Stuctural or Cyclical?

There's a little skirmish going on between the Keynesians and the more conservative economists over the underlying source of our current travails. Team K (Keynesians), most prominently represented by Krugman, insist the problem is lack of aggregate demand which can be solved by government the handing out jobs. Team S (Structuralists), insist unemployment is structural, meaning the unemployed lack the proper skills to be productive in today's economy, and so such government intervention would be useless. Here's the K-Man:

What does it mean to say that we have a structural unemployment problem? The usual version involves the claim that American workers are stuck in the wrong industries or with the wrong skills...but...contrary to what such stories suggest, job losses since the crisis began haven’t mainly been in industries that arguably got too big in the bubble years. Instead, the economy has bled jobs across the board, in just about every sector and every occupation...So all this talk about structural unemployment isn’t about facing up to our real problems; it’s about avoiding them, and taking the easy, useless way out. And it’s time for it to stop.

It sounds to me though that it's the Keynesian-approach that is the easy way out. Who wouldn't want increasing wealth to be as easy as spending a whole bunch of government-created money? No one who believed that such policies could work would object to doing it. Tyler Cowen, from Team S, responds here. While characteristically opaque, I think what Tyler is saying is that "structural" unemployment need not be concentrated in specific industries, but can be manifested in widespread chronic unemployment. Let's remember that this Great Recession wasn't a shot out of the blue - we had the Internet Bubble bursting in 2000, followed by 6 years of very anemic growth accompanied by a massive housing bubble. This has been going on for quite awhile.

One thing I don't hear too many people discussing these days is the apparent unwillingness of Corporate America to train their own workers. There is much gnashing of teeth over the dearth of STEM graduates and it is indeed distressing seeing so many young people graduating college with useless majors like journalism and communications. But in past decades people with non-technical degrees - or quite often just high-school graduates - could get hired by a large corporation and learn COBOL or accounting basics or whatever. A few months ago I heard the chairman of Caterpillar complain on SquawkBox about the lack of trained mechanics to service their high-tech equipment. No one on the panel asked him why Caterpillar doesn't train them.

One obvious disincentive is poaching - companies get real sore about investing in employee training only to have newly-trained workers leave for a higher salary. In the old days, presumably, a mutual sense of loyalty limited this problem. But such ideas are now quite passe. Corporate America's view of colleges is now much like the NFL's - a recruiting ground for fully-trained star players who only need some additional coaching on some organizational specifics. It's probably a no-brainer for any young person that if you're smart enough to do well in engineering or computer science or quantitative analysis that's how you ought to proceed. But if you're not - and the vast majority are not - it's pretty tough to figure out which field is going to get you somewhere. When companies did their own training, that kind of took the guess work out of the equation.

My feeling is that Krugman is wrong and we cannot cure our ills by artificially boosting aggregate demand - and that the problems run deep as the Structuralists contend. But this structural problem is much deeper, and no one is really thinking very deeply about what to do about it.

Business and Health Care

Obviously insurers who make money selling health insurance must lobby like there's no tomorrow to protect themselves when it comes to health-care reform legislation. But what of the rest of Corporate America? Do they stand back, not wanting to interfere in a "not our issue" kind of attitude? Do they stand together with the insurers out of some sense of Corporate Solidarity? Basically, what I mean to ask is - does Big Business generally support the status quo in health care, and if so, why?

Are GE, Google, Ford, Bank of America, Boeing all pleased with America's current health-care financing system, which calls on large companies to pay for their employees' health care? Are they thrilled with having to expend resources negotiating with health insurers and understanding how this coverage affects employee compensation? Do those with large unions find that adding health-care to the equation simplifies the collective bargaining process? Do they not feel they're at a disadvantage with their global competitors most of whom don't have these health-care responsibilities?

Perhaps they'd prefer to avoid getting in the middle of controversial issues, but you'd think they'd be highly motivated to get rid of that particular albatross. They wouldn't have to actually come out publicly - they could just set up some "think-tanks" staffed with articulate, otherwise 'conservative' pundits who would talk about how exceptional health-care is and that while we hate 'socialism' if there's any industry that could use a little 'socialism' health-care is it!

Perhaps they've made an attempt, with those DOA Republican proposals for eliminating group-health plans altogether and moving to individual 'tax-subsidized' vouchers, to push a right-wing solution to their health-care problem. But you've already got a public that overwhelmingly expects someone else to pay for their health care - why not push a little harder on that front - it seems like a surer path to success? Instead, they end up with the worst of both worlds - Obamacare.