Labor Market Commentary
By Arnold Kling
Two pointers from the indispensable Mark Thoma.
A large fraction of displaced workers who have found new jobs have had to switch careers, and most of those career-changers have downgraded to a lower-paying job, according to a new report from Rutgers’s Heldrich Center for Workforce Development.
I regard that as evidence in favor of the Recalculation Story. I’m not saying that it’s decisive evidence, but it’s the sort of evidence I would expect to find if it were a valid story.
Yet with policymakers more focused on deficit cutting then fiscal stimulus and with labour movements weakened by globalization, it seems unlikely that wage policies will get the boost they need for the world to recover from this current crisis.
She is arguing for policies to boost wages. This view was also widespread in the 1930s, and it was employed with disastrous results. I am still reading Piers Brendon’s The Dark Valley, and I just finished a chapter on Leon Blum as French premier in 1936. Saying that he modeled himself after Roosevelt, Blum and his socialist party put many policies in place to empower unions and redistribute income to workers. The result was that French goods became uncompetitive, unemployment shot up, and the franc had to be devalued in order to get real wages back to realistic levels.