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Are the Unemployed Causing Unemployment?

Posted on Friday, June 4th, 2010 at 10:20 am by Les Leopold

This article originally appeared on the Huffington Post. 

Is it good news that the hiring of 411,000 temporary census workers finally made a small dent in our enormous jobs crisis…at least temporarily? Shouldn't we now listen more carefully to Senator Judd Gregg of New Hampshire who wants to cut off extended unemployment benefits? He explained it this way on CNBC:

Because you're out of the recession, you're starting to see growth and you're clearly going to dampen the capacity of that growth if you basically keep an economy that encourages people to, rather than go out and look for work, to stay on unemployment. Yes, it's important to do that up to a certain level, but at some point you've got to acknowledge that we're not Europe. (Senator Judd Gregg on CNBC)

The honorable senator and many other pols and pundits apparently believe that at least some unemployed Americans are just coasting on their unemployment checks, having a bit of a vacation rather than grabbing one of the many jobs being generated in this red-hot recovery of ours.

Somehow Gregg and company studiously ignore the fact that there still aren't enough jobs to go around.

As May's unemployment numbers show, we're still in a jobs recession, despite the impact of temporary census jobs. More than 29 million Americans are still without work or forced into part-time work–that's a real jobless rate of 16.6% (BLS U6). Nearly 7 million people have been jobless for over 26 weeks (the "long-term unemployed") -more than at any time since the Great Depression. We still need more than 22 million new jobs to get us anywhere near full-employment.

Senator Gregg is not the only one who is putting the onus on the unemployed. The philosophy behind his statement is shared by many leading governmental officials. (And after all, the Obama administration wanted Gregg to head the Commerce Department. That thought he's a moderate?)

The philosophy they share is this: In the ideal free market, the price of labor determines the amount of employment, or so the theory goes. If the price of labor goes down, there will be more jobs. By cutting the amount and length of unemployment benefits, we effectively lower the price of labor overall, forcing more people to compete for scarce jobs. Fed Chair Ben Bernanke has blamed high unemployment during the Great Depression on "sticky" labor markets–sticky because resurgent unions and New Deal wage and hour laws prevented employers from cutting wages the way they wanted to during a time of falling prices. (Gregg might say that in those days we were way too much like Europe.)

In short, the way to create jobs is to get those lazy workers off the dole so that they can help lower wages across the economy. Only then will employers find it worth their while to hire more workers.

Interesting theory, but it doesn't apply to this planet.

In fact, during a major economic crash - like the Great Depression and the current Great Recession - the last thing you want to do is reduce the income of working people and the unemployed. With less income, people spend less. And falling consumer demand is the pathway to double-dip recession. The net result: even more job loss and a continued downward spiral - less demand, fewer business sales, fewer jobs needed, lower tax revenues, more public sector layoffs… and down we go.

Have Gregg and others forgotten that the Great Recession began on Wall Street? Do they really believe that coddled unemployed workers are to blame for our economy's failure to produce sufficient jobs? (See the New York Times report, "Black in Memphis Lose Decades of Economic Gain" for a graphic picture of how money hungry banks have devastated whole communities, )

How can they be so blind?

Actually, they are far from blind — they're just covering their eyes. No one in power wants to face up to the enormity of the job crisis. And no one really has a plan to get us out of it. Everyone is praying that "the markets" - the gods who appear to rule our world — will recover and start spewing out the tens of millions of jobs we need. No one has the nerve to say that we'll never get those jobs back — not until the government (either directly or through contractors) starts hiring people en masse to repair our physical and intellectual infrastructures.

And of course no one has the nerve to point the finger at those who really are on the dole - to the tune of $900,000 an hour, in the case of our hedge fund elites. Or the Wall Street bonus babies who walked off with $150 billion last year as a direct result of our multi-trillion dollar bailouts. No, it's a lot safer to beat up on the unemployed - no campaign contributions lost there.

It's time to square up to the jobs crisis. It won't go away by itself. The key to solving the crisis? Move money from Wall Street to Main Street. The only argument we need to have is over how best to do it. Personally, I'm for massive government investment in renewable energy, conservation, and education (especially for dislocated workers). We could create a million weatherization jobs almost overnight if we had the guts to put a 50 percent windfall profits tax on Wall Street bonus babies and hedge fund billionaires. Not only would we get people back to work, but we'd have better insulated homes and offices, vastly reducing our dependence on oil.

But no. Now that we've propped up Wall Street and shoveled out some stimulus money, we're told that we're broke. Deficit mania is setting in. So forget creating jobs. Besides, the mysterious and all-powerful "markets" won't like it if government starts playing a more active role. They'll jack up interest rates to punish any country that fails to cut government spending. The politicians are on their knees praying to the market gods and offering up sacrifices in the hopes that they can get through the next election cycle.

Catering the whims of financial markets is madness. Are we living in a theocracy or a democracy? Do we have to grovel before the market gods? Or can we create a world where there is ample work and more harmony with our environment? Who decides? The wrathful gods of Wall Street? Or the people who actually work for a living–or would like to, if only they could find a job?

Les Leopold is 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.

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