Syndicated columnist Robert Samuelson has penned a column that scoffs at the push for full employment, making the claim that a previous emphasis on full employment led to a disastrous spell of double-digit inflation around 1980.
Jared Bernstein, economist with the Center for Budget and Policy Priorities, corrects the record in the above interview with OurFuture.org, and explain why “jobs for all” should be a rallying cry for progressives as the 2016 presidential campaigns begin in earnest. Bernstein is leading a “Path to Full Employment Project” at the center, and will be releasing a new book, “The Reconnection Agenda: Reuniting Growth and Prosperity.”
Samuelson wrote that “the pursuit of full employment” in the 1960s and 1970s “ended unhappily” with “a wage-price spiral peaking at 13 percent inflation in 1980.”
The reality is that what the nation experienced in the 1970s rarely could be considered full employment. After starting at 3.9 percent in January 1970, unemployment quickly went to 6 percent by December of that year and never went below 5 percent for the rest of the decade, except for a few months in 1973 when the rate reached 4.6 percent. In the decade’s final months, unemployment rates were hovering around 6 percent.
But remember that those percentages represented the general unemployment rate. Unemployment rates among African Americans ran between 10 and 15 percent for much of the decade. (By contrast, the unemployment rate among white Americans has never exceeded 10 percent in the last 50 years, and was below 5 percent for much of the 1990s and early 2000s, as shown in this economic snapshot by the Economic Policy Institute.) It is no wonder that most people who lived through the 1970s, and especially black and Hispanic readers, would read Samuelson’s column and say, “If somebody was in ‘pursuit of full employment,’ they sure didn’t catch it.”
Bernstein explains that the high inflation that people saw in 1980 – which actually peaked at above 14 percent in early 1980 – was more a function of high oil prices than tight labor markets. The Federal Reserve’s response to that high inflation – sky-high interest rates that pushed the economy into recession – led to devastating unemployment rates that averaged above 10 percent between late 1982 and mid-1983.
Bernstein argues that to look at the effects of full employment on the national economy, a more relevant example would be the late 1990s, when average unemployment rates fell to 4 percent for the first time since 1970. “At that point wages were rising” and categories of people who tended to be left behind in the labor market – African Americans, Hispanics, single mothers – were beginning to catch up. “Inflation maybe ticked up a little bit toward the end of the period,” but overall “inflation was not speeding up; it was slowing down,” he said.
Bernstein says that his new book will call for policies that would address the “jobs for all” plank in the “Building the Movement for People and the Planet” platform that has been drafted for the Populism2015 conference co-sponsored by the Campaign for America’s Future, which will take place in Washington the weekend of April 18. That includes a program of federally funded direct job-creation.
“It’s widely argued that we need a Federal Reserve that is the lender of last resort when credit markets fail. That’s not a controversial statement,” he said. “I would argue that we need the government to be the employer of last resort when labor markets fail.”
Bernstein agrees that pushing ideas like these into the national political discussion will require a “people’s movement” that will challenge candidates to say whether they believe full employment should be a fundamental principle that guides economic policy decision-making or, as Samuelson wrote, it’s a “utopian” pursuit that would produce “reckless” behavior.