on The Jobless Trap, his column for Monday's New York Times, which begins
F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things.By now, anyone who has been paying attention knows that Krugman has been sounding a clarion call that austerity is the wrong path and we must focus on the creation of jobs.
He goes through the arguments of the "austerians" such as the supposed - but false - idea that when the debt hits 90% of GDP there is some irreversible tipping point. He reminds us that we aren't Greece, we control our own currency, and despite years of dire warning the government can still borrow at very low rates. And then there is this:
But while debt fears were and are misguided, there’s a real danger we’ve ignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are being confirmed.If I have your attention and you hereby commit to go read his column, you can stop with this. Otherwise, please continue below the fold while I both try to convince you to read it, and offer some personal observations, including from my own experience.
Krugman takes us through the recent history of unemployment, such as only 1.2 million of the 7 million out of work in 2007 had been jobless for more than six months. Now 4.6 million of the 12 million have been out 6 months, 3 million more than a year, and these as U3 numbers: they do NOT include those who have given up looking for work.
He then puts it bluntly:
It goes without saying that the explosion of long-term unemployment is a tragedy for the unemployed themselves. But it may also be a broader economic disaster.For the unemployed, the longer one has been without a job the harder it is to get a new one. While there may be some atrophying of skill, there is also a prejudice that potential employers begin to think the length of unemployment is because of some fault in the person rather than the horrible economic conditions.
And there is, unfortunately, growing evidence that the tainting of the long-term unemployed is happening as we speak.I am not going to try to summarize how Krugman explains this. You can read his column for that.
Instead let me offer an observation from personal experience.
Once I knew I was going to take retirement from my last teaching position, I began to explore possibilities of teaching elsewhere for the current year. While I was still employed I got interviews even though I did not get offers - I was for other public systems and most charters considered expensive, and of course I am older which probably raised some concerns despite my stellar recommendations.
By the middle of the summer things began to change: I did not get interviews. The only reason I wound up back in the classroom in late November was that people in that school knew me, knew I could step into a difficult situation and make it work.
Now, were I looking for a position for next year while still employed there? I suspect that despite age and salary (on which I am willing to flexible given my pension and Social Security as I was for the charter while I was there) I would probably at least get some phone calls, and quite possibly interviews as well.
But since I am unemployed, and have been so now for several months, places that I would expect would at least be interested in talking to me do not.
Yes, I know there is age prejudice. I could apply without mentioning my pension and social security, but many schools and school systems require an online application and for each position you have left they require a reason - once I put down that I retired I already have a problem.
A problem, one I suspect is compounded by not only being older, but also not currently being in a classroom.
Let me return to Krugman. After discussing an experiment done that pretty conclusively demonstrates the prejudice against long-term unemployed - of 4800 fictitious workers the ones who got called back were rarely among those listed as having been out of work for 6 months or more - Krugman warns that we are creating " a permanent class of jobless Americans."
His final three paragraphs are powerful. I cannot quote them in their entirety without clearly exceeding the bounds of fair use.
He starts by point out this is a policy decision. And now let me offer with ellipses some of the rest of his concluding words, including all of the final brief paragraph:
...we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy.
... if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits.
Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe. It’s ruining many lives, and at the same time making us poorer and weaker in every way. And the longer we persist in this folly, the greater the damage will be.creating a slow-motion catastrophe - that is true at the macroeconomic level of the national economy. For individual families it is not so slow moving: the credit cards get maxed out, the kids either have to go only to state colleges or perhaps go to work and try to fit college in part time, the health insurance disappears only partially replaced by the Affordable Care Act. One's credit rating sinks as one struggles to pay bills, and that bad credit rating may be used to exclude you from the very job you need to catch up on your debts.
poorer and weaker in every way - home values fall, revenues from sales and income taxes drop, services that can make a difference are cut because states (except Vermont) are supposed to run balanced budgets and they and localities begin to slash. That continues the downward spiral that affects schools, police, public works, etc.
folly - absolutely. And yet despite the fact that key studies on which the "austerians" rely have now been pretty well debunked, the policies do not change.
Will our government officials listen? Or will they continue to dismantle the economy by continuing on this path of folly?