Can Growth Alone Generate Enough Jobs to Cut Unemployment?
John Maynard Keynes vs. Friedrich von Hayek.
12:00 AM, Jul 10, 2010 • By IRWIN M. STELZER
Or consider the composition of the unemployed. In the good old days when we faced only the problem of the ups-and-downs of the business cycle, auto workers would get laid off in hard times, their plight softened by a variety of generous but relatively short-term benefits, and rehired when demand recovered. Not any longer, at least not in a significant number of cases. So the new question is, whether those workers will be re-employed in some other industry, and if so when and at what sort of wage?
Almost half of the 14.6 million unemployed workers have been out of work for more than 27 weeks, the period covered by initial unemployment benefits. That doesn’t include discouraged workers, those only marginally connected to the work force, and those involuntarily working only part time. It certainly seems arguable that the lengthening of the period of unemployment is not merely a cyclical phenomenon, to disappear when either the spenders or their antagonists have their way. It is a structural one, likely to persist, even though somewhat diminished, long after the economy resumes growing at the expected 3.0 to 3.5 percent.
A focus on the sort of retaliatory trade policy proposed by, yes, Adam Smith, might reduce import leakage. An increase in the quality of retraining programs, rather than the administration’s crackdown on for-profit educational institutions, might relieve the skills shortages that are coexisting with unacceptably high unemployment. Throw in a cooling of the president’s anti-business rhetoric, which his staff says is a treat in store for the business community, and we just might avoid the “jobless recovery” that so terrifies the Obama team as it looks ahead to the 2012 presidential election campaign.
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