The Dangerous Mythology About The US Labor Shortage

The dangerous mythology about the US labor shortage

In explaining the unimpressive quarterly jobs data recently, there is a dangerous mythology surfacing, a common refrain among pundits, that people don’t want to work because of stimulus checks and extended unemployment benefits.

Some argue that unemployed low-wage workers make more from these benefits than from their previous employment. This may be true, but in my nearly 10-year tenure as CEO of what has become the nation’s largest publicly funded workforce development system, where we have facilitated training and employment of over 70,000 people, I have never once heard anyone say they didn’t want to work.

This is a harmful, corrosive narrative rooted in class, gender and race bias; it is a fallacy meant to demean and stigmatize.

The truth underlying what’s being touted as a “labor shortage” is far more nuanced than glib jabs at the working class. Examining reality invites us to reassess our beliefs about work and workers in this country.

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Why is the economy continuing to only plod along? [But, yes, it is indeed better than it was 4 years ago.]

Why is unemployment looming stubbornly near 8 percent?

Paul Krugman explains:

"For future reference. In a depressed economy, with the government able to borrow at very low interest rates, we should be increasing public investment — the true cost of the resources is negligible, so the rate of return is very high, not to mention the desirability of creating jobs.

Here’s what has actually happened, as measured by the sum of state, local, and federal nondefense investment:

Doing it wrong."

And, yes, Republican obstruction of all Obama's and the Democrat's jobs legislation has a lot to do with this.

According to Republicans, borrowing is bad, even though the cost of money is about as cheap as it gets. There isn't a better time to invest our infrastructure - mass transportation, water and sewer ways, the electric grid, the greening of public buildings, repairing bridges and roads, etc.

Also, according to Republicans, government-induced demand is a bad thing, although no one else (I'm looking at you, private sector) is willing to spend any money at the moment. Yes, for those of you being foreclosed upon, losing your job, already out of work, behind on your bills, you're just going to have to tough it out until the market decides you're worthy of saving.

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Debt, Investment & America's Future

Debt, as a percentage of GDP, hasn't been this high since the Great Depression.

And?

Television personalities, pundits, supposed-experts, and other talking-heads are going on and on about how U.S. debt is dooming America.

Over the period following the Great Depression we heavily indebted ourselves to expand infrastructure, educate citizens, and to invest in our future...ending the Depression and moving America forward. From this period, with those large investments, the U.S. saw it's greatest period of prosperity and growth in our history. And, let me add, an income convergence. The middle class was created. The economy as a whole buzzed along, but rather than a select few taking most of the gains (like today), we enjoyed a shared prosperity where one breadwinner could support a family with a decent middle-class lifestyle (the American Dream); the boss made more, but not exponentially so, and the U.S. lifestyle and society were the envy of the world.

Schools, roadways, subdivisions, waterways, electrical grids, sewer systems, bridges ... almost every infrastructure, structural, and institutional entity embodying our national fabric - a majority of the things we now consider "the U.S." - were a direct result of those investments that were made to get out of the Depression.

[graph]

Interest rates are at historic lows. There is no better time to make infrastructure investments to propel us into another half-century of prosperity.

Austerity U.S.A.

Paul Krugman - again - dismantles the meme of an expanding and frivolously spending government: 

"Disappointing GDP number — we’re not growing fast enough to make any significant headway on reducing the output gap — but hey, no need for further Fed action.

But let’s talk right now about fiscal policy. I wrote this morning about our de facto austerity. Here’s another indicator. Look at government (all levels) purchases of goods and services, that is, actually buying stuff as opposed to transfer payments like Social Security and Medicare. Here’s the past decade:

Obama, far from presiding over a huge expansion of government the way the right claims, has in fact presided over unprecedented austerity, largely driven by cuts at the state and local level. And it’s therefore an amazing triumph of misinformation the way that lackluster economic performance has been interpreted as a failure of government spending."

