Papadimitriou: To Solve Unemployment, Employ People

Michael Stephens | January 5, 2012

In an op-ed in today’s LA Times Dimitri Papadimitriou makes the case for a direct job creation program:

It’s unreasonable to expect private enterprises to solve these problems. Full employment isn’t an objective of businesses. … There simply isn’t any known automatic mechanism, in the markets or elsewhere, that creates jobs in numbers that match the pool of people willing and able to work. …

At the theoretical heart of job-creation programs is this fact: Only government, because it is not seeking profitability when it is hiring, can create a demand for labor that is elastic enough to keep a nation near full employment. During a downturn, when a government offers a demand for unemployed workers, it takes on a role analogous to the one that the Federal Reserve plays when it provides liquidity to banks. As in banking, setting an appropriate rate — in this case, a wage — is one key component for success, with the goal of employing those willing and able to work at or marginally below prevailing informal wages.

Papadimitriou goes on to describe successful examples of direct public service job creation programs around the world, and finishes with a discussion of the need for decent monitoring and evaluation systems for these programs (a set of topics highlighted in the recent Levy Institute report on the framework of a direct job creation program for Greece).

We’ve now seen a long string of employment reports in the US in which modest private sector job gains have been paired with continuing job losses in the public sector.  Sometimes (sometimes) the most straightforward-sounding policy solutions really are the best.  When a government faces an unemployment crisis like the one we’re in now it should, after ensuring that lower levels of government (states and municipalities) have the means to stop firing so many people, go ahead and start paying more people to do useful things.

This country is filled with sick, neglected, disabled, and vulnerable children and adults who need care, and plenty of roads, bridges, and school buildings in various states of disrepair or obsolescence.  Now would be a good time to pay some people to do something about it.

Read Papadimitriou’s op-ed here.

The Levy Institute research he references indicating the dramatic employment creation effects of investing in care services versus physical infrastructure (double the jobs created per dollar invested) can be read here, here, and here.  If you only have time for the one page version, see here.


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