Why We Need Full Employment Policies Now

Awhile back, Dean Baker at the Center for Economic and Policy Research published a (free) book castigating progressives for “loser liberalism.” We’ve played into the hands of conservatives, he argued, by failing to focus on how they’ve structured markets to “redistribute income upward.”

This came not long after Rortybomb blogger Mike Konszal asserted that we’ve given in to “a kind of pity-charity liberal capitalism” because we’ve abandoned the vision of a government that empowers workers.

New York Times columnist Thomas Edsell picked up on this, saying that our focus on “means-tested transfer programs” like food stamps and long-term unemployment benefits leave “the most needy and vulnerable to the vagaries of public opinion” — a big mistake because hard times like these diminish sympathy for the less fortunate.

These critiques make me feel more than a little sensitive, since I’ve tended to focus on programs designed to compensate for the economic disadvantages of the poor and near-poor.

I’m not inclined to shift my focus to how markets are structured. Which is just as well because I don’t have the expertise.

But I do think it’s time to get a little balance here. So I want to take note of a major theme in the critiques — and another (free) book, co-authored by Baker and fellow economist-blogger Jared Bernstein.

The theme is the need for government policies that will create and sustain full employment.

We’d then have an economy where increased demand for goods and services wouldn’t create a more jobs because, with some limited exceptions, everyone who wanted a job had one — and was working for as many hours as s/he wanted to or could.

Or, as economists conceive it, the unemployment rate would be low enough so that increased demand would only drive up inflation.

Full employment would obviously solve our immediate jobless worker problems — especially the very high percent of workers who’ve been jobless a long time and seemingly will remain so as long as employers can chose to summarily reject them, as many apparently do.

But as ex-Wonkblogger Ezra Klein’s review of the Baker-Bernstein book says, full employment also creates the conditions for worker power — and the wages, benefits and other working conditions that power can gain.

It’s especially important in today’s economy, where unions represent only 6.7% of private-sector workers. This, combined with other developments, e.g., opportunities for businesses to shift jobs overseas or to states with laws that weaken unions, helps explain the fact that wages have flat-lined — except for those at the tippy-top.

It’s most important for workers without a college degree — in part because many who have one are perforce currently taking jobs that don’t require college-level skills. Hence an unemployment rate for the lowest-educated workers that’s three times higher than the rate for college graduates.

This is one reason Bernstein calls full employment “the best, if not the only, friend of the working class.” But it’s not the only reason.

When he analyzes data from the Economic Policy Institute, he finds significant increases in hours worked by those in the bottom fifth of the income scale during past periods of full employment — and increases for those in the middle fifth also.

This, of course, is another way that full employment boosts wages. It would surely make a big difference now, with more than 7.2 million part-timers who’d like full-time work, but can’t get it.

Needless to say, I hope, anything that boosted working families’ incomes would narrow the growing gap between the richest and the rest. We’d probably still have a high degree of income inequality, which ought to concern us forth both economic and political reasons.

But (back to Bernstein again) the growth of our economy, i.e., the value of all the goods and services produced, would be more equally shared.

And there’d be more growth because lower and middle-income families would spend more, without contributing to the sort of credit bubble that’s been held partly responsible for our Great Recession.

And for all these reasons, there’d more tax revenues that could be used to strengthen the safety net and/or work supports — the Earned Income Tax Credit, for example, and subsidized child care — for the smaller number of people who still couldn’t afford what Baker and Bernstein refer to as “a decent standard of living.”

Baker and Bernstein propose a number of ways to achieve full employment — some more controversial than others.

Most controversial perhaps is the fundamental premise. The federal government should actively intervene to restore full employment. And that will mean choosing to run deficits for awhile, rather than trying to squeeze as much as possible out of the non-defense part of the budget.

Hard to imagine in this political climate. But if enough people understood what they — and the country as a whole — would gain from a full employment economy, we might see the political will to pursue it.


2 Responses to Why We Need Full Employment Policies Now

  1. MICHAEL SLONE says:

    I truly appreciate your sentiments. The social ills of the chronically unemployed are a web of factors that entangle them like Frodo in his frantic attempt to escape the spider. They all must be simultaneously addressed for any hope of lasting reform and a better America for all. And this doesn’t even begin to address the international ethical issues related to fair wages and the goods we buy. This is a grand mess!

  2. Kathryn Baer says:

    And I appreciate your Frodo analogy! One of the many things that makes the situation so complicated now is that we have people who are, as you say, chronically unemployed. Still others are chronically underemployed, patching together part-time and/or temporary jobs. Still others have worked full-time (or nearly so) for many years and can’t find jobs. We’re told they’re likely to become chronically unemployed. So, yes, the different factors that account for the unemployment/underemployment problems must all be addressed.

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