Dr. King, Full Employment, and Some Provocative Wage Trends

August 28th, 2013 at 1:02 pm

There’s a ton of interesting analysis out in recent days on the quite explicit though often under-appreciated economic thrust of the march on Washington that took place half-a-century ago today.

I found economist Joe Stiglitz’s discussion of Dr. King’s influence on his work to be particularly resonant.  As I pointed out here, a seminal part of my own education in this regard was recognizing the importance of full employment in boosting racial economic outcomes, and learning how important this connection was to Dr. King’s own work, both in the 1963 March and even more so in the Poor Peoples’ Campaign he led a few year later.

Stiglitz and others note the lack of black progress on many key variables: income, poverty, wealth, employment.  Richard Reeves adds an important and trenchant analysis of the black mobility gap.  I agree with these facts, but want to add an additional, simple point which is in danger of getting overlooked: the evidence shows the Dr. King was right.  Full employment is a substantial part of what it will take to achieve economic justice.

As I’ve documented in lots of places, full employment labor markets have been the exception, not the norm, over the past thirty years: “between 1949 and 1979 the market was at full employment over two-thirds of the time. Since then, it has been at that level just a third of the time.”

But there was this period in the mid-to-late 1990s when the jobless rate hit new lows, bottoming out at 3.8% in April of 2000.  I very much urge the folks writing about blacks’ lack of economic progress to apply their forensics to that period.  All else equal, which all else never is, it provides a test of King’s theory that while enforced anti-discrimination measures were essential, very strong labor demand is equally essential.

Look, for example, at the figure below.  It shows real median hourly wages of African-Americans in three Southern states, Alabama, Louisiana, and Mississippi.  And it also shows that the only progress made by middle-wage African-Americans in terms of real wages was in the period when the national job market was moving towards full employment.  Labor markets tightened up to some degree in both of the other expansions covered by the years in the figure—the 1980s and the 2000s recoveries.  Yet in neither of those periods did black median wages get any traction.

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Source: EPI analysis of CPS data.

This is, of course, cursory analysis, but it is no doubt instructive.  You may accuse me of dreaming if I think we’re getting back to 4% unemployment anytime soon, especially with a Congress that has if anything, been pushing the wrong way on the economy.  But if you ask me, today is a very good day to have a progressive dream.

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14 comments in reply to "Dr. King, Full Employment, and Some Provocative Wage Trends"

  1. save_the_rustbelt says:

    Political correctness alert:

    Spend any time with low skill urban work forces and you will find blacks being displaced by immigrants, documented and largely undocumented.

    This creates a dilemma for liberals, but cheaper labor for the sector.


    • DHFabian says:

      I’ve always been amazed that this educated nation could somehow overlook the millions of rural poor. That said, we’ve known all along that the solution to the lack of skilled labor was to enabled the masses — including the poor — to pursue higher education/skills training. We actually did try this for a time, with impressive success. But middle classers resented actually enabling the poor to work their way up, so education and legitimate skills training were quickly “reformed” out of the budget.


  2. SeattleAlex says:

    Apparently you’re the 18th most influential Economics blog JB congrats! Time to make a push up towards Paul and Brad. Maybe make fun of some other economists more regularly??

    http://www.onalyticaindexes.com/2013/07/31/top-200-influential-economic-blogs-aug-2013-2/


  3. urban legend says:

    When will Democratic leaders get it through their thick heads that you are 100% right? Their success will always be iffy — in getting elected, in setting the national agenda — until they adopt full employment as the single unifying goal of the entire party.

    Oh my, but what about the deficit? The Washington Post will criticize us if we ignore talking about the deficit, they whine, wringing their hands. The sole and entire answer: “The best way to deal with the deficit is a strong economy, and a strong economy means jobs for everyone. Next question.”


  4. DHFabian says:

    It’s great to call for more jobs/full employment; in fact, we’ve been doing just that for at least the past half century. But you can’t buy a loaf of bread with promises of eventual jobs. Millions of low-wage workers are a single job loss from losing absolutely everything, with no way back up. How do you get a job without a home address, phone, bus fare? The poor don’t just vanish, nor can they put put into suspended animation and be stored until of some use to employers. So — what should we do about them? Reality: Not everyone can work, and we don’t have jobs for all who need one. A nation that simply turns its back on citizens in need just isn’t worth much, itself.


