Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘paul krugman’

More Salvos in the False “Class War” on Public Pensions

Thursday, August 26th, 2010

amytraub4Repeat something often enough and it becomes, if not true, at least a solid bit of conventional wisdom. Consider Ron Lieber’s column in Saturday’s New York Times, which neatly recycles an editorial the Wall Street Journal ran back in March. The issue: the pensions that guarantee public employees a middle-class standard of living in retirement have become more difficult for cities and states to afford. This, according to Lieber and the chorus of conservatives singing the same tune, means a “class war” pitting sanitation workers who deferred compensation so that they could retire with dignity against “have-not” taxpayers who would like some retirement security of their own. Lieber even knows the outcome: public workers should to get ready for many more states and municipalities to engage in “rare acts of courage” and break their promises to pensioners.

Jonathan Cohn at the New Republic asks the obvious question “to what extent is the problem that retirement benefits for everybody else have become too stingy?”

It’s a point I’ve been making as well:

One out of three working Americans has no retirement savings to rely on beyond Social Security, many others have saved very little, especially now that the value of their homes has been destroyed. When it’s public pensions that are falling short, it’s very visible. When it’s the private savings of millions of individual households, it’s easy to overlook. But when we start to hear that it has become “too expensive” to provide teachers and police officers with a decent retirement, we know no one else has a chance at retirement security either.

Former Colorado Governor Richard Lamm, quoted in Lieber’s article, takes the point to its logical conclusion, arguing that “the New Deal is demographically obsolete.” Translation: we’d all better get used to the new normal of low pay, few benefits, and no retirement, sooner rather than later. After all, demographics are inexorable. Resistance is futile.

As Paul Krugman points out in today’s Times, the same air of inevitability hangs over the provision of critical state and city services. Cities and states are broke, the argument goes, there’s nothing we can do. We can neither keep streetlights on nor let teachers retire. Except that in both cases the argument is false:

We’re told that we have no choice, that basic government functions — essential services that have been provided for generations — are no longer affordable. And it’s true that state and local governments, hit hard by the recession, are cash-strapped. But they wouldn’t be quite as cash-strapped if their politicians were willing to consider at least some tax increases.

Krugman’s point about how we got here is equally true of the debate around public employees and their pensions:

It’s the logical consequence of three decades of antigovernment rhetoric, rhetoric that has convinced many voters that a dollar collected in taxes is always a dollar wasted, that the public sector can’t do anything right.

Unfortunately, Lieber’s column effectively adds to that rhetoric.

About the Author: Amy Traub is the Director of Research at the Drum Major Institute. A native of the Cleveland area, Amy is a Phi Beta Kappa graduate of the University of Chicago. Before coming to the Drum Major Institute, Amy headed the research department of a major New York City labor union, where her efforts contributed to the resolution of strikes and successful union organizing campaigns by hundreds of working New Yorkers.

Unemployment: The Economists Just Don't Get It

Wednesday, August 25th, 2010

Martin FordLately, there has been a fair amount of buzz in the economics blogosphere about the issue that I’ve been discussing here: Structural Unemployment.

Paul Krugman touches on it here. Brad DeLong says this. Mark Thoma has a post in a forum focusing on structural unemployment at The Economist.

If you read through these posts, however, you won’t see a lot of discussion about the case I’ve been making, which is that advancing technology is the primary culprit. I’ve been arguing that as machines and software become more capable, they are beginning to match the capabilities of the average worker. In other words, as technology advances, a larger and larger fraction of the population will essentially become unemployable. While I think advancing information technology is the primary force driving this, globalization is certainly also playing a major role. (But keep in mind that aspects of globalization such as service offshoring–moving a job electronically to a low wage country–are also technology driven).

The economists sometimes mention technology, but in general they find other “structural” issues to focus on. One that I have seen again and again is this idea that people can’t move to find work because their houses are underwater (the mortgage exceeds the equity). The emphasis given to this issue strikes me as almost silly. Are there any major population centers in the U.S. that have really low unemployment?

Even if people could sell their homes, would they really be motivated to load up the U-haul and move from a city with say 12% unemployment to one where it is only 9%? Have the economists lost sight of the fact that 9% unemployment is still basically a disaster? The few locales I’ve seen with unemployment significantly lower than that are rural or small cities (Bismark ND, for example)–places that are simply incapable of absorbing huge numbers of hopeful workers. Let’s get real: playing musical chairs in a generally miserable environment is not going to solve the unemployment problem.

Another thing the economists focus on is the idea of a skill mismatch. Structural unemployment, they say, occurs because workers don’t have the particular skills demanded by employers. While there’s little doubt that there’s some of this going on, again, I think this issue is given way too much emphasis. The idea that if we could simply re-train everyone, the problem would be solved is simply not credible. If you doubt that, ask any of the thousands of workers who have completed training programs, but still can’t find work.

Economists ought to realize that if a skill mismatch was really the fundamental issue, then employers would be far more willing to invest in training workers. In reality, this rarely happens even among the most highly regarded employers. Suppose Google, for example, is looking for an engineer with very specific skills. What are the chances that Google would hire and then re-train one of the many unemployed 40+ year-old engineers with a background in a slightly different technical area? Well, basically zero.

