in passing policies that support economic growth, including renewing the extended jobless benefits in the Recovery Act and providing fiscal relief to states, is inexcusable.”

Carl Bloice

Crossposted with permission from The Black Commentator.

Comments

  1. Robert says

    Long-term, structural unemployment is real and is here to stay. Even those economists who are beginning to recognize the problem vastly underestimate the ultimate impact. It is not just about a “skill mismatch.” It is ultimately going to be about a total lack of demand for skills (and workers). It is something unprecidented and it is caused by advancing technology. And ,no, it is NOT the same thing that has been going on for decades. Technology is moving faster and faster. In the next couple of decades will will see a staggering level of progress.

    For an excellent overview of this problem, check out this book (available as a free PDF): The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. http://www.thelightsinthetunnel.com).

    If there were a textbook on this issue of technological unemployment and where it will lead, this book is it. I wish every economist would take a break from data analysis and READ THIS BOOK.

    The author also has a blog at http://econfuture.wordpress.com

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