Forget about the crisis threatening to tear apart the eurozone, a market that four long years later still is 15% below its peak, crumbling infrastructure, gridlock in Washington or savings accounts that pay less than 1% interest.
It’s all about jobs.
The most pressing, socially disastrous and economically corrosive problem facing the economy today is the perniciously high unemployment rate.
Yes, the economy is growing, albeit barely, but not anywhere fast enough to create enough new jobs to keep up with new entrants to the work force — much less put back to work the millions who were sacked during the depths of the recession.
And it all comes down to having enough jobs. Exports to other nations, advances in technology or gains in productivity don’t cut it when it comes to what really drives the U.S. economy.
Not even close.
Consider that about two-thirds of all income earned in the U.S. is paid in the form of wages and salaries. That’s right: The great majority of everything we have to sustain ourselves and spend on others comes from working for a living. From having a damn job.
Now bear in mind that about 70% of all economic activity in the U.S. is generated internally. That is, our economy is critically dependent on Americans buying and selling stuff to other Americans.
As economist Paul Krugman has said many times: “Our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.”
Pretty much everything in economics is autocatalytic — it either creates a virtuous or vicious cycle. And high levels of unemployment create one nasty downward spiral.
People without jobs spend less. If your spending is my income, then I have less income, which means I spend less, too, hurting the next guy’s income, and so on.
Joblessness makes all of us poorer.
Amplifying this vicious circle is that people without jobs don’t pay as much in taxes (even if their unemployment benefits are taxed, which run out in any case). Additionally, the jobs that do exist are under wage pressure thanks to the abundance of job seekers, so people are making less, spending less and paying less in income and sales taxes.
The upshot is that fewer people are generating tax receipts from income and consumption. That deprives local, state and federal government of revenue at the very same time they are distributing unemployment benefits.
That leads them to cut — you guessed it — jobs.
Those newly jobless civil servants not only add to the greater unemployment problem, but they also rob us of something else, because lots of those jobs — teachers, cops, firefighters — have critical social utility.
Which brings us to some even more serious consequences of joblessness. Yes, the proximate economic costs of high unemployment are staggering enough. But the long-term social costs are worse.
Joblessness causes a deterioration in physical and mental well-being, and almost certainly shortens lifespans. It contributes to poverty, political instability, social unrest and lifetimes — entire lifetimes — of decreased earnings power.
At the individual, economic and social levels, it all comes down to jobs. The consequences of our persistent period of high unemployment will reverberate for a generation or more.
It ain’t called the Great Recession for nothing.