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Home Publications Blogs Beat the Press David Brooks Tells Us to Just Sit Back and Accept Double-Digit Unemployment

David Brooks Tells Us to Just Sit Back and Accept Double-Digit Unemployment

Friday, 10 September 2010 03:53

In another fascinating piece of creative economics David Brooks tells us: "we can get distracted by short-term stimulus debates, but those are irrelevant by now." Okay folks, just get used to 9.6 percent unemployment, Mr. Brooks says that there is nothing can be done.

The column is chock full of observations that most people did not know, probably because they are not true. For example, Brooks tells us that if more people follow the recommendation of Michelle Obama and go into teaching and service occupations then it will make the country poorer.

That's an interesting thought. Would the country be worse off if most teachers came from the top quartile in their classes rather than further down the ladder? I certainly did not know this.

As for other service occupations, the country certainly could have used more competent and honest economists. We are losing more than $1.4 trillion a year (@$19,000 for a family of four) due to the recession caused by the collapse of the housing bubble. If we had more competent economists, then the bubble never would have been allowed to grow to such dangerous levels. We can call this $19,000 in lost output a year the "incompetent economist tax." (By way of comparison, toward the middle of next year the incompetent economist tax will exceed the size of the 75-year projected shortfall in the Social Security trust fund.)

Competent economists could make us richer in other ways. For example, we spend close to $300 billion a year on prescription drugs. These drugs would cost roughly one-tenth as much if patent monopolies did not allow drug companies to sell their drugs at prices far above their competitive market price. Competent economists could develop more efficient mechanisms for financing prescription drug research, thereby saving us hundreds of billions of dollars a year.

Even Mr. Brooks' key concern, a lack of people going into engineering, could be addressed in large part of a bit of competent economics. Manufacturing in the United States is at an enormous competitive disadvantage because of the over-valued dollar. If the dollar is 30 percent over-valued, then it means that we are effectively providing a subsidy of 30 percent for imports and imposing a tariff of 30 percent on exports. As people who understand economics know, the over-valued dollar is the main reason that we have a trade deficit.

If we got the dollar down, then our manufacturing industry would be much more competitive. This would make careers in engineering more attractive relative to the alternatives. Then we would have more people entering engineering and David Brooks would be happy.

Comments (10)Add Comment
written by Wes, September 10, 2010 5:43
Liberal economists like nothing more than debasing the currency and more stimulus.
"If the dollar is 30 percent over-valued..."
Another way of looking at this is to say that someone is 30% overpaid compared to the true market rate.
And you are contradicting yourself.
"If we had more competent economists, then the bubble never would have been allowed to grow to such dangerous levels." True. But this means that we did not really lose anything but rather returned to a more normal natural level. Certainly not $19000 per family.
Machinists are trained, not born.
written by Ron Alley, September 10, 2010 6:02
The argument made by David Brooks today is flawed as usual. The worst statement he made was:

One of the perversities of this recession is that as the unemployment rate has risen, the job vacancy rate has risen, too. Manufacturing firms can’t find skilled machinists. Narayana Kocherlakota of the Minneapolis Federal Reserve Bank calculates that if we had a normal match between the skills workers possess and the skills employers require, then the unemployment rate would be 6.5 percent, not 9.6 percent.

Machinists aren't born, they are trained. The "lean" corporate manufacturers just don't hire and train enough machinists. To be sure, aspiring machinists can find training programs at community colleges. However, if you haven't visited one of those training programs lately, I suggest that you find the time. You'll see dedicated instructor and determined students working on machines three generations older than those found in the tool rooms and shop floors of the "manufacturing firms [that] can't find skilled machinists". Those manufacturers just aren't willing to hire a recent graduate of a program and deal with the graduate's learning curve. They are demanding fully trained machinists, current on the latest generation of automated machining centers.

Skill mismatch? No. Opportunity gap? You betacha.
written by izzatzo, September 10, 2010 7:05
If the Incompetent Economist Tax is eliminated with a stimulus it will result in more incompetent economists because they're all supply side economists that respond to a tax cut by multiplying themselves so the tax cut can pay for itself.
Engineering Salaries
written by Bob Mounger, September 10, 2010 10:11
Engineering salaries have been going down in real dollars since the 60's. I remember ads in professional journals offering $12,000/year for PhD Mechanical Engineers in the early 90's.

The "shortage" of engineers is that the Chinese & Indians who would work for a pittance in hopes of a green card find opportunities at home now, so surprise, surprise, supply & demand.

