THE BASIC QUESTION IS, HOW SHOULD OUR SOCIETY DISTRIBUTE ITS WEALTH...:

10 Percent Unemployment Forever?: Why the good news about the economy doesn't necessarily mean that jobs are coming back anytime soon. (TYLER COWEN, JAYME LEMKE, JANUARY 5, 2011, Foreign Policy)

As time passes, it is harder to avoid the notion that a lot of those old jobs simply weren't adding much to the economy. Except for the height of the housing boom -- October 2007 through June 2008 -- real GDP is now higher than it has been in the entirety of U.S. history. The fact that the United States has pre-crisis levels of output with fewer workers raises doubts as to whether those additional workers were producing very much in the first place. If a business owner fires 10 people and a year later output is almost back to normal, it's pretty hard to make the argument that they were doing much in the first place.

The story runs as follows. Before the financial crash, there were lots of not-so-useful workers holding not-so-useful jobs. Employers didn't so much bother to figure out who they were. Demand was high and revenue was booming, so rooting out the less productive workers would have involved a lot of time and trouble -- plus it would have involved some morale costs with the more productive workers, who don't like being measured and spied on. So firms simply let the problem lie.

Then came the 2008 recession, and it was no longer possible to keep so many people on payroll. A lot of businesses were then forced to face the music: Bosses had to make tough calls about who could be let go and who was worth saving. (Note that unemployment is low for workers with a college degree, only 5 percent compared with 16 percent for less educated workers with no high school degree. This is consistent with the reality that less-productive individuals, who tend to have less education, have been laid off.)

In essence, we have seen the rise of a large class of "zero marginal product workers," to coin a term. Their productivity may not be literally zero, but it is lower than the cost of training, employing, and insuring them. That is why labor is hurting but capital is doing fine; dumping these employees is tough for the workers themselves -- and arguably bad for society at large -- but it simply doesn't damage profits much. It's a cold, hard reality, and one that we will have to deal with, one way or another.

...and "via private boondoggle jobs" just wasn't a very good answer.

Posted by Orrin Judd at January 6, 2011 4:09 PM