One of the big stories in economics these days is the prediction of slow growth as the "new normal". The labor force is growing slowly and unemployment is down to the point where nearly all of the excess has been used up. As a result, there will be no increase in economic growth resulting from the employment of new labor. On top of this, productivity is not increasing at a sufficiently fast pace to allow for the economy to grow quickly. I am not making this stuff up. This is really the argument being presented by many in the field of economics to predict not only slow growth but also slower growth than even currently expected.
This prediction is pure nonsense. Let's look at the pieces of it first. The labor force is shrinking as the Baby Boomers retire, or so we are told. New workers mostly only replace those who retire. Now let's consider reality. The labor participation rate has declined markedly in the last five years. Big chunks of the American people have stopped working. The number who no longer work is much greater than the number of Baby Boomers who have retired during that time. In fact, there are many millions of people across the country would could work but who no longer do so. It seems likely that if there were good jobs available, those people would once again seek employment.
Next we are told that unemployment is down to the point where nearly all of the excess labor has been used up. Again, the truth is really something quite different. Aside from all those folks who just dropped out of the workforce in disgust after failing to find work, we have record numbers of people who have been forced to work part time even though they want full time jobs. How many millions of people are being kept in jobs that provide less than 30 hours of work each week so that the "full time" level set by Obamacare does not kick in? How many hours of additional work could be performed were the penalty for full time work removed? And what about the millions of people who are working "off the books"? How many of them would also take a legitimate job if the opportunity came along? The truth is that the unemployment figures are useful only to show a trend, and even that is not complete.
Then there's the theory that productivity is down so that the future will also see lowered productivity. If there's anything that economists ought to understand, it is the simple truth that things change. Who knows what technological breakthrough is coming that will increase worker productivity in a major way? There may be nothing, but that seems unlikely. Too many people are working to produce the next great breakthrough for us to predict a total failure of that effort.
The reality is that this latest economic "forecast" is actually nothing more than an attempt to "explain" slow growth by avoiding a review of government policies that promote slow growth. When the federal government keeps business taxes in America at the highest level in the world, the not surprising result is that businesses locate elsewhere. When the government puts major costs on employers for new employees in the form of Obamacare, it is not surprising that there is less growth as businesses devote their efforts to avoiding costs. When the government takes actions that drive up the cost of energy, it is also not surprising that firms that make heavy use of energy grow more slowly. This list could easily continue, but the point is clear. There are changes in government policy which could revive economic growth in this country. President Obama and the Obamacrats are not promoting growth; instead, they are actually following policies that retard growth in the economy. Change the faulty policies and we can change the rate of growth.
This prediction is pure nonsense. Let's look at the pieces of it first. The labor force is shrinking as the Baby Boomers retire, or so we are told. New workers mostly only replace those who retire. Now let's consider reality. The labor participation rate has declined markedly in the last five years. Big chunks of the American people have stopped working. The number who no longer work is much greater than the number of Baby Boomers who have retired during that time. In fact, there are many millions of people across the country would could work but who no longer do so. It seems likely that if there were good jobs available, those people would once again seek employment.
Next we are told that unemployment is down to the point where nearly all of the excess labor has been used up. Again, the truth is really something quite different. Aside from all those folks who just dropped out of the workforce in disgust after failing to find work, we have record numbers of people who have been forced to work part time even though they want full time jobs. How many millions of people are being kept in jobs that provide less than 30 hours of work each week so that the "full time" level set by Obamacare does not kick in? How many hours of additional work could be performed were the penalty for full time work removed? And what about the millions of people who are working "off the books"? How many of them would also take a legitimate job if the opportunity came along? The truth is that the unemployment figures are useful only to show a trend, and even that is not complete.
Then there's the theory that productivity is down so that the future will also see lowered productivity. If there's anything that economists ought to understand, it is the simple truth that things change. Who knows what technological breakthrough is coming that will increase worker productivity in a major way? There may be nothing, but that seems unlikely. Too many people are working to produce the next great breakthrough for us to predict a total failure of that effort.
The reality is that this latest economic "forecast" is actually nothing more than an attempt to "explain" slow growth by avoiding a review of government policies that promote slow growth. When the federal government keeps business taxes in America at the highest level in the world, the not surprising result is that businesses locate elsewhere. When the government puts major costs on employers for new employees in the form of Obamacare, it is not surprising that there is less growth as businesses devote their efforts to avoiding costs. When the government takes actions that drive up the cost of energy, it is also not surprising that firms that make heavy use of energy grow more slowly. This list could easily continue, but the point is clear. There are changes in government policy which could revive economic growth in this country. President Obama and the Obamacrats are not promoting growth; instead, they are actually following policies that retard growth in the economy. Change the faulty policies and we can change the rate of growth.
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