by Frank Stricker, Professor Emeritus of History, Labor and Interdisciplinary Studies, California State University, Dominguez Hills, and author of Why America Lost the War on Poverty–and How to Win It (Univ. of North Carolina Press, 2007) Cross-posted from OpedNews.com, 12/24/2015
We have had job growth in America for five years. But we don’t have full employment and we haven’t had anything close to full employment since the late 1960s when unemployment stayed below 4% for four years. We’ve had just one year since then when unemployment averaged only 4.0% (2000). But in December, Federal Reserve officials decided that the economy was healthy enough that they could start raising interest rates. That’s a process that could eventually slow job creation. And that would be a bad thing.
Unemployment, and underemployment with too few hours and poverty-pay, is widespread in America. According to the Bureau of Labor Statistics, there were 7.9 million unemployed people in November of 2015 and the unemployment rate was 5%. But the National Jobs for All Coalition, to which I belong, adds 5.6 million people who say they want to work but have not searched lately, and 6.1 million part-timers who want full-time work but cannot find it. Our unemployment rate is 12% and almost 20 million people. So real unemployment is more than twice as bad as the government says.
There are plenty of stories to back up our view. In a really good job market, employers would be begging for workers, but they aren’t. To fill 4,000 positions in September Chipotle had 60,000 applicants pre-register and they expected to interview 30,000 to 40,000 people. That was for jobs that often paid just 9 or 10 dollars an hour. Meanwhile, in Los Angeles, a licensed vocational nurse could not find a job and is selling her blood to pay the bills. A college student who works forty hours a week at Starbucks and lives with her working boyfriend has to sell plasma twice a week to pay the bills. Are these signs of a high-employment economy?
Another negative sign. For 80% of the work force the purchasing power of the average hourly wage in 2015 is about where it was in the 1970s. That’s wage stagnation. It happens because of weaker unions, job exports to other countries, and other factors too, but a crucial cause is that there are always more people who need jobs than jobs.
I am talking to grandpa, Uncle Joe, Aunt Isobel and cousins Bert and Ernie at a holiday dinner. Uncle Joe agrees that the job situation isn’t good. But he thinks government is the problem. He heard most of the Republican presidential candidates say something like that. We just need to liberate the genius of American capitalism. Get government out and we’ll get a millions of new good jobs.
Really, Joe? No more Marco Rubio for you. Beginning in the 1970s, a coalition of conservatives, business leaders, conservative ex-liberals campaigned against unions and worker-friendly legislation and for more power for capitalists. And they won. We got fewer regulations, and less enforcement, lower taxes, less unionization, sharp cuts in welfare, stagnant wages, and huge increases in the amount of money going to the top 1%. More businesses learned to thrive by paying poverty wages at home and abroad. Capitalist “innovation” meant raising the level of old-time exploitation. WalMart and Amazon, with their whizzy logistics systems, have millions of workers in stores, factories, and warehouses getting lousy pay and no benefits. And now there is the Uber, which offers a convenient calling-and-payment system, but uses reactionary labor practices. The company classifies employees as independent operators, thus avoiding the need to pay taxes for Social Security, Medicare, unemployment benefits, and workers’ compensation. That’s innovation?
Well, OK, says Aunt Isobel. We have a problem. Why not use the time-tested method of tax cuts for business and investors to get more good jobs? I answer that the method has failed the tests. Programs that offer tax credits for every unemployed person hired often just reward employers for the hiring that they would do anyway. Ditto for Hail-Mary tax cuts that claim to incentivize rich savers and big businesses to hire more workers. The Bush tax cuts of 2001 and 2003 were a giveaway to the rich that brought no special bump in job grow and, Aunt Isobel, you may have noticed that the cuts did not keep us from the worst recession since the 1930s.
One problem with tax cuts that favor the rich is that there many other things for bankers, business planners and rich households to do with new money than to invest in good jobs in the U.S. They can invest it overseas, stash away for a better day, buy a mansion in the Caribbean or an old master painting in New York. Or invest in Instagram and other high-tech companies that have relatively few employees. Or Uber and other companies that create bad jobs. [i]
So if the Fed cannot create enough good jobs and tax cuts won’t work, we are left with direct government job creation. It’s was done before. In the 1930s the federal government managed three successful programs. The Civilian Conservation Corps (CCC) gave young men skills and work discipline and it gave the country parks, picnic grounds, thousands of little dams, windbreaks and much more. The Works Progress Administration (WPA) had about 2 million people at any one time working in everything from road repair to child-care and theater performances. The Public Works Authority (PWA) provided funding and supervision over projects that were usually carried out by private companies. By the end of the 1930s, the PWA had built something–dams, airports, new bridges, schools, post offices, fire houses–in 3000 American counties.
