6 January 2011

High unemployment forever?

Thought-provoking article in Foreign Policy about the possibly permanent unemployability of the ill-educated.
We have seen the rise of a large class of "zero marginal product workers," to coin a term. [1] Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves -- and arguably bad for society at large -- but it simply doesn't damage profits much. It's a cold, hard reality, and one that we will have to deal with, one way or another.
In other words, the US economy is going through some major structural shifts. It's not a question of getting back to where we were, but that the economy must solve a new problem of re-employing a lot of people who were not, in reality, producing very much in the first place.[2] That's a steeper challenge than we realized early in the stages of this recession -- and so far policymakers have failed to meet it. Analysts still disagree on how rapidly the US economy will recover. But they're missing the point. The era of low unemployment may be in our rearview mirror for a long time to come.
1. In the UK, that would be the bloated state sector, whose already low productivity actually declined under the impact of the Blair-Brown borrow and spend binge. There was no employment increase in the productive sector under the Labour regime.

2. Just a thought, but maybe the cost of labour in the UK was already so high, and the labour force already so ill-educated, that this phenomenon had already manifested itself over a decade ago - hence the Blair-Brown "solution", which was to create a million new non-jobs in the bureaucracy.

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