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Friday, April 19, 2013

'Getting Back to Full Employment'

Jared Bernstein calls for "direct, public job creation":

Getting Back to Full Employment: Getting back to full employment—not debt, deficits, sequester, debt ceilings—is what we ought to be talking about... I’m happy to say, in fact, that in my travels outside this benighted town (DC), it’s the question I get asked most often (“why isn’t Washington doing anything about jobs!!??”). ....

So how do we get there from here?
Of course, the first thing is to get the macro policy right, and I go on about that enough about that ... already. Dean Baker emphasizes dollar policy here as well: the trade deficit is a drag on growth and factory jobs, so that too is a target in the quest for full employment.
But for this post, I’d like to focus on something else, motivated by the chart below, one I’ve posted before. It simply plots private sector job growth against productivity growth. Up until about 15 years ago, you could have nicely employed this picture against your Luddite friends who complain about productivity killing jobs.

Source: BLS

Until then, the two lines largely grew together. Yes, we were more productive, but growth resulted in higher demand that fed back into the economy’s job-creation function in ways that boosted job growth. The income and wage benefits of growing productivity certainly haven’t reached very far down the income scale since the late 1970s—that’s the inequality story. But even as inequality grew in the 1980s and 1990s, job creation largely kept pace with output per hour.

That hasn’t been the case since, and it is a matter of grave concern. The reasons go beyond my scope here, but a prime suspect observed at the crime scene is an acceleration of labor-saving capital investment, like robotics (see Brynjolfsson and McAfee for incisive work on this question).

Here, I want to introduce a different solution, one that isn’t better fiscal and monetary policy to maximize growth. It’s direct, public job creation. That is, if the private sector can’t be counted upon to generate the needed job opportunities to absorb our labor supply, then there is a role for government to correct this important market shortcoming. ...

What, specifically, am I talking about? Not so much a bunch of guys setting up camp in the woods and building stuff circa the 1930s, though that worked well at the time...

But those days have passed, I think, and contemporary direct job creation programs are not limited to public sector jobs. A more common model today is subsidized work, often in the private or NGO sectors. The TANF subsidized jobs program during the Recovery Act is a good recent example of an effective, though small, program that placed over 250,000 low-income workers in 2009-10. As Pavetti et al report, the program worked with private and government employers to create “new temporary jobs that would otherwise have not existed.” ...

There’s obviously a ton to be done, both in terms of infrastructure (upgrading and repairing public goods) and services, and while displacement must be prohibited and monitored (and punished, when it’s exposed), research suggests that a lot of what happens here is you pull forward a hire that might have happened later or nudge an employer at the margin of a hiring decision to go ahead and pull the trigger.

I’ll have a lot more to say about this in coming weeks and yes, I know it’s way outside the current political box. But this relatively new gap between employment and productivity will only exacerbate the old gap between income and productivity unless we begin to think and act outside that box on ways to achieve full employment. Direct job creation is part of the answer.

    Posted by on Friday, April 19, 2013 at 01:34 PM in Economics, Fiscal Policy, Unemployment | Permalink  Comments (47)


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