In our time, there are dozens of useful projects to employ people in regular jobs. Some are under way. Some were included in Obama’s stimulus program which funded road repair. Streets in my neighborhood finally got fixed. The American Society of Civil Engineers gave American infrastructure at D+ recently, so there’s a lot of work to be done fixing our roads, bridges, water systems and public schools. Obama also added money to the Weatherization Assistance Program that employs private companies to insulate the homes of low-income families. There are programs like Head Start that should be expanded and upgraded.
But cousins Bert and Ernie aren’t convinced yet. They are pretty cynical about government. Sure, some things worked in the 1930s, but people were different then and the crisis was bigger. They had to work together. But now? People won’t work together and most federal programs are in trouble. Obama’s stimulus program flopped, Obamacare is a disaster, and Social Security is just about bankrupt. Bert and Ernie tell me that Social Security won’t be there when they retire.
I tell them they are wrong about these three programs. But the cousins want to fight a little more about the pros and cons of direct job creation by the government. They are interested in the issue and it links to some of the things they have been studying in college. Here are some of the debates we had.
1. Assertion: Government screws up everything. Businesses always do things better.
Answer: Really, after all we have seen in the last ten years? Government stumbles at times but many programs work well. As in all large organizations, there are problems due to the complexity and scale of tasks, weak administrators, lazy employees, and reliance on private contractors who are incompetent. But many programs work. Sometimes the simpler and more socialized, the better. Social Security keeps track of millions of workers and retirees. Every month 58 million retirees, their dependents, survivors, and disabled people get checks. [ii]
2. Assertion: Job programs cost too much. We don’t have the money. We can’t keep spending money we don’t have. [iii]
Answer: We can find the money if politicians in Washington want to find it. We’ve spent trillions for wars of dubious justifications (Iraq is an example) and for tax cuts that favor the rich and don’t trickle down. We can easily afford $200 to $300 billion a year for a jobs program by taxing the rich more, adding a small tax on Wall Street financial transactions, cutting loopholes like deductions for corporate meals and entertainment, and creating a national carbon tax to limit greenhouse emissions. And we can borrow some of what is needed. There are good deficits (for job creation, to avoid a Great Depression) and bad deficits (tax cuts to the rich, dubious wars). In the long run, more good jobs adds tax revenues and contributions to the Social Security and Medicare trust funds. And it lowers expenditures on unemployment insurance and food stamps. As jobs and the economy grow, deficits fall. [iv]
3. Assertion: If the federal government borrows too much to create jobs, we’ll bankrupt the country. We already owe $17 trillion. Our kids will have a huge bill to pay; everything they earn will go to pay off the debt. We’re doomed.
Answer: Some people who claim to be alarmed about the national debt are sincere, but many have a hidden agenda. They aren’t really worried about deficits. They hate Obama. They hate liberal social programs. They want to get their hands on public monies. For years, Wall Street billionaire Pete Peterson has tried to scare people about deficits in order to privatize Social Security and put trillions of dollars of retirement money into the hands of bankers and speculators.
You hear less about deficits today, partly because big deficits promoted economic growth and more federal revenues and so the federal deficit fell from $1.5 trillion to $.5 trillion. There’s no urgency to paying off the accumulated debt, but people who are worried about the problem could support higher taxes on the rich and a good-jobs program to increase government revenue. But they won’t. [v]
4. Assertion: If we ever get close to full employment B let’s say 3% unemployment–inflation rates will soar. When workers are in high demand, they get pay increases and employers have to raise wage offers and prices. Bert and Ernie learned in their econ class that economists have proved that a Philips Curve and other iron laws of economics mean we cannot have low-inflation and low unemployment at the same time.
