A tool of the 1% tells us about the wonderfulness of unemployment

Larry Kummer, Editor

12 years ago

Summary: Advocacy for the 1% is the easy and surest way of success in America, with wealth and power concentrated in the 1%. So we should become accustomed to reading their soothing explanations of why we live in the best of all possible worlds. No anger necessary. Today we have a fine example of this genre.

Macroeconomics forms a key element of geopolitical crisis. Both domestic and global crises require a better understanding than today’s theories provide. Perhaps that is the most important similarity between our situation and that of the early 1930s.

To meet this challenge we have thousands of economists. They come in three kinds.

Mainstream: striving to improve as-yet immature theories in a rapidly changing world.
Supporting the 1%: saying whatever necessary to support Team 1%’s agenda. Anything goes: speculative new theories, contradicting one’s own past statements, imaginary data. Sometimes embarrassing work, but a path to career success.
Fringe: bold exciting assertions, data and coherence unnecessary, obtaining crowd appeal rather than peer approval (eg, Steve Keen, as in here, here, here, and here).

For an example of Supporting the 1% at work see “What the ‘End of Retail’ Means for Young Workers“, Karl Smith (Asst Prof of Public Economics and Government, UNC at Chapel Hill), The Atlantic, 6 April 2012.

Let’s see his logic, starting with the opening:

Quickly tying together a bunch of threads: My general take is that neither GDP nor the Employment-Population Ratio is a stat we should care about for its own sake. By that same token, in-and-of-itself, I don’t consider declines in unemployment from people leaving the workforce to better or worse than declines from people becoming unemployed.

There are lots of reasons, but fundamentally because these are a function of choices people make about their lives. … What matters is whether or not the labor market is functioning smoothly.

Smith’s opening suggests his awareness that he’s blowing smoke at us. First, he doesn’t bother to write carefully. He second sentence should read (change in red): “I don’t consider declines in unemployment from people leaving the workforce to better or worse than declines from people becoming unemployed”.

Second, his explanation is insane. Why doesn’t he consider people getting jobs “no worse” than people giving up searching for jobs after years of unemployment? Because poverty is just a choice, a life-affirming wonderland! What matters is the continued working of the sacred efficient labor market!

When lots of people choose to retire, stay in school longer or stay home to raise a family the trends will reverse. However, its not immediately clear that working is a better life choice than the other three options. Indeed, we generally consider the other three to be luxuries afforded by a wealthy society.

The U of NC could provide Prof Smith a valuable post-graduate education by firing him with bad references. What might Smith learn as exhausts his family’s savings and unemployment insurance. Watches his home foreclosed. The lesson would be especially vivid if he was a manual worker in his late 50’s, facing the exciting prospect of either chronic unemployment or starting a new career — working his way up from the bottom rung (again).

Smith might learn that hopeless job searches are in fact worse than getting a job.

Smith’s article gets more interesting as one reads on. One learns that new entrants to the labor force, with little or no experience, find unemployment an opportunity to become poets and scholars (/sarcasm).

One possibility, however, is that the relatively weak growth in shopping center employment relative to retail sales since 2000 and especially recently is driving down overall teen employment levels. However, because teenagers are especially suited to shopping center employment they are dropping out of the labor force in response. That is, the End of Retail is causing a permanent shift in teenage employment because there are no substitutes for retail jobs.

… E-commerce means more efficient shopping but because we are not repurposing teenage labor but losing it completely … On the other hand the non-measured gains to increased free time and — one can dream — increased school work are larger than we would have expected.

College costs rising, with aid availability and coverage decreasing. So of course teenage unemployment is wonderful. Or so “one can dream”. If one is a ~~tenured~~ college professor with a heart of stone. The ideal candidate for a world run for and by the 1%. Someone has to write articles like this to keep the sheep dumb and complacent.

Important note

Of course we can make no reliable judgements about Karl Smith and his work based on this one sample. So while the article discussed here in effect serves the interests of the 1%, it might be an exception in his overall body of work.

For more information about the US job market