Krugman: Jobs Program Needed

Paul Krugman argues that “the recession is probably over in a technical sense” the government must nonetheless treat the 10.2 unemployment rate as a crisis because there are “six times as many Americans seeking work as there are job openings, and the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s” and because “financial crises have typically been followed not just by severe recessions but by anemic recoveries; it’s usually years before unemployment declines to anything like normal levels.”

WPA Work Promotes Confidence PosterBeyond that, “The long-term unemployed can lose their skills, and even when the economy recovers they tend to have difficulty finding a job, because they’re regarded as poor risks by potential employers. Meanwhile, students who graduate into a poor labor market start their careers at a huge disadvantage — and pay a price in lower earnings for their whole working lives. Failure to act on unemployment isn’t just cruel, it’s short-sighted.”

So, he says, “it’s time for an emergency jobs program.”

One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can’t borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.

Meanwhile, the federal government could provide jobs by … providing jobs. It’s time for at least a small-scale version of the New Deal’s Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

Finally, we can offer businesses direct incentives for employment. It’s probably too late for a job-conserving program, like the highly successful subsidy Germany offered to employers who maintained their work forces. But employers could be encouraged to add workers as the economy expands. The Economic Policy Institute proposes a tax credit for employers who increase their payrolls, which is certainly worth trying.

Now, I’m not opposed in theory to either state aid or employer incentives and both strike me as a better response to the financial crisis than the massive corporate bailouts of the recent past.   The WPA-like program, however, is a head scratcher given Krugman’s stated goals.   How does doing low paying make-work jobs keep highly perishable skills from eroding or make someone seem less “risky” to a potential employer?  And Krugman himself complains that having a low paying job tends to depress your subsequent earnings.

If the problem is that there are no jobs for low-skill workers, something like WPA makes sense — preferably coupled with some sort of training program.  But it makes little sense for laid-off MBAs to spend a couple years filling potholes while they wait for the economy to get better.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Pete says:

    Why would Krugman, or any other “progressive,” understand how to create meaningful, long term jobs? After all, most “progressives” worship at the altar of government and believe that free enterprise is evil and greedy. Maybe Krugman should consider grabbing a shovel himself and volunteer to show the way. He should put out a call to thousands of government bureaucrats to join him; all in the name of “progressive patriotism.”

    I have 8 employees I will volunteer as I am about to lay them off. But wait! Maybe a tax credit for a barely profitable business will save their jobs. The economic ignorance of “progressives” is truly stunning.

  2. Zelsdorf Ragshaft III says:

    What Pete just posted is reality as opposed to theory. Krugman claims to be an economist but in fact is a socialist. Since he is an opinion writer and gets paid for writing BS which his editor agrees with. Paul gets a pay check. He is actually a parasite on society because he contributes nothing of value. I would like to inform Mr. Krugman (and I have emailed him my opinion of his opinion often) the greatest contribution to the world given by the Soviet Union was the AK-47. And that was by an uneducated tank man.

  3. I can’t remember now if I finished Friedman’s The World Is Flat. I think so, or pretty close. It was a typical Friedman book, with some things that sounded right and some that sounded obviously wrong. On the relentless pressure moving jobs overseas, I think he painted a pretty good picture.

    I see our jobs crisis in that context. We can train people up with low, medium, or high grade skills, and still see them undercut by a factory worker in Poland or an engineer in Korea.

    Can “skills” really compensate? I’m sure they help individuals, but I’m not sure they can change demographics.

    I am not a protectionist, but I think we need to do something to shake up our competitiveness. Possibly it would be enough to shake up the patent system, and defeat the tragedy of the anti-commons.

  4. JKB says:

    So the government should hire a hundred people in low paying jobs to do backbreaking work that can be done quicker and cheaper by one guy on a paving machine? Or a backhoe operator? Yes, the way to get the country out of a recession is to rollback productivity.

    And they should give tax credits for employers to take on workers rather than tax cuts which would spur economic growth. Because it would be foolish to think that after hiring the unneeded worker this government would pass laws forbidding them from being laid off. To conserve jobs, of course. It’s not like this administration wants to emulate Germany or France.

  5. Brett says:

    How does doing low paying make-work jobs keep highly perishable skills from eroding or make someone seem less “risky” to a potential employer? And Krugman himself complains that having a low paying job tends to depress your subsequent earnings.

    It’s basically a way to inject money into the economy via federal spending. I agree, though, that it’s probably a bad idea- aside from the issues above, it would take time to set up a WPA program. It’d be much faster and straightforward just to either strengthen or lengthen unemployment benefits.

  6. Stumbled on this as I continued my morning reading:

    Competition for engineering talent in China and India has stiffened over the past decade as hardware and software companies have accelerated the transfer of manufacturing and design operations from Western locations to lower-cost parts of the globe. Although both China and India are turning out new engineers by the thousands each year, demand for skilled and experienced engineers is so strong that many positions are going unfilled, forcing companies to raid their competitors for talent. Often, companies offer attractive incentives to secure experienced engineers, only to lose them to rivals after a couple of years.

    Although high-tech employers in China and India have indeed been raising compensation for local employees, many engineers in the two countries still earn considerably less than their counterparts elsewhere, and that salary gulf is driving a wedge between employers and employees.

  7. David G. says:

    All this job talk is 30 years too late.

