THE BURGER ECONOMY

Posted in Rants on July 21st, 2011 by Ed

Any moderately well-informed person understands that what we generically call the "unemployment rate" is unadulterated bullplop. Through the neat accounting trick of reclassifying the long-term unemployed (6 months or more) as no longer part of the workforce is based on the quaint notion that anyone unemployed for half a year has stopped trying to find a job. The official rate, then, masks a shadow population of long-term unemployed that, if counted, would likely double the official rate.

The never-reported U6 unemployment rate, which accounts for long-term and "discouraged" unemployed, is currently hovering between 16% and 17% compared to the official (U3) rate of about 9.5%. An honest economist will tell you that even the government's U6 rate is understated, as there are a greater number of long-term unemployed (including some who have never been employed) floating around outside of what we define as the labor force. If we could really count everyone – unemployed, part timers who can't find full time, discouraged workers who have stopped trying, etc. – we're probably looking at something like 1 in 5 adults who could be working but are not.

Even that understates the problem. Consider this unremarkable, back page news item about automaker BMW's distribution center in California. It is being closed and outsourced. Were it outsourced to a foreign country, its employees would probably end up in the unemployment statistics eventually (for a short time, if nothing else). It isn't heading to Mexico, though. The distribution center is being outsourced to a contractor that will operate the warehouse with the usual perks of subcontracting – namely a high turnover, $9/hr workforce – instead of the 20+ year veteran BMW employees.

This incident isn't exactly national news. We're talking about approximately 75 employees. Maybe the old BMW workers will go to work for the contractor doing the same job for 33% of their old salary. Maybe they'll be replaced by different workers. Either way the unemployment numbers over which we all obsess do nothing to capture what happened here, and what happened here is more damaging to the macroeconomy than plain old unemployment. There's no net job loss. It's merely a transition from 75 good jobs to 75 shit ones, from 75 people who are productive in the economy to 75 who live paycheck-to-paycheck as the working poor.

I can't tell which is worse, from the perspective of both the individual and the economy as a whole: being unemployed for a while but eventually finding a decent job or being continuously employed but "downgraded" from middle class to working poor status. Since the 1980s the unemployment statistics have been used to cover up what is too often happening to the employed. We can trumpet that 5% unemployment rate that we have in "normal" times all we want, but it is little more than a layer of paint over a workforce that is rusting from the inside out. There's little benefit to a low unemployment rate if the workforce is occupying itself by serving one another fast food.