The U.S, Debt & Households

In the media, when trying to practice "The Sky Is Falling" journalism (which is often), you'll see it said that the U.S. should act like a household. They shouldn't be in debt. They should balance their budget. They can't spend more than they take in. If the U.S. doesn't heed these warnings, Armageddon isn't far away.

Inspirational fear mongering aside, most U.S households don't to any of these prescriptions.

67% of U.S. homeowners have a mortgage. The median value for a home in the U.S. is $171,000. Per capita income is $26,000. So, let's assume the typical household with two adults is earning $52,000 per year. With a mortgage on eighty percent of the median home value, this is indebtedness of 2.6 times annual household earnings. And, this is just the house. Most households also have car, credit card, and medical debt.

The United States has a $15 trillion dollar economy. U.S debt is also estimated at $15 trillion. As a whole, the country is breaking even. Now a surplus would be nice, but compared to the typical U.S. household (in debt at least 2.6 times more than they earn, on average), breaking even seems pretty nice.

Cutting Is Completely Wrong

"I would argue that we don't have a budget crisis. We have a refusal to levy adequate taxation on those that can afford it "crisis" created by our politicians who refuse to raise taxes on the rich at at time in our history that resembles the Gilded Age with income disparity. As Sachs noted, we're going after discretionary spending which hits in is words, science, education, technology, and energy and he's exactly right on how our approach to what we should be cutting is completely wrong." [h/t Crooks and Liars]

State & Local Shrinkage

More good reporting from Jon Perr:

• The USA net fiscal stimulus was modest relative to peers, despite being the epicenter of the crisis.
• Once you take state and local cutbacks into account, there was no surge in government spending.
• Local governments are cutting jobs at the fastest rate in almost 30 years.
• State and local governments has shed 407,000 jobs since August 2008.

Public Appreciation

Grover Norquist, Chris Christie, Scott Walker, amongst many other conservative gasbags, are ramping up their efforts to belittle unionized public workers. They're selling their well-worn "privatization" snake oil as our savior; while blasting unions as our nemesis.

But, as I posted recently, aid to state and local governments is one of the five most stimulative spending initiatives the government can engage in. For every $1.00 invested in state and localities, $1.41 is returned. A very good bang for the buck.

Public workers not only provide services we all count on (even if they are rarely thought about or acknowledged by most citizens) but they also spend their earnings in their community - helping to create jobs, stabilize businesses, and support other economic activities.

As government has stepped aside over the past 40 years - with deregulation, less oversight, lower taxation, less unionization - we have seen a proportionate increase in inequality. More privatization and less government have been the trends pulling apart our society. To put this misguided strategy on steroids during the second worst economic downturn in history is suicide. If our goal is a continued concentration of wealth amongst a select few, this might be the way to go. If we'd rather experience a shared prosperity and increasing quality of life, we need government and unions to reassert their crucial role in our public dialogue and social contract.

The private sector, deregulation, the "business climate," the anti-tax cabal, and a host of other conservative "principles" have caused our volatile economy. It is time they stand-up and take responsibility for their actions. Where is their accountability? Their paradigm has handcuffed a generation with debt, low wages, no retirement, and no health care. And they want us to believe that more of this bogus worldview will, after failing for the past 40 years, suddenly, and finally, lead us to paradise.

The government and unions don't have all the answers. And, we can certainly find more efficiencies. We should remember this is true of the public AND private sector. But with government being the same size (when adjusted for population) as it was in the 1970s and with unions representing only 10 percent of the total working population, to keep blaming these two entities as the cause of all our fiscal problems is an exercise in elaborate delusion.

Unions and the government were largely responsible for the middle class. They enabled Social Security, Medicare, weekends, employer provided health care, pensions, labor and employment laws, minimum wages, workplace safety standards, amongst may other worker-friendly initiatives. As we've allowed more and more of the private sector to displace government and unions, we have seen a proportionate and precipitous decline in our quality of life, with an increasing amount of inequality.

This hyper-privatization, pro-business model has failed everyone but a select few. This is obviously not the answer. It's time we re-appreciate the public sector and the good that government can do for us all.