What’s Really Behind America’s Slow Financial Recovery: A Lack of Jobs
February 5, 2014
Event: Employment: A Human Right
Dr. Dean Baker, Co-Founder & Co-Director, Center for Economic and Policy Research
John Cavanagh, Director, Institute for Policy Studies
Dr. Philip Harvey, Professor of Law and Economics, Rutgers University
Thea Lee, Deputy Chief of Staff, AFL-CIO
Dr. Lawrence Mishel, President, Economic Policy Institute
In 2008 the Global Financial Crisis crippled economies around the world. In the U.S. unemployment levels rocketed to levels not seen since the Great Depression. However, even after President Obama’s stimulus package and other deficit cutting measures, the U.S. still hasn’t fully recovered from the Crisis. Today 6.7% of the country is unemployed – this rate is higher amongst Latinos (8.3%) and African Americans (11.9%). Speaking at the Rayburn Office House in Washington, DC, a panel of economic experts all speculated that the real rate of unemployment is actually higher than the publicized number suggests because some people have given up looking for a job all together. Their departure from the labor force and continuing unemployment have larger ripple effect on the economy, as high unemployment severely limits the bargaining power of individuals and unions.
That said, it is clear that the country is far from attaining prerecession levels of employment, and that the policies enacted by Congress and the President have not been as effective as the unemployment number shows. Dr. Baker believes that unemployment has improved so little largely due to the fact that the policies enacted by the President and Congress do not address the country’s real economic problems, which are a lack of jobs and a lack of demand from the market. In fact, he and the other panelists believe that the government has made the economic crisis worse. The passage of a stimulus package that was far too small and the dramatic focus that has been placed on the country’s debt, deficits, and healthcare law, have all taken the spotlight off of the real issues that are holding the country back.
What Dr. Baker and the other panelists see as most essential for the economy is that the President, representatives in Congress, and business leaders throughout the country, put aside politics and be completely candid about where economic challenges are coming from. The rhetoric that says, uncertainty about the Affordable Care Act, new taxes and government spending are stifling job creation, is, in the panelists’ eyes untrue. Theoretically, a reluctance to hire new workers should result in a current employees having their hours extended – a company experiencing an increase in demand but unable to hire should naturally demand more from its current workers – however, currently no data suggests hours are being increased, implying demand isn’t rapidly rising. Job-training programs also fail to address the real economic problem, which is a lack of jobs, not skilled candidates. In order to repair the economy, the dialogue surrounding the crisis needs to change and leaders need to focus on areas that can really bring about change.
Perhaps one of the most obvious places for spending to take place is in the federal government. Dr. Mishel pointed out the irony that the federal government, which one might think would have the greatest convening power and funding of any business in the country, was hit so hard during the recession and forced to cut over 1.5 million jobs. If the government could adopt the right focus and shift from concentrating on deficits to jobs, there are a host of infrastructure projects that could be approved, benefitting unemployed workers and modernizing the states. Further, with the passage of new laws, these programs could be funded without heavily increasing government spending. Currently, 11 European countries, including France and Germany, are moving to introduce a financial transactions tax, taxing the purchase of stocks and derivatives. Though a potentially unpopular move – the reason European leaders are pursuing it is because the financial situation has gotten so bad – there is little doubt amongst the panelists that such a tax would be extremely effective in raising money and funding projects and jobs. Similarly, what is needed in the U.S. is for leaders to stand up, speak out against the current rhetoric dominating Congress, and urge the government to spend money and create jobs.
The current growth rates are simply not sustainable in the long term. The current solutions being prescribed only further encourage what Mr. Cavanagh referred to as the “Walmart economy;” providing low skill, low wage jobs to a largely over qualified labor force. Under this model, the vast majority don’t have the option to invest in their or the country’s future. Unfortunately, this reality is not being heard above the political fray that accompanies today’s economic debates. Those looking to score political points in the near term are drowning out the opinions of economic experts. In order to ensure the nation’s long-term success and growth, money needs to start flowing into programs and projects, creating jobs, raising wages, and encouraging people to spend.