If employers were really suffering because of a skill mismatch, they could easily help fix the problem. They don’t because they have other, far more profitable options: they can hire offshore low wage workers, or they can invest in automation. Re-training millions of workers in the U.S. is likely to make a killing for the new for-profit schools that are quickly multiplying, but it won’t solve the unemployment problem.

Why are economists so reluctant to seriously consider the implications of advancing technology? I think a lot of it has to do with pure denial. If the problem is a skill mismatch, then there’s an easy conventional solution. If the problem’s a lack of labor mobility, then that will eventually work itself out. But what if the problem is relentlessly advancing technology? What if we are getting close to a “tipping point” where autonomous technology can do the typical jobs that are required by the economy as well as an average worker? Well, that is basically UNTHINKABLE. It’s unthinkable because there are NO conventional solutions.

In my book, The Lights in the Tunnel: Automation, Accelerating Technology, and the Economy of the Future, I do propose a (theoretical) solution, but I would be the first to admit that any viable solution to such a problem would have to be both radical and politically untenable in today’s environment. That’s why I don’t spend much time suggesting solutions here: what would be the point? (but please do read the book–it’s free). I think the first step is to get past denial and start to at least seriously think about the problem in a rational way.

The few economists that have visited my econfuture.wordpress blog and commented on my previous posts have generally barricaded themselves behind economic principles that were formulated more than a century ago (see the comments on my posts about these economic concepts: lump of labour fallacy and comparative advantage).

Most economists seem to be unwilling to really consider this issue–perhaps because it threatens nearly all the assumptions they hold dear. I wrote about this in my first blog post . We’ll see how long it takes for the economists to wake up to what is really happening.

About The Author: Martin Ford is the founder of a Silicon Valley-based software development firm.  He holds a computer engineering degree from the University of Michigan, Ann Arbor and a graduate business degree from the University of California, Los Angeles. He is the author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (available from Amazon or as a FREE PDF eBook) and has a blog at econfuture.wordpress.com.

Putting People Back to Work and Obama's Jobs Summit

Thursday, December 3rd, 2009

The U.S. is now 24 months into the worst economic crisis since the Great Depression. Over the course of those two years, we have lost 8.1 million jobs and 17.5 percent of the workforce–27.4 million workers–are unemployed, underemployed, or have given up looking for work. Economists surveyed by Bloomberg forsee the unemployment rate remaining at above 10 percent well into the first half of 2010.

On the eve of President Obama’s Jobs Summit at the White House, SEIU Secretary-Treasurer and Change to Win Chair Anna Burger has a piece on the Huffington Post outlining a bold jobs plan to meet the demands of a 21st century economy:

“If we are going to come out of our current crisis stronger and better prepared for the challenges of a 21st century economy, we need someone to take charge, to focus–24/7–on job creation until we see results.

“It’s time for President Obama to empower the 21st century Francis Perkins, someone to speak for him and someone who has the authority across government to shake things up. It’s time to create a country that works for all of us. And that starts with jobs.

“Creating jobs isn’t rocket science. We just need the political will, courage and determination to make it happen.”

The jobs plan Burger laid out focuses on investments in public services and the private sector, a national job training program, and the need to pass the Employee Free Choice Act. Her plan also advocates for a “green bank” to fund energy-efficiency and renewables projects, as well as funding for infrastructure to help rebuild schools and roads. Read the entire plan here.

Burger will join 129 business, academic and government leaders at tomorrow’s Jobs Summit. Other labor labors in attendee will be Leo Gerard from the United Steelworkers, Joe Hansen from UFCW, the AFL-CIO’s Richard Trumka and AFT president Randi Weingarten.

Economist Paul Krugman, who will be at the White House jobs forum as well, shares his thoughts on how we can begin to right the wrongs of our economy in the NY Times this week. A large part the solution, according to Krugman? Not leaving workers out of the economic recovery–and the federal government actually creating jobs. “There’s a pervasive sense in Washington that nothing more can or should be done, that we should just wait for the economic recovery to trickle down to workers,” notes Krugman. “This is wrong and unacceptable.”

Krugman proposes direct public employment and employee incentives–such as a tax credit–to swell job creation.”All of this would cost money, probably several hundred billion dollars, and raise the budget deficit in the short run,” he writes . “But this has to be weighed against the high cost of inaction in the face of a social and economic emergency.”

More confirmed attendees of tomorrow’s jobs forum at TPM here.

*This post originally appeared in the SEIU Blog on December 2, 2009. Reprinted with permission from the author.

About the Author: Kate Thomas is a blogger, web producer and new media coordinator at the Service Employees International Union (SEIU), a labor union with 2.1 million members in the healthcare, public and property service sectors. Kate’s passions include the progressive movement, the many wonders of the Internet and her job working for an organization that is helping to improve the lives of workers and fight for meaningful health care and labor law reform. Prior to working at SEIU, Katie worked for the American Medical Student Association (AMSA) as a communications/public relations coordinator and editor of AMSA’s newsletter appearing in The New Physician magazine.

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