The Sources of Unemployment

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Unemployment is the most corrosive and most desperate aspect of economic downturns such as the Great Depression or the current Great Recession. It affects all other economic activity. Beyond that, it destroys the very identity, the sense of confidence and purpose, of the people it strikes. It is worth asking ourselves: what has led to the present situation, and what can be done about it?

The immediate cause of our present employment problem was the financial collapse of 2008. Economists are grinding out a whole literature of efforts to explain the particular financial arrangements and failures that led to that collapse. I will not try to enter that arcane jungle but will instead start from the premise that the system was a house of cards that collapsed in 2008, and try to identify the underlying sources of the weakness.

Blame is frequently put upon the national drug addiction, or failed schools, or the breakdown of family. Perhaps so, but those things are as much the result as the cause of unemployment. I think a much better case can be made against our immigration policy (or lack of one), our commitment to free trade, and the shrinkage of employment that comes from rising productivity. The “school” solution to unemployment – public stimulus programs to revive economic growth – becomes less and less effective as we grow beyond our natural means. And our huge Federal debt has made such programs fiscally dangerous.

Mass Immigration in an Era of Unemployment. The most important thing about mass immigration to the United States is that it drives our population growth, because of the sheer numbers of immigrants and because of their relatively high fertility. More immediately, it is (along with trade policy) the most pervasive force depressing wages and exacerbating unemployment. Most of the immigrants compete for unskilled and semi-skilled jobs – the most vulnerable sector of the work force. Those two aspects of immigration are interconnected. An immigration policy that addresses unemployment would also address population growth. Yet all the political debate about immigration, now and in the past three decades, has been about secondary issues, and there has been near-total silence on both those issues.

Paradoxically, the best measure of unemployment is the number employed. It is more comprehensive than the narrowly defined official figure for unemployment (which stood at 8.9% in 2011). Employment peaked at 146 million in 2007 and dropped to 139 million in 2010 – a net loss of seven million jobs in the U.S. economy. It recovered only 805 thousand of those jobs in 2011. Meanwhile, the total adult (16+) U.S. civilian population rose by 7.75 million. The proportion employed declined from 63% to 58.4%, which suggests a growth of about 11 million people who need jobs.1 That is a remarkable loss of jobs in a very short time. Employment will fluctuate, but there is no evidence to suggest that it is going to reach the 2007 ratio in the foreseeable future.

Lindsey Grant

Lindsey Grant is a retired Foreign Service Officer; he was a China specialist and served as Director of the Office of Asian Communist Affairs, National Security Council staff member, and Department of State policy Planning staff member. As Deputy Secretary of State for Environmental and Population Affairs, he was Department of State coordinator for the Global 2000 Report to the President, Chairman of the interagency committee on Int'l Environmental Committee and US member of the UN ECE Committee of Experts on the Environment. His books include: Too Many People, Juggernaut, The Horseman and the Bureaucrat, Elephants in Volkswagen, How Many Americans?

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