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Misleading Vital Signs

books and culture

Misleading Vital Signs

In a new book, David Blanchflower argues that the labor market is unhealthy, but the evidence he mounts is shaky at best. September 24, 2019
Economy, finance, and budgets

Not Working: Where Have All the Good Jobs Gone?, by David G. Blanchflower (Princeton University Press, 456 pp., $29.95)

David Blanchflower’s Not Working is about many things—too many, in fact. Each time I picked it up, I recalled how I felt as an undergraduate, heading off to the class of an avuncular professor who seasoned his lectures with personal anecdotes, titillating asides, name-dropping, references to other professors, and other material peripheral to the subject. Sure, it made the time pass more pleasurably, but I wanted a more comprehensive treatment of the subject matter.

Not Working reminded me of those experiences, but it also gave me a lot to chew on. One chapter—“Wage Growth and the Lack of It”—does an excellent job explaining how labor markets work. Blanchflower demonstrates how the unemployment rate—a statistic on which the media and politicians rely heavily—provides an inadequate picture of labor markets’ strength or weakness. At present, historically low rates of unemployment disguise the large numbers of part-time workers who might increase their hours with strengthened labor demands and higher wages. Such changes might also motivate the relatively large portion of the population that isn’t working at all to rejoin the workforce. Both groups’ potential to place additional working hours at the disposal of employers helps explain why wage growth remains substandard.

Blanchflower mines an impressive array of measures—first in the U.S., then in the U.K. and the EU—to document how poor employment prospects have demoralized many working men and women. Among other ills, he mentions falling life expectancies, addictions to opioids and alcohol, and low fertility rates. It’s grim, if necessary, reading, and though his descriptions wear, he does create a sense that the U.S. urgently needs to push for full employment.

But Not Working elsewhere makes sweeping generalizations, without establishing basic facts. Blanchflower identifies globalization, with its movement of production abroad, as a cause of the weak labor and wage situation, for instance, but he quotes little statistical, analytical, or even anecdotal evidence of its detrimental impact. He also mentions declining union membership as a factor, but again fails to provide much statistical support or tie it to anything else going on in the economy.  

Blanchflower hardly mentions technology, an odd omission in any book on labor markets, especially when fears of artificial intelligence and robotics run high. He mentions in passing “migrants” as a contributor to the current plight of labor, yet dedicates an entire chapter to immigration, seeking to show that it neither takes jobs from native workers nor depresses wages. The juxtaposition makes the reader wonder, then, who the “migrants” are, and how they undermined labor markets. The book provides no answers.

Inconsistent application of evidence weakens Blanchflower’s arguments. He contends, for example, that higher wages might have increased output per hour by inducing employees to work harder. Though an interesting point, it runs counter to orthodox economic thinking, which holds that increased productivity allows employers to pay higher wages, or alternatively, that high wages induce employers to substitute equipment—say, robots—for labor by increasing the hourly output of remaining workers. Blanchflower simply stops at his assertions without supporting them.

In another example, Blanchflower shows how homeownership pins people to certain geographic locations and makes labor markets less efficient by discouraging them from moving to where jobs are more plentiful. This, too, is an intriguing point, and hard to dispute, but it could have used a more thorough treatment. After all, homeownership matters significantly to people’s sense of self-worth and security. To boost labor markets’ efficiency, Blanchflower argues, Washington should discourage homeownership. Washington has already done much with recent revisions to the tax code to make homeownership less advantageous, however. Blanchflower presumably applauds such measures—but again, it’s hard to tell, as he offers little detail on how he would otherwise persuade people to rent instead of buy.

Lavish attention to how things work but only slight interest in why they work that way renders the book incapable of answering the question in its subtitle. Does Blanchflower believe that jobs have gone overseas—to robots or to shadowy “migrants?” It’s not clear, and the confusion weakens his policy prescriptions. To increase employment and raise wages, he wants both monetary and fiscal policy stimulus. With little wage pressure, the Federal Reserve, he believes, shouldn’t fear inflation. It should therefore keep interest rates low until wages gain a strong upward momentum, and only then should it consider a less stimulative policy. The government, he argues, can directly increase employment by spending lavishly on infrastructure—both new projects and refurbishment. In his focus on creating jobs, he seems unconcerned about budget matters.

Blanchflower also wants the federal government to subsidize childcare. While this measure would no doubt bring some people back into the workforce, it has little grounding in his earlier analysis. And he makes a novel suggestion: the federal government should move some of its operations out of Washington to depressed regions. It’s not apparent how such a policy would square with civil service work rules, though it might have the salutary side effect of reducing the government workforce.

Blanchflower wants to use the tax code to reduce inequalities of income and wealth, and he encourages a general revival of civic spirit. These goals seem distant from the book’s labor focus, though there can be little doubt that an optimistic view of the future would inspire growth, and that less inequality would lift spirits among working people. Such uplift would require deliberate tax-and-spend policies, including, it would seem, a tax on wealth. Blanchflower appears to believe that such policies would improve the country’s mood.

Not Working offers something close to the well-known progressive agenda, except with an appealing emphasis on work—and so, mercifully, no mention of a universal basic income (UBI). Blanchflower’s policy prescriptions would be more persuasive had he made more effort to explain why things are as bad as he says and perhaps spent less time describing the problems in as much detail. Still, there is food for thought in this engrossing but flawed book.

Photo: ollo/iStock

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