New York Times columnist Paul Krugman has launched a small debate about the nature of today's ongoing unemployment crisis. Is it "structural," meaning that it reflects a "natural" shift in the way that our labor force works? As Krugman summarizes the idea, it means that U.S. workers are "in the wrong places, or they have the wrong skills." Or is this unemployment crisis "cyclical," meaning that our economy as a whole is simply unhealthy enough to sustain high employment? Here's what Krugman and the rest have to say.
- It's Cyclical--and Solvable The New York Times' Paul Krugman writes, "All the facts suggest that high unemployment in America is the result of inadequate demand — full stop. Saying that there are no easy answers sounds wise, but it’s actually foolish: our unemployment crisis could be cured very quickly if we had the intellectual clarity and political will to act. In other words, structural unemployment is a fake problem, which mainly serves as an excuse for not pursuing real solutions."
- Bill Clinton Sees Structural Problem Krugman notes that former President Clinton "recently told an interviewer that unemployment remained high because 'people don’t have the job skills for the jobs that are open.'" Liberal blogger Duncan Black notes, " What he actually said is much worse." Here's Clinton:
How could this be? Because people don't have the job skills for the jobs that are open. So here's the most important thing. If we were hiring since last June when economists said the shrinkage stopped, between then and now, if we had been hiring people on the jobs where people are trying to hire, that is we could get those jobs this morning after this TV show is over, if we were doing that at the same rate were doing that in 93, 94, 95, there would be five million more people at work. This unemployment rate would be 6.9 (percent) not 9.6 (percent.) We would be in a different world, not just economically but emotionally as as country.
- Why Clinton Is Wrong Economist Brad DeLong responds, "When jobs are open, it is because employers think that they could sell what new employees would make for a handsome price and profit. Therefore they will be eager to hire--and eager to pay what the market will bear in order to hire. If it is indeed the case that people do not have the skills for the jobs that are open, or if firms have jobs but cannot find appropriate workers, then we ought to see tight labor markets and rapidly rising wages in those occupation-region pairs where there are ample jobs. We don't."
- No, He's Right, It's Structural Outside the Beltway's James Joyner writes, "Generally speaking, trying to convert unemployed white collar workers into low skill drudge workers in the public sector makes little sense. Especially if the problem is one of stifled demand rather than structural mismatch in the economy. Sure, hiring all those people to empty bedpans and paint hospitals and whatnot would create 'demand.' But it would be artificial and come at the expense of the 91% of the economy that’s somehow managed to overcome the demand crisis."
- The Good and Bad News The Washington Monthly's Steve Benen writes, "To a certain extent, this should come as something of a relief. Structural unemployment is a far greater policy challenge, and it takes much longer to address. Cyclical unemployment can be addressed though additional stimulus and intervention from the Federal Reserve. But additional investment in job creation has been deemed unacceptable by congressional Republicans, and the Fed wants to sit on its hands. And so the jobs problem persists -- and will get intensify just as soon as the GOP is rewarded for failure in the midterms."
- Problem Is No One Wants to Make a Decision Krugman sighs, "We’re suffering from a lack of policy resolve. As I said, structural unemployment isn’t a real problem, it’s an excuse — a reason not to act on America’s problems at a time when action is desperately needed." Liberal blogger 'Prairie Weather' concurs, "Certainly that's a conclusion that applies to just about every problem we're experiencing now: policy makers -- White House and Congress -- are operating within a dead zone and seem likely to stay there."
- Workers Ready to Work Balloon Juice's Anne Laurie writes, "There is no shortage of jobs that need doing in America, from repairing our crumbling infrastructure to digitizing millions of pages of public records to adding desperately needed hands in schools, hospitals, and nursing homes. Many unemployed and underemployed Americans already have the necessary skills, and many more are capable of acquiring those skills—if the people at the tip of the economic pyramid were as interested in preserving our shared community as they are in preserving every last scrap of their hoarded power and resources."