Defenders of Wealth Blame Workers For Lousy Recovery, Not Policies Protecting Profits
That seems to be endless demand for economic policy analysis that finds ways to blame workers for the bad economy rather than the folks in Washington with their hands on the policy wheel.
The Wall Street financed group Third Way and the Wall Street Journal gave us more proof for this proposition yesterday with a new explanation for the "jobless recovery." Their basic story is that economy lost routine relatively low-skilled jobs, but it now needs workers with high-skills for the new jobs that are being created.
There are two basic problems with this story. The recovery can better be described as "growthless" than "jobless," and there is no evidence of any significant sector of the labor market experiencing a labor shortage.
Taking these in turn, contrary to what we might believe from the WSJ and Third Wayers, we have created a surprisingly large number of jobs given the economy's weak growth. Back at the start of 2010 CBO had projected growth would average 3.2 percent over the next five years, it actually averaged less than 2.2 percent. So we have seen extraordinarily weak economic growth over this period. On the other hand, job growth has been reasonably healthy, especially in the last year. The explanation is extraordinarily weak productivity growth, which has averaged less than 1.0 percent the last two years. This would seem to be pretty much 180 degrees at odds with the story of a rapidly evolving economy that needs more skilled workers.
The point about no evidence of a labor shortage is a simple one, where is the wage growth? Even college grads have seen virtually no wage growth in this century. If there are all these potential job openings for skilled workers, then we would expect to see employers bidding up wages to attract the workers they need. We don't.
In other words, we have a nice story that blames workers for the weak recovery that has essentially no evidence to support it. What's the alternative? We had demand from the housing bubble propelling the economy before the downturn. The bubble has now collapsed. We could fill the demand either with large budget deficits or by pushing down the value of the dollar to reduce the trade deficit, but there is little political support in either party for going these routes.
Like I always say, the economy is far too simple for economists to understand.