For corporate America, the Great Recession is over. For the American work force, it's not.
Unfortunately, fixing the job market will take years. Even if job growth accelerated to the rapid pace of the late 1990s and remained there, the unemployment rate would not fall below 6 percent (which some economists consider full employment) until 2016! We are now, quite likely, only in the first half of the longest stretch of high unemployment since World War II.
The best way to put people back to work is to lift economic growth?
For Washington, lifting growth will first mean avoiding the mistakes of 2010, when the Fed, the White House and some members of Congress prematurely assumed that a solid recovery was under way. The risk this year is that they will start reducing the budget deficit immediately by cutting federal programs, rather than having the cuts take effect in future years.
Policy makers could also help the unemployed by spreading unemployment more broadly among the population. I realize this idea may not sound so good at first -- Who wants more unemployment? But the fact is that this downturn has concentrated its effects on a relatively narrow group of Americans. And if unemployment compensation is sufficiently increased, along with the length of time one might collect such compensation, the shrinking amount of available work could be more equitably shared -" to everyone's benefit. If this can be done so successfully and beneficially in Europe, why not here?
In Germany and Canada, some companies and workers have averted layoffs by agreeing to cut everyone's hours and, thus, their pay as well. However, in Germany at least, the government provides pay supplements to the workers so that even though their hours have been reduced, their monthly income remains unchanged. This enabled Germany to avert most of the recession that has plagued the US and other countries. Why and how so? Because German workers did not cut back on their spending as a result of reduced wages. Owing to government-provided income supplements, their spending remained unchanged, thereby maintaining the effective consumer demand that kept other Germans employed in the production of the products and services that were thereby kept in demand.
In America, unemployment remains terribly high, and almost half of the unemployed have been out of work for at least six months. These are the people bearing the brunt of the downturn.
Germany's job-sharing program -- known as "Kurzarbeit," or short work -- has won praise from both conservative and liberal economists. Senator Jack Reed, Democrat of Rhode Island, has offered a bill that would encourage similar programs. So far, though, characteristically timid in the face of the corporate objections that would surely develop, the White House has not welcomed the idea.
Restoring some balance to the relationship between employers and employees will be difficult. One problem is that too many labor unions, like the auto industry's, have been poorly run, thereby hurting companies and, ultimately, workers. Of course, many other companies -- AT&T, General Electric, Southwest Airlines -- have thrived with unionized workers, and study after study has shown that unions usually do benefit workers. As one bumper sticker says, "Unions: The folks who brought you the weekend."
Today, however, unions are clearly playing on an uneven field. Thanks to a timid government, largely "bought out' by corporations and the rich, companies pay minimal penalties for illegally trying to bar unions and so have become expert at doing so -- legally and otherwise. Yet for all their shortcomings, unions remain many workers' best hope for some bargaining power.
The list of promising solutions to the jobs slump are many. Reforming the disability insurance system so it does not encourage long-term joblessness would help. "Once people enter that system," as economist Katz of Harvard says, "they basically never come back." Improving high schools and colleges -- reclaiming the global lead in education -- would help even more. Remember, the jobless rate for college graduates is only 4.8 percent, and plenty of highly skilled jobs in America continue to go unfilled.
However, the jobs slump has become too severe to disappear anytime soon. It will be part of the American economy and American politics for years to come. But there is no reason to treat it as a problem that's immune from solutions. For starters, it would be worth figuring out what other countries are doing right. Countries like Germany for instance. (Click here for source article.)
Poverty and recovery
In 2008, the first year of the Great Recession, the number of Americans living in poverty rose by 1.7 million to nearly 47.5 million. While hugely painful, that rise wasn't surprising given the unraveling economy. What is surprising is that recent census data show that those poverty numbers held steady in 2009, even though job loss worsened significantly that year.
Clearly, the sheer scale of poverty -- 17% of the country's population, and anywhere between 18 and 27% of its children (varying from state to state)