In May and June of 1953 the unemployment rate was at 2.5% due to the Korean War, which was an historic low level for the untied States. The bubble burst, and started the recession of 53, and for this reason some economists said the rate of unemployment should be 4%. At the time 4% unemployment, in theory and practice would keep the equilibrium of the economy stable, by controlling growth and in turn lower the inflation rate. This they termed as a natural rate of unemployment and is defined by 3 factors. First, workers leave jobs for many reasons, sickness, pregnancy, or retirement, this is known as Frictional Unemployment. Second, is Structural Unemployment which reflects the mismatch of workers skills and jobs availability, e.g. robots take over manufacturing jobs, or when factories move to cheaper labor markets. The third, Surplus Unemployment is specify to supply side or Trickle Down economic policy, that says, the demand for higher wages (minimum wages laws and unions) by workers, forces employer to keep the same payroll budget by laying off workers. The first two aspects of the definition are expressions of free market forces that determine the real wage level, forces that are hard to predict or control. The third, is a reflection of one of many economic policies, that could be used to influence a economy. In this case the supply side model.
From one economists to another the definition may vary, and the economic policies differs, but a natural unemployment rate is part of our economic system. In 1953 the natural unemployment rate was placed at 4%, in the1980s the CBO’s forecast the rate was estimated at 5.0 percent, and for the 10-year projection period through 2017, it is lower than the 6.0 percent. Along with the benefits of controlling short term inflation, it also enables businesses to control their labor costs. That’s all and good but that still leaves the American worker unemployed, a worker who has shown by any measure a willingness and ability to work. Of course there are some economists who say that there are ways to lower the natural rate of unemployment without long term inflation, which would help the downside of high unemployment. But the fact is that our economy has been based on the Supply Side economic modelwhichadvocatesthe definition of Surplus Unemployment, and compounded by Frictional, and Structural unemployment, making unemployment a systemic part of the economic model. So no matter how you spin, bend, or twist it, Americans will be forced to be unemployed.
In the face of an economic policy that demands a 5 to 6% unemployment rate, and 15 million peopleunemployed by the great recession, Texas Governor Rick Perry was asked, what should the unemployed do, his answer “Get a job”. If you are to listening to some in this country, it’s the lazy American workers who are the problem. Repeated over and over on talk radio, and so called cable news programs the callers reflect this fallacy, with comments like, “50% of the people that voted for Obama are on food stamps”, or “the unemployed has made a hammock out of the safety net”. For some in this country, it’s a matter of one’s character that they have or don’t have a job. While, with everything, there is some degree truth to this, but adjusting someone’s character as a solution to the unemployment problem, isn’t a solution.
This is the same perception that existents to the 2008 economic crash, where it was the American home owner’s character that caused the world wide economic collapse. It makes no different that the Bank of America paid a 250 million dollar fine for selling subprime (junk) mortgages to minority American’s who were eligible for prime mortgages. JP Morgan Chase was fined $13 Billion for selling toxic mortgages to Fannie Mae even before the crash, and causing financial irregularities. The fines for this fraud could reach 100’s of billions dollars, and we are still being told that it was the American home owners who were the problem.
The reality of this simplistic perception isn’t that it’s a few who game the system, but extents to anyone who they see as them. These principled folks, and are just as willing to push hard working Americans under the bus because of this perception. The measure of their principled commitment is fully illustrated by their zeal in which they plan and have cut food stamps and other support programs for millions who are unemployed. When confronted with a real world policy of supply side economics, which has only trickled on the American people, a recession that left 15 million unemployed, and their only solutions seems to be, more of the same economic policies, and smearing the American people’s character. Well, maybe they’ve got a point, it just could be, a matter of character.