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Home Publications Blogs Beat the Press A Liberal Agenda Without Full Employment?

A Liberal Agenda Without Full Employment?

Tuesday, 22 January 2013 04:56

There were numerous news stories and columns touting the liberal agenda that President Obama put forward in his second inaugural address yesterday (e.g. here and here). While the speech certainly hit on several issues that have historically been important to liberals, the failure to mention full employment was a major omission.

The fact that the economy is still more than 9 million jobs below its trend growth path implies enormous suffering. Not only are millions of people unnecessarily unemployed or underemployed, high levels of unemployment mean that most workers lack bargaining power. As a result they are unable to raise their wages and get their share of productivity growth. This means that income is likely to continue to be redistributed upward.

There are not easy political paths to full employment at this point. Government stimulus (i.e. larger deficits) is the most obvious path, but that seems out of the question in a context where deficit reduction is dominating the policy debate. If the dollar dropped, it would make U.S. goods more competitive, thereby increasing net exports, but Obama has made little commitment in this direction and the process would take time in any case.

The best prospect is probably increased use of worksharing. Germany has used worksharing to lower its unemployment rate by more than 2 percentage points below its pre-recession level, even though its growth has been no better than growth in the United States. Worksharing does enjoy bipartisan support in the United States and is an option in the unemployment insurance systems in 25 states, but the takeup rate has been extremely low. It's possible that a major presidential push could substantially increase the use of worksharing.

Anyhow, it is striking that a speech that touched on many liberal themes did not make a commitment to full employment. This should have been noted in the coverage.

Comments (10)Add Comment
written by JaaaaayCeeeee, January 22, 2013 8:28
It is truly frightening that our news media no longer even reports on unemployment, nor politicians on what they plan to do for fiscal stimulus, presumably because those responsible for fiscal policy talk instead only about manufactured crises, which are marketed by deep pock interest groups.

Is desperately needed infrastructure spending really less politically feasible than worksharing? Also, would worksharing help in our country, which does not have the labor clout of Germany?
written by Union Member, January 22, 2013 8:56
But if putting the 9 million (truly suffering) people back to work will also significantly contribute to cutting and eventually balancing the budget, why isn't a full employment policy an easy sell for a President as articulate and eloquent as Obama?

(Seeing Chuck Schumer - the Senator from Wall Street, the happy land of bubbles and no suffering - so obviously pleased with himself sitting behind the President yesterday, couldn't help but think of MLK's observation in '63 that where Negroes in Mississippi may not vote, Negroes in New York have no one to vote for.)
excellent point
written by Peter K., January 22, 2013 10:03
Some commentators did note a lack of "populism." Maybe full employment is now considered populist?
written by Jennifer, January 22, 2013 11:30
Employment has not been a issue for either party for the last two years. It has been all debt/deficit all time, there seems to be a bipartisan faith in the confidence fairy. It is rare in economics and policy issues to have case studies for comparasion but in this case Europe provides several perfect examples of what not to do. Pushing austerity has led to incredible suffering to the point of society breakdown but the important people insist either there should be MORE cuts or things are just about to get better. This is exactly what the Republicans and to a lesser extent the Democrats are pushing, nobody has explained to me how the outcomes here would be different. Whereas Japan has huge deficts and could be doing better, it has not suffered from a significant uptick in suicides. People seem to doing be doing ok there by and they are trying some aggressive fiscal stimulus. The fact that neither party is addressing the employment crisis in any meaningful way and the fact that the most compelling media coverage on unemployment is on gossipy website https://gawker.com (the unemployment stores are excellent if super depressing) really speaks to the priorities of the ruling class.
The non-mysterious disappearance of full employment
written by Sandwichman, January 22, 2013 12:29
As I commented in the "robot" message, the disappearance of full employment from the liberal agenda has been a long term trend -- perhaps a strategy. In the General Theory, Keynes used the parable of telling people that green cheese is the same thing as the moon to get around the inconvenient fact that money has paradoxical conditions of supply and demand:

Unemployment develops, that is to say, because people want the moon;--men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot be readily choked off. There is no remedy but to persuade the public that green cheese is practically the same thing and to have a green cheese factory (i.e. a central bank) under public control.

In the post-war period, economists and governments have dutifully substituted "full employment" for "money" and "growth" for "green cheese" in Keynes's parable, effectively reversing its meaning since what grows is the money that Keynes had originally dismissed as the impractical, unattainable "object of desire." Policy pursues precisely what Keynes had identified as the ultimate barrier to full employment!

As I mentioned in the "robot" post the other day, almost all of my students thought that growth referred to an increase in the number of jobs. The dilemma for me is no longer that the take-up rate for work-sharing is extremely low in the U.S. It is rather that people continue to view this as a misfortune rather than a design feature.
Wasn't our constitution supposed to protect us from tyrany by the majority? So what went wrong?
written by Perplexed, January 22, 2013 1:54
Why is labor exempted from anti-trust laws? How is it constitutionally legal to prevent these people from accessing the labor "market"? If it was a "market," there would be no unemployment. Why do economists go along with ruse and continue to call it a "market"?

Allowing society to solve its "lack of demand" problem by denying people access to the "market" without adequately compensating them is unconscionable and indefensible. Why do economists continue to support this ruse?
written by James Salsman, January 22, 2013 8:42

Why not just reduce the length of the workweek? That's always associated with lower unemployment through distribution of labor, and greater purchasing power, too. The Netherlands got down to 26 hours in 2002: http://bit.ly/Ut5bpH
cultural liberal versus social liberal
written by paine, January 23, 2013 6:54
an od distinction

post new dealers like side saddle stevenson
and jfk were vigorous cultural liberals ..at heart
but quite sceptical of the old new deal social libertal
tax to transfer system builders

LBJ may have been our last social liberal POTUS

jesse jackson our last serious social liberal candidate

carter clinton and now o'barry
seem to prefer the cultural liberal axis
now sanctified with the attached name jfk

it doesn't cost uncle much to liberate minds
and permit stuff
Obama a Liberal?
written by FoonTheElder, January 23, 2013 9:15
Most of Obama's real policies are what was known a couple of decades ago as Mainstream Republican.
written by watermelonpunch, January 24, 2013 9:07
Very disappointed that unemployment doesn't seem to be relevant.

I sent a letter about this.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.