the only way we [can] have anything resembling a middle-class society [is] by having a strong social safety net, one that guarantees not just health care but a minimum income, too. . . that safety net [will] have to be paid for via taxes on profits and. . . investment. [emphasis added]Krugman is making two points: 1) liberals have no job-creation strategy, instead the state should put the middle class on the dole, and 2) there is at least one Nobel-prizewinning economist who can’t grasp that U.S. business is nowhere near large or successful enough to finance complete middle class dependency. But if business could guarantee middle class incomes to all, permanent middle class dependency would keep Democrats in power forever. Heaven on earth.
Here’s the positive I carry away from Krugman’s “dream”-- progressives are increasingly accepting we are in a job creation crisis. Nelson D. Schwartz, also in the progressive New York Times, writes:
overall employment in the United States remained 2.1% below where it was at the end of 2007. . . By comparison, over the same period, between December 2007 and March 2013, the number of jobs was up 8.1% in Australia; Germany, the biggest economy in the troubled euro zone, has managed a 5.8% gain in employment. . . Canada, Sweden and even Britain, which is trapped in yet another recession, have enjoyed healthier job gains than the United States. In fact, of the nine countries surveyed. . . only perennially-troubled Italy and Japan performed worse.Schwartz quotes Harvard economics professor Lawrence F. Katz saying, “The United States is way below where it should be. We had a massive downturn and a tepid recovery.” Schwartz adds the strong job market that is Federal Reserve chairman Ben Bernanke’s key focus remains “out of reach.”
One study Schwartz found reports that over half of the recent variation in employment trends between the United States on the one hand, and Canada and Germany on the other, are traceable to construction. U.S. construction jobs are still nearly two million below their 2007 total. Other countries have generated jobs through exports, with Germany’s economy until recently powered by machinery, cars, and other high-end manufacturing product exports, and with Australia greatly helped by China’s booming demand for raw materials.
“MarketWatch’s” Ruth Mantell makes the same point as Schwartz, with a graph showing that despite employment growth, there are still about 1.9 million fewer private nonfarm jobs in the U.S. than when the recession began in late 2007:
And Mantell has a second graph illustrating how poorly average income has done in relation to overall economic growth (GDP) and especially in relation to the stock market. Hard times for the people, and for their households:
Stocks have boomed and households have recovered the wealth that was lost in the recession (gaining about $3 trillion in the year’s first quarter to reach $70.3 trillion), but once you factor in inflation, net worth is about 8% below a pre-recession peak. Still, Mantell reports, home-mortgage debt has declined, and Americans at first quarter’s end were the least leveraged they’ve been since the fourth quarter of 2005.
Even as liberals have come aboard the "economy sucks" train, conservatives continue banging away at America’s inability to create jobs. Edward Lazear is a former Council of Economic Advisers chairman now at Stanford’s Hoover Institution. He writes that the best measure of a strong labor market is
the proportion of the population that is working, not the proportion that isn't. In 2006, 63.4% of the working-age population was employed. That percentage declined to a low of 58.2% in July 2011 and now stands at 58.6%. By this measure, the labor market's health has barely changed over the past three years.Lazear mentions the constant debate over whether the headline unemployment rate, "U3," which measures the number actively seeking work but do not have jobs, is more--or less--valid than "U6," which adds in unemployed who have dropped out of the labor market and are not actively seeking work because they are discouraged, plus those working part time because they cannot find full-time work.
Lazaer advocates setting aside this debate, and focusing instead on the employment-to-population ratio, because it goes straight to the bottom line. It measures the proportion of potential workers actually working (chart).
As Lazear’s chart shows, while the unemployment rate has fallen over the past 3½ years, the employment-to-population ratio remains constant at about 58.5%, well below its prerecession peak. As all agree, the U.S. is not getting back jobs lost during the recession. Lazear thinks that at current rates, more than a decade wil pass before the economy returns to full employment.
Yet while Krugman wants to put the middle class on the dole, Lazear says current government dependency programs are slowing down a return to work. He points to research that suggests
because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits—unemployment insurance, food stamps and disability benefits among the most obvious. The disability rolls have grown by 13% and the number receiving food stamps by 39% since 2009.These disincentives to seek work may also help explain the unusually high proportion of the unemployed who have been out of work for more than 26 weeks. The proportion of unemployed who are long-termers reached 45% in April 2010 and again in March 2011. It is still above 37%. During the early 1980s, when the economy experienced a comparable recession, the proportion of long-term unemployed never exceeded 27%.
Agreement: we have a no-jobs problem.
Agreement: government wants to put unemployed on the dole, not help entrepreneurs create jobs.
Disagreement: progressives say “good,” conservatives say “bad.”