Economics is a Dirty Job, but Mike Rowe shouldn't do it

One of the worst "zombie economics" (thanks to PK for that gem) ideas out there is that the current unemployment crisis is due to "structural unemployment", or some chronic flaw in the American economy where workers are not trained or available to fill open jobs. This is one of those ideas that despite having absolutely no empirical support, and having been disproven over and over again by professional economists, refuses to die and keeps trudging alone, eating the brains of innocent people along the way. This is a common theme among the pseudo-economists and media talking head flacks. Even Mr. Dirty Jobs himself, Mike Rowe, went on Bill Maher last week to dispense his anecdotes about how "there are tons of jobs out there that kids these days dont want to do because they are spoiled and lazy" etc. If structural unemployment were a real problem, there would be some sort of macro data to support it, such as rapidly rising wages in the sectors that were struggling to fill job openings. In the total absence of such data, all that remain are the folksy anecdotes of people like Mike Rowe. God help us if 21st century American policymaking is based off anecdotes instead of empirical data.

These people insist that the American workforce is hopelessly unprepared for the modern economy, despite the fact that we remain one of the most productive, efficient, and highest educated workforce's in the world. The problem is aggregate demand, not enough spending in the economy, pure and simple. As Warren Mosler likes to say, unemployment is simply the evidence that the government deficit is too small, and can be easily cured by a large tax cut or spending increase. If the government does not spend enough to cover the tax liabilities that it imposes on the country, combined with the net savings desire of the private sector, unemployment will result. If the private sector is net saving, as it usually does, that savings is unspent income, which means that some amount of goods and services will go unsold, leading to unemployment. Its really that simply folks. There are some times when the private sector can spend more than its income (go into debt) to support full employment even when the government is in surplus. However this is rare and unsustainable, as evidenced by the Clinton surplus and subsequent stock market crash. This also happened to a lesser extent in the Bush years; although Bush did run deficits, they were sufficiently supplemented by the housing bubble, so unemployment remained fairly low.

As far as I can tell, these complaints about structural unemployment, are themselves the product of insufficient demand. When the economy is slack, what minor structural problems may exist become more acute, and thus win the attention of the talking heads. However if we are constantly focusing on workforce issues, we take our eye off the ball of aggregate demand. As I have said before, if the jobs are there, the skills will follow. This is how healthy economies usually work. In fact, if you believe in the efficiency of markets, as I do to some extent, structural unemployment should never really happen at all. What really bugs me is that these claims of structural unemployment serve to let bad economic policy makers off the hook. Even worse, all these talking heads are effectively blaming American workers for being inadequate, when it was really the reckless behavior of Wall Street, and the idiotic responses of Washington policymakers, that actually led to these 5 years of weak growth.

Aggregate demand is the momentum with which structural changes can be made. There is an order of things: first you get the economy going, then you change its structure. Its like pulling on the steering wheel of a car when the engine is off; without forward movement you cant change the direction anyway. From now on, Mike Rowe should leave econ to the experts, and stick to shoveling shit and doing Ford commercials.