Unemployed still suffering with nowhere to turn

Despite the two-year anniversary of the official end of the latest recession, around 14 million people are still unemployed, and the unemployment rate is at a staggering 9.2 percent. With the last couple of months having been monopolized by the high-stakes debt-ceiling theatre, this particular problem has been completely neglected with the exception of a few dogged commentators.

I am worried that as the unemployment crisis lingers on, many will eventually become tired of the problem altogether. Despite the fact that they did not cause the financial crisis, efforts to implicate the unemployed for their plight have already begun seeping into conversations about the issue. Some individuals refuse to believe that the unemployed cannot find a job, and as time progresses that sentiment will no doubt become more widespread. I can already imagine what the rhetorical line will be: “if you haven’t found a job 3-4 years after the recession, you must be lazy.”

Graph of number of unemployed and job openings

As the above chart indicates, the chances of an unemployed person landing a job still remains dismally low. There are just far too many unemployed persons per job opening. Although it has declined significantly since its peak, the ratio of unemployed persons per open job currently stands at 4.7. Even if every unemployed person was doing absolutely everything they could to fill those jobs, around 79 percent of them would still be out of luck.

With the number of job openings still as low as it is, the unemployed have very few if any places to find employment. Although the total inaction on this problem might seem to indicate otherwise, this level of unemployment is not unavoidable. There are ways that the government could act to decrease unemployment significantly.

For instance, the government could undertake a fiscal stimulus project. Despite the ignorant commentary to the contrary, the first stimulus did help soften the blow of the recession even if it was not big enough to completely turn it around. Allocating hundreds of billions of dollars for infrastructure projects and other enterprises would serve the dual purpose of improving the country while employing those currently languishing without work.

In addition to fiscal stimulus, the government could start a public jobs program. A new Works Projects Administration would serve the same basic function as the fiscal stimulus, but with public jobs instead of private jobs. Like the fiscal stimulus, the number of unemployed people would decline, useful public projects would be completed, and the incomes paid out to those employed by the project would be spent, increasing aggregate demand.

The last idea that I will mention here is the possibility of a work-sharing policy. Although the best time to implement a work-sharing policy has passed, it still could be called upon to provide some relief to the ranks of the unemployed. Under a work-sharing policy, instead of a firm laying off, say, 10 percent of its workforce, it reduces the hours of each of its employees by 10 percent. This kind of policy has been successfully put into use in Germany during the recession. In the German approach to work-sharing, the hours are cut as mentioned above, and the burden of those lost hours are shared among the government, the employer, and the workers. The government replaces some of the income; the firm replaces some of it; and, the worker foregoes the rest.

Of course, implementing any of these policies would require that the government actually care about the high rate of unemployment which does not appear to be the case. The government certainly should be concerned about unemployment if not for moral reasons than for practical ones. High unemployment rates cause the government to spend significant amounts of money on welfare programs like unemployment insurance and food stamps. The amount it might spend employing those people would probably be more, but at least it would lead to the production of useful things, something welfare does not.

Instead of focusing on this however, both the President and the Congress have been almost exclusively trying to work out just how much the elderly, the poor, and the disabled will pay in order to reduce a budget deficit that they did not cause. With the government uninterested in their plight and very few job openings available, the unemployed truly have reached a point where they have nowhere to turn.

The market is a distortion

Commentators and politicians of more conservative persuasions often criticize certain behaviors that they label as “market distortions.” Regulations, government spending, and progressive taxation are all said to distort the market because they change the economic incentives of certain behaviors. For instance, imposing fines on firms that dump poison into rivers distorts the market because if fines are high enough and properly enforced, the incentive to cheaply dispose of poison that way is destroyed. A firm then might have to undertake extra costs to dispose of the poison differently which might have various other effects on profits, wages, and prices.

Typically conservatives aim this bit of criticism at government actions like spending and regulation, but other policies that they support distort in similar fashions. Subsidies, corporate tax breaks, and individual tax deductions all have the exact same distorting influences as programs conservatives so often deride. Deductions and loopholes alone accounted for over $1 trillion in tax expenditures in 2010. Of course, these kinds of programs are typically targeted towards corporations and middle to higher-income individuals which no doubt makes their distorting influence more bearable for the conservative crowd.

As Mike Konczal points out, this kind of distortion manages to fall under the radar of most Americans, even those who actively benefit from the programs. The majority of those who receive a mortgage interest tax deduction do not realize that the deduction is nothing more than a way that the government spends through the tax code. It is functionally identical to setting up a mortgage interest welfare program in which the government sends out checks to those paying off a house. Just as that program would, the mortgage interest tax deducation distorts the housing and lending markets as well as the alignment of consumer incentives.

These sorts of programs — which are hardly if ever mentioned in the market distortion screeds of the small government advocates — make up what Suzanne Mettler refers to as the Submerged State (pdf). But instead of attacking the Submerged State for its market-distorting influences, the conservative commentators almost exclusively use the rhetoric to go after things like the minimum wage and labor unions. Recall Michelle Bachmann’s notable 2005 comment that we could wipe out unemployment if we got rid of the minimum wage, the suggestion being that the minimum wage introduces a distortion that affects the types and number of jobs that are available.

