In his speech commemorating the Martin Luther King March on Washington last week, President Obama got it partly right. It’s not only about civil rights. It’s also, crucially, about jobs. Of the marchers back in 1963, Obama said, “They were there seeking jobs as well as justice—not just the absence of oppression but the presence of economic opportunity. For what does it profit a man, Dr. King would ask, to sit at an integrated lunch counter if he can’t afford the meal?”
The need for gainful work is desperately important now, with overall unemployment, even after recent improvements, still stubbornly high, and blacks, as has long been the case, around twice as likely to be unemployed as whites. Indeed, Obama’s speech heralded the arrival of a bleak Labor Day, at a time when so many young Americans cannot find work.
But then Obama got it wrong. “The twin forces of technology and global competition,” he said, “have subtracted those jobs that once provided a foothold into the middle class, reduced the bargaining power of American workers.” This is the centrist economist in Obama talking, who buys into current economic orthodoxy: technological advances in many industries, so the explanation goes, have in many cases replaced a human labor force with an automated one; and thanks to global markets, what human labor is needed is moving to countries where wages are low.
What about government policy? Many aspects of our current employment crisis have less to do with technology or globalization than with the administration’s failure to adopt policies to strengthen the labor force, and more precisely, those parts of the labor force that are most crucial to the nation’s long-term social and economic health.
Consider the bleak prospects of young people entering the workforce today: the portion of people aged twenty to twenty-four who have jobs has fallen from 72.2 percent in 2000 to just 61.5 percent. Meanwhile, if we adjust for inflation, the median earnings of men between the ages of sixteen and twenty-four working full-time has fallen by nearly 30 percent since 1973. For women, the median has fallen by 17 percent. As Andy Sum, an economist at Northeastern University who has studied youth unemployment for many years, has shown, if you are out of work or underemployed during those initial years of adulthood, chances are far higher you will be unemployed, poor, or dependent on welfare later on.
The summer work situation for teens is even worse. Sum and his Northeastern colleagues figure that in 1999, 52.6 percent of American teens between age sixteen and nineteen had summer work. Today, only 32.3 percent do. And these numbers are worse for young blacks and Latinos. In 1999, about 33 percent of black teens had summer jobs; now 19 percent do—a reduction by almost half. But the decline is true for all groups: 39 percent of white teens worked this summer—a sharp decrease from the 1999 figure of 63.3 percent.
You may think that teen employment, which has been largely neglected by the media, is not a critical issue. Some may imagine suburban kids who have part-time jobs to supplement their spending money on cars and clothes. But the reality is that, in poorer families, teens often provide crucial household income; many others are trying to pay their way through school. The lower a family’s income, in fact, the less likely a teen from that family will be able to find a summer job. And the extent of teenage job experience plays an important part in determining future job prospects.
You can also talk about education all you want: those most likely to be out of work, the argument goes, are those who have failed to go to, or didn’t finish, college. But the proportion of young people with college degrees, or even advanced degrees, who are employed is also down considerably from a decade ago. I emphasize the plight of the young because, if we abandon them, they will abandon us. Cynicism and apathy take root early in life. The future prospects of an entire generation will be significantly diminished as a result of early unemployment, and many will lose faith in government entirely.
In fact, it is not technology and China that are the main causes of joblessness among the rising generation. First, by a long shot, ours is a nation that refuses to take the economic measures necessary to get itself to anything resembling full employment. The sequestration—Obama’s own proposal—is reducing government spending just at the moment when it might help the economy finally reach the conditions for lasting job growth. Instead, we have a situation in which older, more qualified adults are taking scarce jobs from young adults, young adults from teens, the college-educated from those with only a high school degree.
The government has many tools at its disposal to address the problem. First, more government spending would create government jobs, many of which are being cut. But it would also generate more GDP than the dollars spent. Numerous empirical studies show that a dollar of stimulus creates well more than a dollar of income nationwide, especially when the economy is weak—the so-called Keynesian multiplier. That income would increase consumer spending, encouraging businesses to invest more in the economy, thereby creating more jobs.
Second, more direct public investment in infrastructure, green energy, and other civic projects will also create new job opportunities.
Third, a more flexible set of trade rules and a movement towards reduced trade deficits and surpluses would make American manufacturers more competitive with their foreign counterparts, and thus better able to support the American workforce. At present, World Trade Organization rules are too strict and should allow more room for targeted investments at home and better protection of infant or threatened industries.
Fourth, the implementation of laws that enable labor to organize would protect against unnecessary export of jobs that can be done competitively in the United States. And, finally, the nation needs to raise the minimum wage substantially to help improve wages of those—often young people—who do find entry-level work.
While some mainstream economists support fiscal stimulus, many rail against an increase in the minimum wage. Their main argument assumes that wages have been set in a fair market undistorted by corporate power or other market imperfections. But much empirical work suggests higher minimum wages would help, not hurt, employment levels, by creating demand for products absent in the economy. As for teens, a far higher proportion worked in the past when the minimum wage was higher, adjusted for inflation. Indeed, the minimum wage in 1963, when Martin Luther King led his historic march, would be $9.40 an hour in today’s dollars, and the unemployment rate in 1963 was under 6 percent. The federal minimum wage today is $7.25 and the unemployment rate is 7.4 percent.
In his own March on Washington speech, Obama was more rhetorical than incisive, and added little to what we already knew. He did not provide a blueprint for how we can create a more equal society in which economic opportunity is shared by all groups and ages. Who can deny that, as Obama suggested, we must keep fighting this battle? But as a summer in which few found jobs comes to its end, the president should tell us precisely what the battle entails. Perhaps the fast-food workers’ strikes, which spread to nearly sixty US cities the day after Obama’s speech, will be the new front lines.