Structural Unemployment Talk Is Nonsense

Remember that unemployment problem we used to have? The one that politicians, pundits and policymakers used to talk about on a regular basis, debating how we might fix it? Well, forget about all that, because the problem is structural, meaning nothing can be done. So sayeth a loud slice of the econo-pundit class.

Rather than traditional cyclical unemployment, which reflects a weakness in demand for goods and services and can be goosed with additional government spending, structural unemployment is impervious to traditional economic solutions. It results from a mismatch between available workers and needed jobs. But skip the academic definitions. In what passes for the national conversation, the essential meaning of "structural unemployment" is that people with money need not bother fretting over those who are out of work and are struggling to pay their bills, because fate and globalization and forces larger than any institution have rendered so many jobs obsolete. No point making the wealthy pay more in taxes to support government spending, because this will not deliver jobs.

Structural unemployment is functionally a euphemism that allows its adherents to claim the imprimatur of professorial authority while condemning millions of people to long-term joblessness -- all this, without having to feel mean or heartless. People are out of work, but nothing can be done. What a pity! Please pass the paté.

For many months, two prominent New York Times columnists -- Paul Krugman, the Nobel laureate economist, and David Brooks, the controversy-loving dilettante -- have been debating the root causes of high unemployment, while unleashing thinly veiled attacks on one another without the indelicacy of naming names. The latest flare-up came this week as Brooks described his belief that joblessness is mostly structural. This prompted Krugman to produce a chart on his blog showing that manufacturing, services and construction have all seen job losses since the beginning of the Great Recession.

"Maybe people have some other structural story in mind -- except that's the one they like to tell in popular articles," Krugman wrote in his umpteenth obvious dismissal of Brooks. "So why are these people so sure that it's structural? I know that it sounds wise and Serious to say that it is, but there is this matter of actual evidence; that evidence is strongly inconsistent with a structural story, and quite consistent with a demand story."

The day after Brooks' column landed, the Wall Street Journal's Justin Lahart delivered a pertinent piece of analysis: Absent government job cuts since the financial crisis of 2008, the unemployment rate would today be at 7.1 percent, a full point lower than its current level. If state and local governments had more money to spend, that would mean more jobs for everyone -- and presumably more government revenues.

We do have structural problems, to be sure. We have let our basic educational infrastructure decay, and we have made it difficult for the vast majority of Americans to afford higher education, while shoveling more and more of the profits to people with advanced degrees. We still have way too many people working in finance, an area of the economy that has very little to do with producing goods and services of intrinsic value -- products that human beings can use to solve a problem, or make their lives more productive -- and a good deal to do with making money change hands so Wall Street can exact a cut. We would all benefit from a restructuring, moving the economy away from dependence on financial innovation and toward real innovation in productive areas such as renewable energy, information technology and the life sciences.

That's all long-term stuff. But in the meantime, there's a good deal that can be done to more quickly alleviate the broad suffering attendant to an employment crisis that remains so widespread and persistent that it has insinuated itself into the basic fiber of American expectation. We can increase investment in infrastructure and education, and we can deliver aid to struggling states and local governments so they can hire people -- people who will then distribute their wages to private businesses. We can pay for these things not by adding extravagantly to our deficits, as some alarmists would have you believe, but rather by lifting tax rates back to where they were when that tax-and-spend socialist subversive enemy of free enterprise Ronald Reagan occupied the White House.

This may not be a sexy story. It may deprive us of the opportunity to impress cocktail party-goers with exotic concepts like structural unemployment. But it will improve our economic lot.