by the Sandwichman
At the New America Foundation, James Galbraith, Randall Wray and Timothy Bartik offer their policy proposals for dealing with the jobs crisis. These three gentlemen apparently believe that the jobs crisis is merely a symptom of some mysterious financial or structural crisis that itself needs to be addressed by "better government regulation" or something like that there.
How to treat the symptom? Spend money! Bartik advocates a New Jobs Tax Credit and wage subsidies targeting 'disadvantaged' workers. Wray promotes his version of Hyman Minsky's Job Guarantee idea. Galbraith offers a laundry list of good things the government can spend money on: public sector jobs, higher education, early retirement, weatherizing houses, elder care, rehabilitating foreclosed houses, funding non-profits and last but not least a federal jobs pool such as Wray also advocates.
Galbraith calls the Job Guarantee idea "the last taboo". He is wrong. The last taboo is something none of the three mention: work time reduction. In French it is "la solution interdite." Ironically, Jamie's "last taboo" comment brings to mind his father's more salient insight about "the forbidden question" of resource conservation from some fifty years ago.
Government spending on all those nice things is all very well and good... as long as you don't have to worry about an exit strategy. The spending cure also ignores the real nature of the jobs crisis. Unemployment is not a symptom of the financial crisis. The financial crisis is a symptom of the employment crisis. To put it as simply as possible, industrial economies have failed to collectively adjust the hours of work to reflect the new realities of much higher levels of productivity.
Standard full-time hours of work have remained static over the last 30 years even as productivity has almost doubled in the last 30 years -- an increase of 84 percent -- while average weekly hours have fallen only 7 percent, notwithstanding sectoral and demographic changes in the workforce that have increased the incidence of part-time employment from 16.3 percent of the workforce in 1979 to 19.7 percent in 2009.
Most hours of work adjustment has taken place has been at an individual level rather than a collective one. That is to say more unemployment and underemployment. And this increasing precariousness of work has acted as a drag on wages. Adjusted for inflation, hourly wages have remained virtually flat. In today's dollars, the average hourly wage in September 1979 was three cents higher than the average wage today.
Let me repeat that: an 84 percent increase in hourly labor productivity and a 0 percent increase in hourly wages. WHAT PART OF 84 - 0 DO BARTIK, WRAY AND GALBRAITH NOT UNDERSTAND?
So, how did all the extra stuff get bought? Credit. Personal debt mushroomed over the last 30 years. Bartik, Wray and Galbraith's solution to the collapse of a debt-bubble is... wait for it... DEBT! Undoubtedly, some government deficit spending may be necessary to lubricate the transition. But deficits sufficient to prop up employment cannot go on forever. With Bartik's, Wray's and Galbraith's non-solutions, huge deficits would have to continue indefinitely.
Growth is not the answer. Thirty years of debt-fueled economic growth has eroded the job-creating capacity of growth. In hindsight, we would be a lot better off if workers had taken half of the productivity gains of the last 30 years in shorter working time. With a four-day workweek and a six-hour day, workers could have had roughly the same incomes they had in 1979. That's not a feasible policy solution right now. It takes time to make the adjustment. Any and all of the policy prescriptions offered by Bartik, Wray and Galbraith may be useful during the transition. But put forward as stand-alone cures, they are worthless. A spending policy without an exit strategy is like applying a band-aid where a tourniquet -- and then restorative surgery -- is needed.