America's jobless recovery

It's different from discussion-having

Free exchange

MY CRUSADE for a more sophisticated discussion about the American labour market seems to be falling short of its goals. Lawrence Mishel released a note yesterday entitled, "Debunking the theory of structural unemployment", which concluded:


Sigh. First of all structural unemployment isn't a "theory" to be "debunked". We understand what structural unemployment is, where in previous episodes it has occurred, and why it is almost certainly occurring, to some extent, right now. Second, it is almost certainly occurring, to some extent, right now. Given the nature of the recession, it would be surprising if there weren't some developing structural issues, and estimates from economists at the IMF and the OECD suggest that maybe 10% to 30% of current unemployment is related to structural factors.

Third, and I can't emphasise this enough, the presence of structural unemployment does not rule out huge demand issues. Fourth, because demand is still important, acknowledging structural unemployment does not mean that macro tools like monetary and fiscal expansion are powerless. Fifth, rather, monetary tools are complementary to structural reforms and other policies designed to ameliorate structural unemployment. Sixth, contrary to most of the people poo-pooing the structural side of things, structural unemployment does not imply that government should do nothing. As The Economist has argued, an array of policies from labour market reforms, to investment in re-training, to employment subsidies, to mortgage principle write-downs would be helpful in addressing structural factors.

Here's what I think is happening. Policymakers have become less interested in knowing what problems need solving and more interested in knowing how best to sell the policies they'd like to enact. Republicans don't want to enact stimulus, but wouldn't mind cutting taxes, cutting the minimum wage, and rolling back other labour rules. Democrats may want to enact more stimulus, but they also remain interested in other programmes that are likely to boost spending (in practice, it's hard to know what "Democrats" want—the caucus is hardly speaking in unison right now). And so the polarised policy discussion sources itself in a polarised analysis of current conditions.

And if you care to influence this policy debate, you have to speak in polarised terms. Policy is explicitly zero-sum. If you acknowledge structural unemployment, you strengthen the Republican policy argument and weaken the Democratic policy argument.

But reality isn't either-or. And it goes without saying that carrying out a discussion in this fashion is a terrible way to try and arrive at the right policy answer. One thing that seems particularly troubling to me is that some prominent economic writers appear to have so internalised the polarised method of argumentation that they no longer recognise they're doing it. It comes naturally, even when discussing issues that haven't necessarily been wedged into the polar, partisan dynamic.

It's unfortunate, and frustrating, and disappointing. But I don't know that anything can be done about it.

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