I worked at small technology company in North Texas in the early 90's whose CEO would constantly complain that engineers were "a bunch of g*ddamned prima donnas". I'll never forget the year he paid himself more than the President of Exxon...
written by liberal, September 10, 2010 10:21
Wes blithered ignorantly,

Another way of looking at this is to say that someone is 30% overpaid compared to the true market rate.

Nope. The current China/US exchange rate isn't set by the market. It's set by the Chinese government.

But thanks for playing.
written by Wes, September 10, 2010 10:52
Seemingly frustrated liberal wrote in anger:
"Nope. The current China/US exchange rate isn't set by the market. It's set by the Chinese government."
OK. But is your salary set by Chinese government too?
And, you know, there are plenty of other currency pairs, not only dollar-yuan.
And, perhaps more importantly - check how volume of trade with China compares with the amount of goods and services produced domestically.
written by diesel, September 10, 2010 11:56
Wow. Is his column a joke?, A parody? If it's a joke, then it's a cruel one. People didn't "turn away" from technical jobs and skillsets because of a change in cultural mindset. They were fired or laid off. They left in tears with a feeling of bleakness in their hearts and sometimes had to be driven off by adamant owners. Talk about not understanding people's allegiances.

That, for example, Middle schools today don't even teach shop class is not because of a shift in values, but because they can't afford the machinery or liability insurance. To be absolutely clear on the importance of this, shop class is relevant to all 7th and 8th graders because it speaks directly to the way their minds process information--it matters not in the least whether they are the sons or daughters of Nobel prize winning nuclear physicists, poets or concert violinists. They need hands-on learning to supplement their developing mental categories.

Some commentators complain about the shortage of engineers, and it sounds plausible, but when you go to the engineering societies' websites, they say frankly that there is not a surplus of vacant engineering positions. Engineering departments trim the class of aspiring applicants ruthlessly in their rigorous prerequisite courses. If there were a shortage, they could easily lower their standards and raise admission rates.

I just don't buy the "this sort of just happened to us because of some moral shortcoming" type of argument. Sure, that's a somewhat useful and accurate explanation, but it exonerates the business caste that, using the prestige and might of the American political and military machine benefitted from expanding into foreign markets and who say, in effect, "Let the laid off worker's sons and daughters serve as pawns in our Army." When business wants to trim costs, they treat labor as an insensate commodity, yet to rally the populace for another war, they cynically tap into people's deepest feelings of loyalty. How can Brooks miss the cause/effect relationship between the drive toward global expansion by American corporations and its social fallout?

Finally, workers embraced lower and middle management jobs not because a decadent softness overtook the nation, as though we passed through a cosmic dust cloud, but because factory assembly work is often dirty, loud, toxic, grueling labor that takes a lot out of you. The softness and wooly headed thinking of Americans is the product, not the cause of a shift away from labor and manufacturing.
written by S Brennan, September 10, 2010 12:27
"a lack of people going into engineering, could" be attributed to high skill/low wages that are a direct result of H1-B and L-1's being paid wages 30-40% lower than native born. These H1-B and L-1's folks are held in a slave like condition by the rules that say if they want to switch jobs they get thrown out of the country.

"The L-1 program rarely gets much congressional attention, even though there were more than 380,000 L-1 admissions recorded in FY 2008."


David Brooks...or reality...you make the call
written by S Brennan, September 10, 2010 12:37
What may be unsaid is that such a succession of positions is likely to be characterized by periods of unemployment between them, and that new positions are likely to be lateral moves rather than the upward advancement of past generations. Further aggravating the situation is the irrational basis for job loss and unemployment. In many cases it appears that companies discard experienced engineers after a few years when their knowledge may not be as timely across the board as that of recent graduates, and replace them with recent engineering graduates at starting salary levels. Seniority and experience seem to count for little, and good work offers no protection in such a climate.

The instability of employment for engineers as well as other professionals is a defining characteristic of the breakdown of the implied ‘contract’ between employees and employers. Current day employers seem to feel no compulsion to protect the positions of their skilled and experienced employees when quarterly indices are down, and employees seem to feel no allegiance to their companies, and if even a marginally better job offer comes along, they are inclined to jump ship. This instability in employment continuity appears to be equally true for engineers employed in traditional technical fields, as well as those employed by the broad consulting firms and other non-traditional employers.

Taken together, engineering appears less and less attractive as a career path for many qualified students.

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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.