Sunday's New York Times Magazine had a first-rate article by Roger Lowenstein on the all things job market . (Registration required, but it's free.)
Here Lowenstein puts his finger on the real puzzle of the current jobs picture:
But despite the gloomy headlines, America has not been losing jobs at an unusual rate. The widely watched jobs stat registers only the net change in employment; it obscures the furious process of both creation and destruction, the dynamism that we witness every time a friend or neighbor loses one job and finds another. In a typical year, some 32 million Americans are hired and about 30 million lose or leave their jobs. And job destruction has been occurring at a normal rate since the end of the recession. The problem is, first, the loss of quality jobs like those at Timken. And, second, job creation -- hiring -- has been atypically slow.
The article has many a worthy nugget, like this on the President's tax policies, from one of its architects:
Bush Republicans have a remarkably doctrinaire approach to jobs: cut taxes. It's classic Keynes that releasing money into the economy will give it a temporary jolt, and the Bush campaign, naturally, has highlighted the stimulative effect of the tax cuts... But Bush is only an accidental Keynesian; he campaigned to cut taxes in 2000, when the economy was still growing. R. Glenn Hubbard, Bush's top economic adviser during his first three years and now the dean of the Columbia Business School, emphasizes that Keynesian tinkering was not the administration's aim...
The Bush-Hubbard agenda is a long-term one: to lower tax rates, especially the top marginal rate, which is applied to the highest incomes. The catechism goes like this: lower rates will induce taxpayers to work longer and harder, fueling more investment. That will raise worker productivity, leading to better-paying jobs and possibly to more jobs.
But not everyone is convinced.
Other things being equal, societies with lower tax rates probably do perform better. But again, tax rates are not the all-powerful jobs lever that Republicans suggest. In the 1960's, the marginal rate was fearfully high -- between 70 and 90 percent -- and employment boomed. Reagan lowered the marginal rate to 28 percent; because the change was so pronounced, it surely had an effect. Doctors had an incentive to treat more patients. But simple math suggests that the Bush cuts, which reduced marginal rates by far less, from 39.6 percent to 35 percent, will not have as big an effect. Those doctors are already working.
What is little appreciated is that low-income workers have not gotten a tax cut over the past 25 years, because the reduction in their rates has been offset by higher Social Security and health insurance taxes. (Such taxes fall most heavily on low-wage workers.) ''The notion that low-wage earners have gotten a big cut -- it simply isn't so,'' says Michael Mussa, a former Reagan adviser. This is no small point. The tax code can be used to tease out more work, but its effects are most striking on lower-income workers, and they are precisely the ones the tax-cutters have ignored.
The article pretty much covers the entire playing field. Laws and regulations that enhance flexibility in hring and firing? Good idea. Proetectionism? Bad idea. Retraining and education? Good idea (but, boy, does it take some patience). Exchange rate and interest rate policies? Limited (and besides, as we know -- or will know within a few months -- these are effects, not causes).
All this, and my friends Randy Kroszner (GSB professor) and Erica Groshen (from the New York Fed) are quoted.
This is a really good article. You should read it.