  5. Perplexed says:

    Interesting post Jared, but I’m curious as to why you didn’t reference this post http://jaredbernsteinblog.com/is-economics-a-science-spoiler-alert-nope/ of a couple of days ago and this article http://opinionator.blogs.nytimes.com/2013/08/24/what-is-economics-good-for/?ref=opinion&_r=0 on which it was based? What with all of the questioning about what “economics” is good for if it cannot be relied on for prediction or “scientific” understanding, it seems that we may be overlooking one of its most significant and highest impact effects (as measured by the number of people seriously effected) on populations over the last 250 years or so. If not for the support of economists and the economics profession in general, where would the “scientific” support come from that we could, at the same moment in time, exclude 15% of the population of those looking to work full-time from the “market,” and have still have a “free market” for labor? Its highly doubtful that such a proposition would find much support among philosophers, mathematicians, or logicians. Or how about the proposition that differences in income distribution are the result of “marginal products” (while at the same time refusing to develop and report on measures of rents in the economy)? That incomes in the economy, with all of the rents, patent monopolies, tax preferences, and other government generated corporate welfare are just the “natural,” “primary distributions” of a “market based” economy? How could labor be exempted from anti-trust laws without the substantial support of “economic science?” Who would believe these non-sensical notions if not for their support from “economic science?” What other “science” would argue that its more important to keep interest rates high and prevent even the prospect of higher inflation than to bring down unemployment? Is there any other field of “study” more responsible for the existence of unemployment than economics? Has any other “science” argued against job sharing, government employment, or actual markets for labor? I think “economics” really stands alone in these types of “scientific findings.”

    So while the value of economics to “investors” may be questionable, and its value as a “science” is highly questionable, there is no questioning of its value to those who would use power to oppress people and redistribute wealth and income upward. Quite the legacy. And to think, Adam Smith was a moral philosopher; the “science” of economics has sure come a long way since his time. Medical doctors and engineers at least make pledges to “do no harm” in their professions; economists don’t even bother.

    The only protections the less powerful have against the implementation of these ideologies is their democracy. A few “economic” studies showing that money doesn’t effect the outcome of elections should take care of that little problem though.


  6. Joe says:

    Full employment in and of itself is not necessarily a solution for individual, low income people. Job quality must be coupled with full employment in order to achieve real progress.

    Low/no skilled low education required jobs should provide a starter platform for young people starting work, retirees looking for supplemental income or folks between work.

    Quality, skilled jobs that our people are prepared for that pay well and provide a secure income and stability are essential to sound family economic growth. In order to make those jobs plentiful we need an economy that is creative, inventive, and competitive.

    We need to recognize the value of trade schooling that will provide a skill base for key skill areas such as carpentry, plumbing, electrical work, machinery operators and other categories of the like. As always there is a critical role for advanced education but we can’t overlook other job categories that are vital and do not require that level of education but do require skill sets that come through training and experience.


    • purple says:

      Just training more people to be carpenters is not going to create more carpentry jobs or raise wages. We have to deal with the jobs people are in now, they aren’t going away.


  7. Auburn Parks says:

    When are people going to finally get it? The modern American private sector is wholly incapable of maintaining full employment. Put simply, the private sector just does not need to employ everyone in order to produce the amount of goods and services that Americans will buy plus imports. Since 1980 (33 years) there have only been 7 years (in 3 short 2 years periods) where the unemployment rate even got close to 5%, thats 7 years of 33 or 21%.

    http://research.stlouisfed.org/fred2/series/UNRATE

    Furthermore, it took 3 of the fastest increases in private debt (new money) in history to do even that, the S & L bubble in the 80’s, the dot com bubble in the 90’s and the housing bubble in the 00’s. Private debt growth like that is clearly unsustainable, as evidenced by our long, slow debt deflation that will keep this economy stagnating for years to come.

    http://static.seekingalpha.com/uploads/2012/1/9/1066626-132608573651625-marchahead_origin.png

    The only sustainable way to maintain full employment is through sufficient fiat creation from the US dollar sovereign, Congress or We The People. We are in control of our fiat, its our constitutional right per Article 1 Section 8 to “coin money and regulate the value thereof”.


  8. purple says:

    Skills and training is fine for individual solutions, but most U.S. jobs don’t require a 4 year degree nor will they. Far better just to raise the wages at the low-end in the ways we know will work.

    Abandoning Card Check from the outside in 2009 probably all but doomed this. I can’t imagine any sustained economic progressive movement without unions. And unions are definitely dying, and their numbers look awful with Gen X and younger.


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