Is Unemployment Good for the Economy?

Editorial adapted from: Seeing the System: Alan Greenspan and Intentional Unemployment, By Tim Wise, AlterNet
June 8, 2000

...when the Labor Department says the unemployment rate is 3.9 percent – the current official rate and a 30-year low – this is hardly an accurate depiction of the joblessness picture in the U.S. After all, the official unemployment rate doesn't include those who have grown so discouraged by their job prospects that they've stopped looking for work; nor does it include the many who can only find seasonal work and so they don't actively seek employment for much of the year; nor does it count those persons who are able to pull down only a handful of hours – perhaps temping – and instead counts these as if they were every bit as employed as the full-time salaried employee. If these persons were counted in an official unemployment/underemployment rate, the number of such folks would at least double, coming in at around 8 percent, or perhaps even as high as 10 percent. That the Labor Department does in fact keep this number – called the U-7 rate but never reported to the general population...

And so it is essentially a matter of official monetary policy to maintain unemployment at around 8-10 percent of the potential workforce – between 9-11 million people in all – so as to keep the economy from "overheating," which really means to keep wages from rising too high, thereby forcing companies to either raise prices or suffer a loss of profitability as workers pocket more of the value produced by their output. If we assume that many of these 9-11 million unemployed and underemployed persons have dependents, and that lacking steady income they likely also lack bankable wealth-producing reserves to call on in hard times, it is fair to estimate that over 20 million Americans are stuck in the ranks of the poor and near-poor thanks to the conscious decisions of economic elites to keep them there.

The doors that this simple and readily apparent fact of American life has the power to open are substantial: after all, if people are out of work and poor (and thus, often in need of public assistance) because of a deliberate economic policy; and if, according to this theory, the destitution of these individuals is something which is required so that the rest of us may enjoy lower prices by maintaining a certain degree of slackness in labor markets, then not only should we not disparage the poor for their poverty, but indeed, we should perhaps consider them among our most noble citizens: sacrificing their own good for the well-being of us all. Certificates of good citizenship for the homeless should be just around the corner, if we are to accept the dominant monetary logic; Congressional medals of honor, perhaps, for all the minimum wage workers who, by their limited and shrinking purchasing power help keep the price of milk and software low for everyone else!

To witness what the Fed is doing this summer [In 2000 he Feds raised interest rates] to interest rates – all because workers are supposedly doing too well – is to witness perhaps one of the central organizing issues of the new decade: simply put, that working people are hurting and will continue to hurt in this system so long as the interests of the owning class are put ahead of those of everyone else.

As long as jobs and wages are seen as zero-sum games – and profit maximization seen as the ultimate goal of national economic policy – working people will continue to be played off against one another, rotating in and out of financial instability. To highlight the structural nature of economic hardship – and the Fed's actions make this much easier for radicals to do effectively – is to provide a new way of discussing so many of our most vexing political and social issues. It is to allow citizens to potentially rethink their stereotypical and negative views about the poor, about people of color (blamed for "taking" jobs from whites), and the real sources of whatever pain and insecurity they may be experiencing in their lives. It is to launch a frontal assault against the myth of meritocracy and the "magic" of the marketplace, and it is to make clear the overlapping worldviews of the two dominant political parties in America: a clarity that will be desperately needed if we are ever to build an effective alternative to the status quo....

Questions:

1. Why does the official unemployment rate not give an accurate picture of joblessness in the U.S.?

2. What will happen to wages if unemployment disappears? How will that affect the profits of company owners?

3. Why does the author (tongue-in-cheek) say the homeless should get medals of honor?