Answer: This assertion highlights a potential problem. Truly full employment should bring substantial wage increases. That’s one reason we want full employment. But do companies have to raise prices much? Most large companies, like Wal-Mart, have huge profits. Shareholders can take a little less and CEOs too. It’s time to stop the upper-class pay grab while tens of millions work for poverty wages. We should talk about the morality of people “owning” $100 billion, like the Walton family, while millions of households try to get by on less than $30,000 a year. Workers’ productivity increased 80% over 1979-2009, but average pay barely moved. Almost all the benefits of more efficient production went to the top 10%. High-end incomes are wildly inflated but that kind of inflation got little attention for many years and even now not much is being done about it. [vi]
Another point: inflation of 4% rather than 2% would not be a heavy price to pay if more people had a decent job or reasonable prospects for getting one. Also, if the cousins are sincerely concerned about inflation, they can work to make sure our new job program includes money to pay scholars and activists to develop anti-inflation programs that do not rely on laying off workers and quashing wages. In the 1970s few economists worked on softer solutions. The brutal recession of 1981-1983 was easier B and it fit the business and conservative agenda for decimating unions and worker power. Other countries with strong unions or a stronger sense of WITT (We’re in This Together) have had success with softer solutions. [vii]
5. Assertion: Where’s personal responsibility? Bert and Ernie have finally had it with economic ideas and political discussions. Their solution is simple: If people who want a job got off their butts and looked for work, the unemployment problem would disappear.
Answer: Of course people need to take responsibility for themselves; a relative handful don’t. Most do, and many who try hard don’t get much in return. National policy should help the large group that is trying hard and not getting ahead. We know average wages have been lousy for forty years. We know that there are always fewer job vacancies there are job seekers. It’s obvious that the general ups and downs of unemployment are systemic and have nothing to do with people getting more or less lazy. Finally, tens of millions of people go to work every day for low pay, no benefits and unsteady hours. Are they lazy?
6. Assertion: Do we have to be idealists? We work hard–well, at least in the summer–the cousins say. We’re getting by. Why should we worry about other people? YOYO (You’re on Your Own) is a more realistic way to organize society than WITT (We’re In This Together).
Answer: Kids, you are living off others, your parents and tax payers in particular. Furthermore, as we discussed, many people who work hard are barely getting by. Some day you guys may be out of work and unable to pay your bills. Our collective goal should be to recast the economy to create better jobs and make success possible for more people. Economic success requires three things: individual effort, supportive structures, and a little luck. YOYO is not a full description of the way the world works. Our modern robber barons don’t do it all on their own. They have laws and police and politicians and media hacks who defend them when they fleece the public and exploit their workers. They depend on public schools to educate the work force and they use publically supported transportation, communication networks, government subsidies, and more. We are all part of a densely interdependent economy. [viii]
7. Assertion: Do we want everybody working all the time? Grandpa makes a good point: “You people are always complaining about being too busy. Full employment means more people with less time.”
Answer: Right. We don’t want everyone working all the time. We want better jobs and better pay so that people who need to take time off have enough income to carry them through. We need paid parental leave so that employees have more time for their children and struggling old folk. In the sandwich generation, it’s usually women who do the care work for kids and elders, sometimes while holding down a job. They need breaks and men need time to do more care work. And many people need vacations and sabbaticals to refresh themselves and do fun things B cook, write poetry, build a motorcycle, shoot the rapids, hike to the top of something. Along with full employment, we need a Basic Guaranteed Income B a package of income supports to guarantee that people who need time off have a minimum income. [ix]
8. Assertion: By dessert time, some of the people at the table are starting to buy into the idea of a government good-jobs program. But they think that the politics of getting job laws enacted in Washington are impossible. Why exert yourself for something that cannot happen?
Answer: This is a tough one. Conservatives have huge power in Congress and in many states. But many people are taking action around jobs and wages and in some regions of the country minimum wage levels are going up, and sometimes pretty rapidly. In 2010, no one would have predicted that a $15 an hour minimum wage would be on the books in a fair number of cities and regions in 2015.
9. Assertion: Gramps has one more point. He knows about people. He’s been around. The American People are suspicious of government and they don’t like welfare-type programs. A large government jobs program is dead on arrival.
Answer: The job program is about work, not welfare. Full-employment supporters should not badmouth government handouts; some people need and deserve government assistance, whether or not they work. But the jobs program is about work and enabling the work ethic.
Furthermore, the attitudes of average Americans are less conservative than grandpa thinks. In surveys they give majority support to food stamps, unemployment insurance, Social Security, government infrastructure projects and much more. How strong these beliefs are, and whether public opinion would fall away when right-wingers attack job programs as inefficient, socialistic welfare boondoggles is not clear. There is a class of things including welfare and affirmative action and income redistribution that turns off quite a few people B even people who are living on government payouts. Few Americans B certainly fewer than Dutch, Danish, and French people B show a forthright appreciation of welfare programs. Few could say this: A Welfare programs are really good. They help make America great. Most people will need government handouts at some time in their lives. It is good and moral that we help one another through our government. Poverty and unemployment have systemic causes. The victims are not the cause.