Labor unions are attacked as market distortions because their collective bargaining strength permits workers to command greater compensation than they would otherwise receive bargaining alone. This is claimed to have “job-killing” effects because so long as other locales do not permit unions to operate effectively, owners of capital looking to make as much money as possible may move to those locales where they can squeeze more profit out of the workers. (see also: What warnings about job-destroying regulations really mean)

Two things about the discussion of market distortions always baffle me. The first is that the label is used by itself to be synonymous with “bad.” Those who rely on the concept to provide policy commentary take it as a given that just calling something a “market distortion” is enough to argue that it is a bad thing. Unless you have some sort of fetish for the market, that assumption is completely off. An argument needs to be provided to explain why a specific market distortion is bad that makes a point other than simply remarking that it is one. For instance, consider the market distortion that consists of the government ban on leaded gasoline. This policy has a huge impact on public health, in particular the development of children, precisely because it distorts the market. To claim then that market distortions are an evil in and of themselves is totally foolish.

The second problem with the rhetorical device is that it relies upon the assumption that there is such a thing as a market without distortions. The fact of the matter is that the market is itself a distortion. Distortionary government policies are necessary to generate markets in the first place — granted these policy distortions are so entrenched that people do not even think of them as such.

For instance, consider certain aspects of the legal system in the United States. In that system, there exists laws which forbid individuals from taking over a house or building that someone else has a government-issued titled over. In addition to the law, the state has imposed taxes in order to hire police to enforce these laws — with violence if necessary — through the arresting of those who do not comply. A prison system is also built up in order to impose severe punishments to skew the personal incentives away from performing such an action. All of these policies are distortions. They affect the economic incentives surrounding the non-consensual seizure of property that someone has a title to.

Without those distortions, a great many people — for instance the homeless and very poor — might very well decide to simply take from others. But with the laws, police, and prisons set up, an enormous disincentive is imposed for that kind of behavior, distorting the decisions that they then make. But this kind of property protection is a baseline necessity for the existence of any market to begin with. I am doubtful you would find any conservative commentator arguing that the government distortions that create the market itself are wrongful despite the fact that they use the term in such an all-encompassing, pejorative way.

As I have mentioned previously, this whole enterprise of trying to describe behavior by appealing to specific baselines — in this case the market — is wrongheaded. We should not be asking ourselves whether something is a market distortion or not, especially since the market itself is a distortion. Instead, we should be asking ourselves who is owed what and why? From the answer to that question, we can decide whether a distortion is good or bad by determining whether it ensures that individuals are given what they are due. Treating distortions as categorically good or bad is simply untenable in any given ideology — especially the laissez-faire one — and also has the unfortunate additional quality of making absolutely no sense.

Education reformers are making teaching less attractive

Dana Goldstein has a worthwhile article on Slate today about the widespread breakout of cheating in schools that have adopted high-stakes testing models. These evaluation models — which are championed by the newest crop of education reformers — are plagued by a long list of conceptual and empirical problems, some of which I have detailed in the past. One additional problem that I think deserves to be raised is the possible impact these testing-heavy approaches — and the rest of the reform agenda — have on the attractiveness of the teaching profession.

As a background, it is important to note that the education reform movement has almost exclusively implicated bad teachers and schools as the cause of the country’s educational problems. Gone in this new movement are the more typical considerations of the impacts that poverty and inequality have on student performance. In its place is the very American idea that a child’s background has nothing to do with their level of achievement, and that therefore there must be something fundamentally lacking in the teachers and schools that serve students who perform poorly.

If you thought this was true, then the most logical thing to do would be to make improvements to schools and find ways to attract quality teachers. Even if you did not think it was true, attracting good teachers is still a worthwhile goal if only for the marginal impacts they are bound to have on at least some of the students. Given that the new reform movement is premised on the idea that we need better teachers, you would think that reformers would be doing all that they could to make the profession more attractive. However, what they are actually doing is the exact opposite.

Take high-stakes testing for example. I think it is safe to say that most individuals considering a teaching career are going to be turned off by a profession that forces them to narrowly teach to a limited test that then takes up their instruction time to administer. More than that, the high-stakes testing strategy is usually coupled with some sort of merit-based pay that is connected to student test scores. In this system, every few years a teacher might receive anything from a $25,000 bonus to a pink slip depending on the performance of their students which is at least partially if not primarily outside of their control. I can not speak for anyone else, but income and job instability is not what I usually look for when considering careers.

In addition to high-stakes testing, the movement also has a strange obsession with demonizing unions. If you were to listen to Michelle Rhee or watch the documentary Waiting for Superman, you would think that teacher unions were plaguing school systems and must be destroyed. In fact, one of the arguments often mentioned in favor of charter schools is that they are unencumbered by those awful union contracts. Like high-stakes testing, I am not exactly sure how attacking the collective bargaining agents of teachers is supposed to make the profession attractive to prospective teachers. Given the willingness of states to cut teacher salaries any time they are having a crunch, the last thing I would want to do is enter into a profession in which I had no protection against arbitrary policy whims.

Finally, the whole teacher-blaming focus of the reform movement is toxic. Teach for America, the darling program of the movement, is a complete slap in the fact to the teaching profession in that it suggests that green college students could do better than experienced instructors. Additionally, the almost exclusive focus on teachers as being to blame or praise for a students achievement level sets the profession up to be one of perpetual abuse. What do you expect to happen when inevitably a student performs poorly and the reformers are claiming that it is exclusively or primarily the teacher’s fault? Verbal abuse from parents and principles, that’s what.

Given the necessity of attracting high quality job candidates within the framework of teacher-focused reform, it is totally baffling that the reformers endorse so many remedies that are hostile to those in the profession. If attracting high quality teachers is already difficult, making the profession more rigid, more unstable, and more abusive is going to make it nearly impossible. How the reformers expect to fix the problem of bad teachers by making the whole profession less attractive is beyond me.