The U.S. Department of Labor today reported that the official unemployment rate had nudged down from 7.7 percent in February to 7.6 percent in March. But this slight improvement in the unemployment rate was due entirely to the fact that nearly 500,000 people dropped out of the labor force in March. Think of a mid-sized city like Indianapolis. Now image if all of the people in the labor force in Indianapolis in February dropped out in March. That’s effectively what happened last month to bring down the official unemployment rate to 7.6 percent. If those nearly 500,000 people (from Indianapolis and everywhere else) had been included among the unemployed, the official rate today would instead be 7.9 percent. On top of this, if we also take into account people who wanted full-time work but had to accept a part-time job, plus people who didn’t look for work this month but haven’t fully stopped looking, the unemployment rate rises to 13.8 percent, or 21.3 million people.
In “Political Aspects of Full Employment,” a still widely cited article from 1943, Michal Kalecki raised many questions about the ability of a capitalist economy to maintain prolonged full employment — even though in light of the understanding of tools for stimulating aggregate demand and the use of fiscal policy brought about by the Keynesian ‘revolution.’ In a series of papers, Kalecki showed that the arguments against the use of budget deficits to secure full employment were invalid. Among these arguments, and their rebuttals, were that:
> deficits add to government debt, which is a burden on future generations
(rather, the government debt is bonds owned by individuals, pension funds etc.);
> deficits crowd out investment
(rather, they allow savings to take place and enable investment); and
> deficits cause higher interest rates
(the current situation makes the rebuttal to this clear).
Yet those arguments are still trotted out.
Decades of research have been devoted to the question of whether minimum wage hikes lead to job loss—the leading argument made against this century-old labor standard. Despite the accumulating evidence pointing to the conclusion that minimum wages do not adversely affect employment (see this nice summary by John Schmitt) this same debate seems to be recycled, nearly verbatim, each time a minimum wage hike is on the table. To put an end to this perennial debate one simple fact has to be pounded into the American psyche:
The dire warnings that the minimum wage hikes impose unbearably high costs on businesses are false. Costs to businesses from an average minimum wage hike are small—so small that the typical business can adjust by means other than closing their doors or laying off workers.
Last December, I posted a very thoughtful set of critiques of my book Back to Full Employment by Phillip Harvey, a Professor of Law and Economics at Rutgers University. I posted my responses to Phil then along with his comments.
Last month, Phil sent me a long set of responses—running to over 6,000 words—to my initial replies to him. I appreciate Phil’s interest and commitment around this issue. We are therefore posting his comments in full below. At the same time, after giving lots of thought to what he had written in this second go-round, I don’t think there is too much more to be gained through me responding to all of his points in full, as I did in the previous round. The main reason is that my responses this time would be basically the same as what I already wrote back in December.
I therefore think it would be most constructive for me to simply highlight what I see as Phil’s main critiques of my approach and to restate my position. That should then provide some context for interested readers to go through Phil’s comments in full. Here, therefore, is what I see as the main areas of contention:
If you can’t measure it, how can you know if it’s growing? The green economy suffers from this problem. In the past few decades, and particularly in the past few years, the green economy has expanded tremendously. By how much exactly? Well, that depends on how you define this “green economy” and what data you include in its measurement. If we look at the number of megawatts of wind power capacity installed, or the number of solar panels shipped, or other indicators of sales and installations of renewable energy or energy efficient goods, we get a sense of the recent growth of the green economy. A recent report by Bloomberg New Energy Finance documents some of the growth of various energy industries, including natural gas, renewables, and efficiency.