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Can We Finally Stop Worrying About Unemployment?

Photo by Julian Povey | CC BY 2.0

Even those of us who think the U.S. economy is far from real full employment can admit that 3.9%  is a lot better than 5 or 6% unemployment. Unemployment has not been this low since December of 2000. Prior to that, you have to go back to the late 1960s to find unemployment rates under 4%. Some employers are more willing to hire ex-convicts and people in prison, and at regular wages.

It is a positive sign that more employers are complaining about labor shortages. As the economy continues to grow, it takes a little more effort for some employers to find workers. For agribusinesses, it’s an extra problem because there’s been less immigration from south of the border in recent years, and the work itself is strenuous and underpaid.

Elsewhere, there’s better times now in towns that were decimated by deindustrialization and capital flight. Then, young people left for the metropolis; now they don’t want to come back, even when locals offer financial incentives. Around the country, fast-food business owners complain that they cannot find teenagers to work their stores. Some offer tuition reimbursements, bonuses, and even higher wages. It’s just that tough for the bosses. But let’s be realistic: it is tougher for severely underpaid fast-food workers, most of whom are adults, and who work every day to subsidize profits for owners and low prices for consumers.

As to labor shortages, across the whole economy, there are millions of jobless people who can work. Six million were actively searching for a job in April, and were considered unemployed. Some among them suffer extra-high unemployment. The rate for African- Americans was 6.6% in April, for black teens 29%, and for disabled people 8%. And that is the official count which leaves out a lot of people.

Another fact suggests that there is no general labor shortage. Shortages should lift wages substantially; but wages aren’t rising much. The mid-May earnings report from the Bureau of Labor Statistics is same-old, same-old. Real wages for rank-and-file employees in the private sector in April were exactly where they had been in April of 2017. Some labor shortage.

But since unemployment is lowish, the lack of wage-growth is a puzzle. Why aren’t average wages increasing? There are several explanations but I want to focus on two of them. One is a matter of will and ideology: employers’ extreme application of the normal business practice of keeping wages down. As one commentator put it, “American businesses seem to think they are entitled to low-cost, untroublesome labor,” so they resist the imperatives of the market. They began to do this in a big way in the 80s when Ronald Reagan led the assault on unions and working-class living standards. This fundamentalist effort to fend off wage hikes for rank-and-file workers is still with us, so that even when labor markets tighten up a little, some employers try every other thing than higher pay to attract workers.

But there is a second, deeper explanation for why wages have not taken off, even with apparently full employment. There are millions of people who are essentially unemployed but are not counted as such. In other words, there is no general labor shortage, and the 4% official unemployment rate omits millions who are virtually unemployed. Here are three examples.[1]

1. Every month, most newly employed people were not counted as looking for work and unemployed in the previous month. In January of 2018, 70% of the newly employed came off the sidelines. Big deal? Yes. This means there are a lot of people outside the labor force who are about to look for work or who are searching in a passive way or who are not searching at all, but all of whom are ready to work if their life situations change or attractive job possibilities come into view. In short, the population of those who would like to work but are not counted that way is large.

2. Some of the people in this nearby labor force are mentioned in the government’s regular employment survey. They are the 5 million people who say they want a job but are not currently searching for one. The National Jobs for All Coalition adds these people and part-timers who want full-time work to get a better, and much higher unemployment rate than the government gives us.

3. There is a very large group that includes quite a few people who either try for a job against heavy odds or don’t even try. Poor and working-class prisoners were pushed into alienation and crime because of lousy labor markets due to racism, capital flight, and inadequate demand across the economy. Now, as ex-prisoners they again meet restricted job opportunities, and also harassment by the police and other officials. Some are caught up in a web of impossible situations that drive them back to crime if they are not already there.

The number of felons in America jumped from 5 to 20 million between 1980 and 2010. Eight percent of adults in 2010 and 33% of adult African-American males had felony convictions. Many ex-prisoners do get jobs. Most face huge barriers. Studies have shown that ex-convicts are less than half as likely as others to get an employer call-back. More felons and even prisoners are being employed at regular jobs because of labor shortages in some locales across the country, but there are untold millions who will not get work even if they want it.[2]

So here’s the takeaway. There’s no general labor shortage. We’ll know that there is one and that we are near real full employment when real wages rise 3, 4, or 5% for 3, 4, or 5 years running. We won’t get there with anecdotes about employers who promise employee bonuses. Bonuses aren’t widespread, they don’t go into base pay, and often they don’t amount to much. A $500 annual bonus for  someone earning a poverty-level income of $30,000 is not to be sneezed at, but it’s only a 1.7% increase, and inflation wipes all of that out.

In 2017, Trump, Ryan and the Cheatum Caucus gave huge tax-cut handouts to corporations and the rich. We know already that most of the new money is not going to job creation or higher wages. For real change, we’ll need a big federal program to create millions of good, regular jobs, and I know where we can get the money for it.

Notes.

[1] None of these categories is a comprehensive estimate of the total number of people who are ready to work but not counted as unemployed, and each count includes people who are in the other counts.

[2] Alice Goffman, On the Run: Fugitive Life in an American City (NY: Picador, 2014);  Ben Casselman, “As Labor Pool Shrinks, Prison Time is Less of a Hiring Hurdle.”

 

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Frank Stricker is in the National Jobs for All Coalition. He taught history and labor studies at CSUDH for thirty-five years. He has just written What Ails the American Worker? Unemployment and Rotten Jobs: History, Explanations, Remedies. For some sources behind this essay, e-mail frnkstricker@aol.com.

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