NO ADVERTISING, GOVERNMENT OR CORPORATE FUNDING

  • Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • High Unemployment Due to Lack of Demand, Not Lack of Skills or Education


    Jesse Rothstein: Low wages and lack of purchasing power the real structural problem, skills training and more education is not the critical solution -   April 30, 13
    Members don't see ads. If you are a member, and you're seeing this appeal, click here

    Audio

    Share to Facebook Share to Twitter




    This is where I am able to find out what is actually developing across the world. Thank you TRNN! - Stan Estus
    Log in and tell us why you support TRNN

    Transcript

    High Unemployment Due to Lack of Demand, Not Lack of Skills or EducationPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

    There's a debate of sorts amongst economists and policymakers what's the real cause of the sustained, long-term high unemployment. Well, some people argue that it's because of lack of training. It's lack of mobility--people aren't willing to move to different parts of the country where the jobs are. It's because of new technology, and people's skill set don't meet that new technology. And President Obama more or less articulated that in his State of the Union speech, where he called for more job training and such.

    But there's another argument that goes, no, it's because people don't have enough money to buy stuff; there's not enough demand.

    Now joining us to talk about this debate and give his point of view on it is Jesse Rothstein. He's an associate professor of public policy and economics at Berkeley. He spent 2009 and 2010 first of all as a senior economist at the U.S. Council of Economic Advisers, and then as chief economist at the U.S. Department of Labor.

    Thanks very much for joining us, Jesse.

    JESSE ROTHSTEIN, ASSOC. PROF. ECONOMICS, UC BERKELEY: Thank you for having me.

    JAY: So the argument is, you know, yes, there's cyclical unemployment, but why there's such long-term high unemployment now and not what we would normally see as cyclical--in other words, you start seeing recoveries in the stock market and you see some growth in the economy. In theory, cyclically, some people say, unemployment would be coming down more than it is. But there's more structural stuff, as I mentioned, people's skill sets and such. What do you make of the argument?

    ROTHSTEIN: So people are arguing, basically, that the demand would be there, but that the problem is that there aren't enough workers there to fill the demand. And so you can find some evidence of employers who say they're having trouble finding workers to fill their jobs, and you can point to that and say, well, it must be that there aren't workers to fill the jobs that are available, and if only we had workers with the right skills in the right places, we would be able to--we would be back to a high-performing economy.

    I don't make much of that argument. I think the main problem is that there aren't enough people who want to hire workers, there's not enough demand in the economy.

    JAY: Okay. So what's your evidence? Let's go through some of the different arguments. Like, the big one is that, you know, workers aren't skilled enough, that there's lack of skilled labor and such. So what do you make of that?

    ROTHSTEIN: There are a couple of different versions of the labor supply story. One is, as you said, skills that are--somehow the economy has changed, and we need more highly skilled workers. Workers' skills haven't kept up with the needs of the economy. Another version is geographic, that the jobs are showing up in some places, and the workers are in other places, and they're not willing to move to where the jobs are, perhaps because they're stuck with underwater mortgages or something like that. And then a third version is what Paul Krugman has called the great vacation hypothesis, that workers have just decided that now is a good time to not work so much and they're not really interested in working, and while it looks like they're unemployed, in fact it's voluntary unemployment.

    JAY: And this is partly to do because unemployment benefits are long--have been extended, and so people can stay home collecting the pogey.

    ROTHSTEIN: Yeah, there have been various versions of it, either because unemployment benefits have been extended, or because it's so nice to live on food stamps, or because you're hoping to get mortgage relief and that the only way to get mortgage relief is to have a low family income, or something along these lines.

    What all of these stories have in common is the claim that there's really a shortage of workers out there, that there's plenty of jobs but not enough workers. And what that claim should imply is that firms should be bidding up wages in order to find workers to fill the job, that there are five employers who all want the same worker, and they're going to start offering more and more money to get the worker. And so what we should be seeing if these stories are true is that workers who do have jobs are seeing their wages go up. And there's really no sign whatsoever of that in the data. And so I see that as prima facie evidence that the problem is not labor supply, the problem is labor demand.

    JAY: And you can see it from the side of investment, too. Banks don't want to loan money to businesses. I mean, it's not because they don't want to loan money, I wouldn't think; it's 'cause they don't believe the businesses are going to have enough market for increasing their sales.

    ROTHSTEIN: Exactly. Exactly. And you can see it in the GDP data, that while GDP is recovering, we're still well below the trend of where we should have been. There's still a big cyclical hole that we're in. So while it's been an unusually long time since the recession officially ended, but that's because we've been in a very slow recovery and the economy really has not taken wing and taken off.