    It should have been in place during Reagan,HW Bush, Clinton and GW Bush’s tenure. Typical government inaction…. 30 years late and many trillions of dollars short.

    Our IRS tax code should have had major disincentives and surcharges for any US headquartered corporation that moved production and jobs outside the USA.

    Our government’s job is protecting our borders, our country and our economy. Instead they worried about unfair trade pacts, boosting Wall Street profits, and CEO bonuses, and allowing in unskilled illegal labor — all factors that are negative to the USA as a country.

  8. gustopher says:

    But it makes little sense for laid-off MBAs to spend a couple years filling potholes while they wait for the economy to get better.

    Honestly, I think a lot of MBAs could use a couple of years of real work to put things into perspective.

  9. Gerry W. says:

    Some of this posting is somewhat course. I am bringing over what I said on another website, so I have not edited this.

    So, how in the world did our country get into a mess that it is in today?

    I guess we can go back to when Clinton and Gingrich left office. At that time, they left with a yearly surplus. While we still had a debt and other problems, they seem to be manageable at that time. Enter Bush and it was an 8 year disaster.

    Normally to get out of recession, you have tax cuts and have the federal reserve lower interest rates. And this can be done in a span of 2 to 3 years. And when the economy is good, you cut spending.

    We are not in a normal recession today. And these are the problems we are up against.

    *Under Bush you had tax cuts for 8 years. It was borrowed money, it was spent, and it was for the here and now. Since spending was not cut, we saw deficits and debt. So today, we cannot do the normal tax cuts as it would just be more borrowed money. It is like crying wolf too many times. It was the roaring twenties.

    *The fed has had lower interest rates for a long time now, this creates a low dollar and possible inflation. At some point the fed will have to raise interest rates. And the fear is that this could slow the economy down at a time we need to create economic growth. Deflation/inflation anyone?

    *Tax cuts today may not do as good as before if people buy goods. Half the goods sold in this country come from China or some other country.

    *Jobs continually go to China and other countries. While this was minimal under Clinton, it certainly gained momentum under Bush. Globalization has not been addressed. All we heard is that “free trade is good” and anything else was ignored.

    *We have not invested in our country. You cannot have jobs go overseas, money going to Iraq, and neglect ones country. And yet, that is what we saw for 8 years.

    *We had a financial crisis, a housing crisis, and an auto crisis at the same time.

    *And I ask. What widgets can be made here and not in China if you want to create jobs?

    *Trickle down does not get down to the last 20% to 30% of the population.

    So since we cannot normally reduce taxes and lower interest rates and expect the same kind of recovery as in the past, the only answer is to invest in your country, in your people, and in the future.

    1. Invest in your country: That is energy independence. You do everything from drilling to nuclear plants, to alternative energy for security and for jobs. A new air traffic control system would give airlines to fly more direct routes, which means fuel savings. The money saved would go for new aircraft and that would create jobs.

    2. Invest in your people: Mandatory vocational training. Everyone should have a skill by the time he graduates. Or at least have a consoler direct the student to the right direction. You will need an educated society to deal with globalization.

    Hudson Institute > Promoting U.S. Worker Competitiveness in a Globalized Economy

    3. Invest in the future. That is in all sciences and stop using religion to stop embryonic stem cell research. You do all the innovation you can. You also can maximize federal research grants and invest money into universities and businesses to create new researches and jobs. Right now there is no “new” jobs to go to.

    Is America Losing Its Mojo? | Print Article | Newsweek.com

    Now, I have heard all this crap about the constitution, trickle down, and cutting spending. Some of it well and good. However, none of that manages the problems of the day. Republicans want to sit on ideology. I am pragmatic. You have to fix the country and recognize problems and not sit on laissez-faire. The republican party sits on a right run by the Limbaughs and Hannitys and they say the same thing over and over again. We see it on this website. That is cut taxes. But that is not enough. Ideology is not enough. You see Palin saying we need tax cuts. DeMint saying the same thing. Does anyone in the party have a brain? I saw jobs lost in my town while we had 8 years of tax cuts. Where was the republican party? Oh, that’s right, you were stuck in Iraq and neglected Afghanistan and your own country.

    We know that democrats will go to welfare policies. And at this point, that is the only straws that cities and states can grasp. We cannot compete with 2 to 3 billion cheap laborers in the world. We have seen our jobs lost, and if you keep one or go to another one, then it is for less money and benefits. So now we resort to bailouts of cities and states, extension of unemployment benefits, cash for clunkers, and casinos for every state. Well, this is a fine state of affairs. While you can sight the constitution in not doing anything, you will turn around and spend money in other countries. So you can blame democrats all you want, but you turn your back on the American people.

    We have seen the glorification of ideologies by Bush. “Stay the course” and run the country into the ground. And he got his answers from a “higher authority.” Hollywood could not do any better painting a picture like this. A delusional president caught up in the wrong war, answers to God, has failed ideology, and runs our country into the ground.

    And guess what? Republicans just go on repeating the same o thing.

    So we are caught up with deficits and debt, war, and failed ideologies.

    China is investing in Africa. They are buying raw materials. They have made contracts for oil. Their growth is at 8% or more. They are taking our jobs. They have money. They are building whole cities, high speed rail, and has the worlds largest airport.

    Now, guess who is winning?

    As it is now. We will have a jobless recovery. And to do the things I have said will have results 10 to 20 years from now. There is no other choice and little time to succeed.