Wednesday, July 15, 2009

Unemployment = $1 Trillion in Lost Output

Wake up America!! Underinvesting in jobs is costing us a fortune.

To see just how much, check out this great Uncommon Sense piece by Helen Ginsburg, first published in 1994 by the National Jobs for All Coalition.

The piece quotes the great Nobel-Prize winning economist Robert Eisner, who was a steadfast proponent of smart fiscal stimulus and full employment.


By Helen Ginsburg, Professor of Economics, Brooklyn College of the City of New York and Executive Committee, National Jobs for All Coalition

Unemployment adds to the federal deficit,* and to the already oversized human deficit. And, although it is hardly ever mentioned, unemployment alsomeans a tremendous loss of potential output.

In plain language, jobless workers and unused capacity do not turn out goods and services that couldbe used to raise living standards.

Houses that are not built, urban transit systems that are not produced, and child-, health-, and eldercare workers who are fired or not hired cannot meet the housing, mass-transit,andhuman-service needs of our people.

LOSS OF OUTPUT. The magnitude of this loss is not trivial.

For example, suppose unemployment in 1994 had been 4 percent--the interim 5-year goal of the Humphrey-Hawkins Full Employment and Balanced Growth Act of1978--instead of the 6.1 percent experienced in that year. In that case, the nation would have produced roughly $280 billion in additional goods and services--more than $1,000 for every man, woman and child.

Current estimate (2009): "We’ve taken a huge step back here," said James Glassman, senior economist at JPMorgan & Co. He said elevated levels of unemployment and underemployment are costing the economy about $1 trillion in gross domestic product a year.

"We’ve lost several decades of progress that was going on in terms of the people number of people coming into the workforce," said Glassman.

As noted economist Robert Eisner, former President of the American Economic Association, commented on the staggering loss caused by unemployment: the nation is "literally throwing away potential output."

OUR REAL DEFICITS. Eisner also brings a much-needed correction of the deficit hysteria that has dominated the political agenda by pointing outdeficits that are more serious than the budgetary one.

Over the long haul, he says, "our deficits are in our rundown infrastructure of roads, bridges, airports, waste disposal facilities" and inadequate environmental protection.

They are also in our neglect of "a significant part of a generation growing up semi-literate in an unending cycle of poverty, in an educational system moreand more clearly behind that of the World's other developed nations, in our ...gaps in child care and health care and in inadequate housing for tens ofmillions of Americans. These are our real deficits. They are large. They pose awesome dangers to the future of our economy and our nation." ["Deficits:Which, How Much and So What?" American Economic Association Papers and Proceedings, May, 1992]

*See Uncommon Sense #1: "Increasing Unemployment Increases the Deficit; Reducing Unemployment Reduces the Deficit (1994)."

Cross-posted from National Jobs for All Coalition,

Save the date!! Join us for the NATIONAL CONFERENCE TO CREATE LIVING-WAGE JOBS FOR ALL, MEET HUMAN NEEDS & SUSTAIN THE ENVIRONMENT, New York City, Friday & Saturday, November 13-14, 2009.

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