    JAY: I was driving to New York once. I think we were going through New Hampshire and somewhere. We were driving from west to east. And we stopped to have some food. And we met with a guy who's a general manager of a large factory. I think they have about 2,000, 3,000 workers. And he was complaining to me about how they can't hire, and he didn't understand why they weren't able to hire workers in this kind of an economy. And I said, well, what are you paying? And he said, well, we used to pay $14, $15 an hour, but we're down now--I think it was $8.50 for starting. And I said, well, do the math. I mean, if you're collecting--you know, at $8.50, if you take your bus to work and take your bus back, and if you had to pay for daycare and everything, you're probably not even breaking even, especially when you compare what you might get on unemployment insurance, 'cause he was complaining people would rather be on unemployment insurance than take the job. And I said, well, then raise your wages. I mean, why would any reasonable person not sit at home on unemployment insurance? I mean, if you want them, pay more. You can't--you're not going to--if you lower unemployment insurance, you're asking people to starve.

    ROTHSTEIN: Exactly. So if you want them, pay more, offer the training that you used to offer. Increasingly you're seeing manufacturers who used to pay everybody union wage and have in the last few years extracted concessions from the unions so that the new workers are paid a much lower wage than existing workers. They've gotten rid of training and now demand that workers have specific experience in the field, and they complain that they can't find workers. Well, they're offering a much different deal than they were before, and so it shouldn't be a surprise that nobody wants to take that deal. That doesn't tell you that nobody would take the deals they used to offer.

    JAY: And so, I mean, your argument is if there was more demand in the economy, they would raise their offer of wages, because they figure they could make more money selling stuff. But it is chicken and egg, isn't it, is that in terms of each individual enterprise, they want to, you know, keep wages as low as possible, and then somehow, magically, the economy's supposed to bounce back, except everybody's trying to keep their wages low as possible.

    ROTHSTEIN: Right. This is what Keynes called the paradox of thrift, that when everybody wants to cut wages and cut spending, all of a sudden the economy falls apart. And what you need to do--there's a fairly well worked out solution to this--is that you need the government to create some temporary demand, and it does that, and that brings us back to full employment, and then everybody wants to spend money, and that brings the private sector back.

    JAY: But doesn't it need to be more than that? And what I mean by that is let's say you have some government stimulus--and we did have some stimulus. Some people argue it wasn't enough. But doesn't it--if you want to get to a structural argument--and not the structural argument that people aren't trained well enough and such--but isn't there a structural problem with unions being so weak? You know, workers have lost any--you know, their ability to, you know, fight and have higher wages. So, I mean, eventually the stimuluses kind of wear out, and if you don't deal with this side that wages need to go up in a general way in some mechanism or another--and I don't know what else it would be other than unionization or a significantly higher minimum wage or some combination thereof, but don't you have to do something on that structural side?

    I mean, President Obama was talking all about, you know, the Employee Free Choice Act, EFCA, in the first couple of years, and then nothing happened when the Democrats did--. Just for people that don't know, EFCA was legislation that would make it easier for unions to organize unorganized workers. In the first two years, where in theory the Democrats could have passed it, they never really advanced it on the congressional agenda. And then, after they lost the House, those words were less and less spoken. And now--I actually just talked the other day to a legislative aide to a senator who does labor policy. She's worked there about a year and a half. She didn't know what EFCA was, meaning the unions have given up even lobbying senators for this legislation.

    ROTHSTEIN: Right. Right. So I agree that more unionization, higher minimum wage, those would all be very helpful and those would all help to support wages. But at the end of the day I think there's no substitute for full employment, that when the economy is strong and when employers are having trouble finding workers, then they can agree to higher union wages and they can hire workers despite a higher minimum wage, and people's wages rise whether or not there are unions.

    JAY: So if they make you economic czar tomorrow, what's your plan? What does the stimulus program look like?

    ROTHSTEIN: The first thing it involves is a lot of aid from the federal government to states, that over the last few years, states have laid off hundreds of thousands of teachers. That subtracts from demand, and it makes us poorer in the future because our students aren't learning as much. And so the first thing you want to do is get back to the pre-recession class sizes and hire back all of the social workers and other people that you've laid off. There's just no excuse for that right now.

    Second thing you want to do, I would say, is put a lot of money into repairing infrastructure, fix all the bridges that need fixing, fix all of the roads and highways and parks and all of the other things that need fixing. You can think right now that essentially construction labor is on sale. And we know we're going to need it in the next few years, and we should buy it now while it's on sale and get that work done.

    And then I would be thinking about other broader public employment programs, thinking about trying to ensure that anybody who is actively looking for work and is willing to work can get a job, and make sure there's money in people's pockets so that they can then spend it.

    JAY: That means direct public works hiring, does it not,--

    ROTHSTEIN: It does.

    JAY: --and words which this administration or certainly a Republican administration seem to have no intention of doing.

    ROTHSTEIN: Right. I agree. There's no--if you don't make me czar and also give me control of the Senate, then I don't know what to do, because I don't know what can get through the Senate that's going to do any good.

    JAY: Alright. Thanks for joining us, Jesse.

    ROTHSTEIN: Thank you.

    JAY: And thank you for joining us on The Real News Network.

    End

    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Comments

    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at contact@therealnews.com

    Comments


    Latest Stories


    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7)

    RealNewsNetwork.com, Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting