On December 27, 2013, Brad Plumer writes on Ezra Klein’s Wonkblog in The Washington Post:
This Saturday, Dec. 28, an emergency unemployment insurance program will expire, immediately cutting off jobless benefits for 1.3 million workers who have been unemployed for longer than 26 weeks.
Here’s our full primer on why this federal program is about to sunset and who will be affected. But it’s also worth taking a step back and looking at the broader disaster of long-term unemployment in the United States. Here are seven reasons why this issue still very much matters:
1. Long-term unemployment is still at its highest level since World War II.There are currently about 4 million people who have been out of work for 27 weeks or longer. Although that’s come down since the nadir of the Great Recession, the U.S. long-term unemployment rate is still the highest it’s been since World War II:
The ranks of the long-term unemployed include all types of workers, according to a survey by the Urban Institute. There are young workers who have been out of work for more than 27 weeks. Married workers with kids. Older workers. College-educated workers. High-school dropouts. The problem touches nearly every demographic group you can think of.
2. Most of the long-term unemployed are having an extremely difficult time finding jobs. If you’ve been out of work for 27 weeks or longer, then you currently have just a 12 percent chance of finding a new job in a given month. And those odds go down the longer you’re out of work:
Note that job prospects for the long-term unemployed are even worse today than they were in 2007. And the long-term unemployed have a much harder time finding jobs than those who have been out of work for just a few weeks.
Why is this? It’s possible that the long-term unemployed are simply less employable. But there’s also evidence that businesses actively discriminate against these workers. In one recent study, Rand Ghayad of the Boston Fed sent out a flurry of fictitious résumés to different employers, tweaking some of the characteristics of the applicants. He found that most employers won’t even look at the résumés of the long-term unemployed, even if they’re otherwise perfectly suitable.
One possible reason for this, as Michael Strain of the American Enterprise Institute points out, is that employers are leery of hiring the long-term unemployed because they assume there must be something wrong with these workers. Why else would they be out of work for so long? That may well be irrational. But there’s little doubt that it’s a huge obstacle for these workers.
3. Long-term unemployment takes an extreme toll on people’s health and well-being. It’s hard to overstate how much damage long-term unemployment can do to a human being. This recent study (pdf) by the Urban Institute offers a gruesome summary.
Workers who have been out of a job for longer than 27 weeks typically see their incomes fall by 40 percent. Even if they do find a new job, it tends to be lower-paying, and their long-term earning prospects are usually impaired. These workers tend to have worse health, higher rates of suicide and strained relationships with their families. They see a massive drop in self-esteem. Their children do worse in school and earn less over the long run.
(For some recent portraits of the long-term unemployed, see this piece by Annie Lowrey or this piece by Ylan Mui.)
4. The expiration of emergency benefits will take away a key source of income for millions of people. At the moment, many states still offer up to 63 or even 73 weeks of unemployment aid, and benefits average around $300 a week. That will all change Saturday. At that point, most states will go back to offering 26 weeks of jobless benefits at most, as they did before the recession.
That creates a problem: Right now, as a result of the downturn, the average job-hunter takes about 35 weeks to find a new job. So that means many jobless workers will see their benefits cut off before they find work again. All told, the Center on Budget and Policy Priorities expects some 4.9 million people to get kicked out of the program before they find a job in the next year:
5. There’s scant evidence that the long-term unemployed will find it easier to get jobs if their benefits are cut off. For starters, there still aren’t enough jobs to go around: There are currently about 2.9 unemployed workers for every job opening. That’s worse than the ratio at any point during the 2001 recession.
Recently, JP Morgan’s Michael Feroli surveyed the evidence and found that the long-term unemployed don’t typically find jobs en masse when their benefits expire. Some workers who get cut off may take lower-paying jobs than they otherwise would. But many seem to give up looking and drop out of the labor force entirely. Indeed, there are some signs that this is happening in North Carolina, which recently slashed its state unemployment program.
Strain argues that this makes intuitive sense. “If you look at the long-term unemployed, a good chunk of them have children. A good chunk are married. A good chunk are college-educated or have had some college and in their prime earning years,” he told me. “It strikes me as implausible that this person is engaged in a half-hearted job search.”
6. Congress is doing very little else to help the long-term unemployed find work. It’s worth noting, as Strain does, that simply extending jobless benefits once again won’t solve the problem of long-term unemployment. Not even close.
Economists on both the left and the right who have looked at this problem tend to think the government needs to do a lot more to tackle long-term unemployment. That could include work-sharing programs. Or tax incentives for companies that hire the long-term jobless, as economist Dean Baker has suggested. Or relocation assistance. Or even, as AEI’s Kevin Hassett has proposed, the government could hire people directly.
But Congress isn’t doing any of these things. They’re not even talking about any of these things. Right now, the main debate is between Democrats (and some Republicans) who want to extend the emergency unemployment insurance program for another year, at a cost of $25.1 billion, and Republicans who oppose it. (This fight will probably flare up in January.) But there’s little legislative debate over larger, more comprehensive measures.
7. All this long-term unemployment is destroying the U.S. economy. Earlier this year, three economists at the Federal Reserve published an unsettling paper arguing that the long-term productive capacity of the U.S. economy has been greatly diminished. The reason? Long-term unemployment:
The economists’ argument goes like this: There are now millions of Americans who lost their jobs in the recession, often through no fault of their own, and they’ve now been out of work for years. Those workers have seen their skills atrophy, their networks fade, and many of them have dropped out of the workforce entirely, discouraged by their inability to find work. That, in turn, has weakened the total potential of the U.S. economy.
This is an extremely worrisome situation. It means that long-term unemployment isn’tjust a temporary ailment that will heal itself as the economy keeps rebounding. It has left permanent scars. The U.S. economy will never be as productive as it could have been had we figured out how to get people back to work more quickly. And those scars are still getting deeper.
This Wonkblog article by Brad Plumer does an excellent job of addressing the scope of problems related to our dependency on job creation as the ONLY source of income, but as is virtually universal is oblivious to the non-job-dependent solution. Simply extending jobless benefits once again won’t solve the problem of long-term unemployment and the diminishing impact income losses have on the long-term productive capacity of the U.S. economy.
While emergency assistance is necessary, the references cited in Brad Plumer’s Wonkblog article are ALL one-factor thinkers: LABOR ONLY!––with a focus on wages rather than income, and “full employment” rather than “full production” as the economy’s panacea. They ALL are stuck in the LABOR ONLY idea that ALL WEALTH is created by human labor. The reality is that less and less human labor is necessary to produce wealth. If that is the case, then ownership of the non-human means of production is necessary if one desires to be wealthy. Ownership is the key to providing sufficient income purchasing power, not JOBS alone.
The political maneuvering in Washington is directed at benefiting the wealthy capital ownership class, not the average person on “Main Street.” Such policies as are pursued will further concentrate ownership of wealth-creating, income-producing productive capital assets among the 1 to 5 percent of the American population and further enhance the economic and political power of the wealthy ownership class.
Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The technology industry is always changing, evolving and innovating. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income even though EVERY wealthy person or family knows that capital incomes can be far greater than wage incomes. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When capital “workers” (productive capital owners) replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another including unemployment benefits.
Conventional economists, political leaders and the national media are oblivious to the structural problems that plague our economy, especially with respect to the ways the system further concentrates ownership of wealth-creating, income-producing productive capital assets and growth among the already wealthy ownership class, which represents 1 to 5 percent of the population. With such concentrated economic power, the American majority is barred from participating in the ownership of the non-human factor assets that are doing the bulk of the production of products and services, leaving them with their ONLY income source a job or welfare. Thus they are shut out from a most significant income source to effectively empower them to be “customers with money” and propel economic demand, and thus real productive growth of the economy.
There is a way out if the Federal Reserve System can be reformed to act as a purveyor of economic growth.
Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens using insured capital credit loans via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of diversified corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.
The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.
Virtually all the economic gains have pertained to the wealthy ownership class within the top 1 to 5 percent of the population, who own the vast wealth-creating, income-generating productive capital assets of American corporations.
Unless we reform the system inequality will expand and the American people will experience far greater competition globally as teams of people and machines compete to produce and sell their products and services. This means that we must look to increasing the productiveness of technological innovation and invention.
The system is rigged by the wealthy ownership class to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 to 5 percent ranks.
The reality is that personal and family household income for those who are dependent on a job as their ONLY income source is declining. Wage and salary incomes will continue to decline simultaneously with global competition and, as a result of the necessity to turn to increasingly more productive non-human means of production, destroy jobs that will become unnecessary and devalue the worth of labor.
Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. This will not change with companies realizing that they can operate more efficiently with fewer employees. Therefore, unless the employees are owners, the share of corporate profits going to the employees will continue to decline.
The reality is that more and more people are being squeezed financially, faced with dismal job prospects (their only source of income) and on the blink of having to turn to the government for welfare support funded by tax extraction and national debt. Americans, for the most part, are in a mode of retrenchment even though they have tremendous pent-up demand and unfulfilled dreams for a more affluent life, which they see enjoyed by the wealthy ownership class (without realizing that those people are wealthy because they OWN).