I can see that the folks at the table are not comfortable with that idea. But, in fact, gramps loves that Medicare pays most of his medical bills and he needs his Social Security to get by. Uncle Joe and Aunt Isobel once had to go on food stamps for more than year when Joe got permanently laid off by the Ford Motor Company. The cousins have received Pell Grants. But those are exceptions to the rule, right?
Not really. Americans need to know wide usage of government programs and conservatives need to learn compassion. Political education in this direction is being done all the time by community activists, on-line sites, progressive unionists, Moral Monday participants, liberal pastors, and outstanding politicians like Senators Bernie Sanders and Elizabeth Warren. Perhaps someday we can banish the term welfare and start over. Maybe all social welfare programs, from unemployment insurance to welfare itself can be called the American Independence Program, because without Social Security, Unemployment Insurance, food stamps, Medicaid, and, yes, welfare, people are less free and more enslaved to poverty and worry and stress. But whatever the wording, Americans, especially conservatives, need to stop picking on poor people. I think Baby Jesus, who’s responsible for the Xmas holidays, would have wanted that.
[i] The work of Mark Zandi during the Great Recession is useful here. For example, he estimated that the Bush tax cuts were 1/15 as effective as direct job creation.
[ii] As an example, Medicare fraud usually involves crime by private businesses B doctors, clinics, and so on. It’s really private-sector crime, but few politicians say we should eliminate the private sector element in government medical programs. Of course, the Social Security Administration is not perfect. Nor are people in the system. Some people are listed as deceased who are not, and vice versa. But erroneous payouts are less than 1%, and the cost of keeping perfect records would require more spending, and Congressional conservatives won’t support that. Better to use the problem as a target for undermining Social Security. See Michael Hiltzik, “60 Minutes Bungles Another Hit Piece on Social Security,” March 16, 2015, Los Angeles Times.
[iii] This is a common right-wing approach. Republican Representative Paul Ryan says, “We need to reform our poverty programs. We’re going to have a debt crisis if this country keeps spending money we don’t have.” Ryan quoted in Parade, August 17, 2014, 14.
[iv] Valuable here are Philip Harvey, “Responding to Rising Unemployment: Can We Afford Jobs for All?” Uncommon Sense 14, October, 2001, accessed 11/30/2007; and Thomas L. Hungerford, A The People’s Budget: Analysis of the Congressional Progressive Caucus Budget for Fiscal Year 2016, Economic Policy Institute, March 18, 2015, esp. 10-12 on taxation.
[v] While some conservatives claim to be worried that the U.S. cannot pay its bills, Tea Partiers are willing to have the government renege on its obligations to get their way. In his drive to privatize Social Security, George W. Bush suggested that the federal government had no obligation to repay what it had borrowed from the Social Security Fund. Recently, Tea Partiers opposed raising the debt limit, which meant they opposed the government from paying debts already incurred.
[vi] Productivity table from Mother Jones, “All Work and No Pay,” July August 2011, 21. Also, Catherine Reutschlin and Amy Traub, “A Higher Wage is Possible: How Walmart Can Invest in Its Workforce Without Costing Customers a Dime,” Demos, November, 2013.
[vii] Inflation in the 70s was driven by oil price increases, not wage increases. But, vice versa, a big recession with high unemployment did help to cut inflation rates, regardless of inflation’s causes. See Robert Pollin, Back to Full Employment, 29-33, and “Is Full Employment Possible Under Globalization” (Political Economy Research Institute, University of Massachusetts Amherst, April, 2008). Also note that modestly rising prices encourage more investment than falling prices.
[viii] Elizabeth Warren, quoted in John Cassidy’s review of her A Fighting Chance in the New York Review of Books, 5/22/2014, 6. Additionally, WITT-style altruism can be good for the soul. Being active in movements to push politicians to create good jobs is hard work, but it may help some people combat depression, the sense that life has no meaning, and the feeling that we have no power over events. E-mail to author, 8/18/2014, from Sharla Stephens, Licensed Marriage and Family Therapist, Littleton, Colorado.
[ix] See the publications of BIG, the Basic Income Guarantee group.