The Aquarian Agrarian: Alexandria Ocasio-Cortez is Part-Right on Unemployment

Monday, August 6, 2018

Alexandria Ocasio-Cortez is Part-Right on Unemployment

Table of Contents

1. Introduction
2. Multiple Job Holders

3. “The” Unemployment Rate

4. Working Overtime

5. Additional Factors in Employment

Content

1. Introduction

On July 13^th, 2018, U.S. House Democratic primary winner Alexandria Ocasio-Cortez (NY-14) appeared on PBS's program Firing Line, to discuss her campaign with host Margaret Hoover.

Ocasio-Cortez, a former Bernie Sanders campaign staffer who has been described as a democratic socialist, was criticized for her response to Hoover's question about unemployment. The following is a transcript of that exchange:

Margaret Hoover:

In your campaign. It was always about working-class Americans. You talk about the top versus the bottom, not the left versus the right.

Alexandria Ocasio-Cortez:

Right.

MH:
Now, the economy is going pretty strong, right? There's roughly four percent unemployment, 3.9% unemployment... um... Do you think that capitalism has failed to deliver for working-class Americans, or is [it] no longer the best vehicle for working-class Americans?

AOC:
Well, I- I think the numbers that you just talked about is part of the problem, right? Because we look at these figures, and we say, “Oh, unemployment is low, everything is fine”, right? Well, unemployment is low because everyone has two jobs. Unemployment is low because people are working sixty, seventy, eighty hours a week, and can barely feed their kids. And so, I do think that we have this no-holds-barred, Wild West hyper-capitalism. What that means is profit at any cost. Capitalism has not always existed in the world, and it will not always exist in the world. When this country started, we were not a capitalist- we did not operate on a capitalist economy.

Ocasio-Cortez's comments were quickly criticized by numerous figures in conservative media, including Tomi Lahren and Dan Bongino on Fox. On July 17^th, former Republican congressman turned conservative radio host Joe Walsh tweeted “@Ocasio2018 is proof that just because you have a degree in Economics doesn't mean you actually understand economics.”

Alexandria Ocasio-Cortez graduated from the College of Arts and Sciences of Boston University in 2011, with a bachelor's degree in economics and international relations. Her critics have also pointed out their reasons for suspecting she is as unqualified to speak about international relations as they feel she is about economics, specifically her position on what she called “the occupation of Palestine”.

Although many news outlets and fact-checking sites were determined to prove her wrong, she did have a point. While her comments on unemployment were not technically correct in the strictest and most literal sense, the way she articulated her position on why unemployment is low is, at the very least, understandable and on the right track.

That's because, as Harvard economics professor Gabriel Chodorow-Reich says – as quoted in “Ocasio-Cortez Wrong on Cause of Low Unemployment”, written by Corey Berman and Robert Farley, published on FactCheck.org on July 18^th, 2018 - “if she meant 'The unemployment rate is low[,] but that doesn't mean the economy is at its potential[,] because many people don't have a solid job and instead are forced to work two jobs to make ends meet', you could find economists willing to agree or disagree with the statement.”

I suspect that that's exactly what she meant.

2. Multiple Job Holders

Ocasio-Cortez's critics say that one reason she is wrong about unemployment, is that the percent of workers who have multiple jobs is near an all-time low.

That is true; however, that low was achieved in 2013, in the middle of the Obama presidency, and thus, could arguably be attributed to Democratic policies. But on the other hand, that rate increased from 2013 to 2016, and decreased from 2016 to 2017. This rate has ranged between 4.8% to 5% since 2010, and ranged between 5-6% during the previous 25 years before that.

Ocasio-Cortez never claimed that the number of people working two jobs was at an all-time high. Although it was hyperbole for her to use the word “everyone” to describe who has two jobs, it would be incorrect to say that she claimed that the multiple job holders rate is higher than it has ever been. While she arguably may have appeared to imply that, she did not directly say it.

Despite the fact that that figure is actually near its all-time low, many people, nevertheless, still do have two or three jobs. George W. Bush said this is possible “only in America”, but it's also only necessary in America.

One job ought to be enough for people to make ends meet. But a minimum-wage job is not enough to support a small family in a two-bedroom apartment in any state in the nation. And that statistic is not made-up; it's the people who say the minimum wage doesn't support a one-bedroom who are wrong.

The reason Ocasio-Cortez was not technically correct about the cause of low unemployment rates, is that employed people getting second and third jobs, does not, by itself, increase, nor in any way affect, the unemployment rate.

But that's because the figure we're talking about is the “proportion of employed persons with more than one job”; that is, the number of total workers, divided by the number of workers with multiple jobs. That statistic is not based on the relationship between the number of multiple job holders and the number of unemployed people.

That's why the unemployment rate does not change when a job goes to a person who is already employed, instead of someone who is non-employed, who arguably needs the work more badly than the already employed person.

Focusing on the multiple job rate instead of unemployment, blinds us to the fact that unemployment can stay about the same, even while the number of jobs rises, which is largely attributable to people getting a second job, and having both jobs' hours fall to 25 to 30 hours a week each.

The last thing I want to do is to pit unemployed people against employed people who are struggling to balance two jobs. But the truth is that people who take-on a second job are “taking jobs” from unemployed people who actually need those jobs.

This is a struggle related to the ease of obtaining employment, yet changes in the number of people with two or more jobs does not affect the unemployment rate the way it is currently measured. Alexandria Ocasio-Cortez rightfully drew attention to that fact, when she said “ I think the numbers that you just talked about is part of the problem”. The way we measure unemployment does not in any way give us a clear picture of the general woes the people are experiencing as it pertains to obtaining employment opportunities.

3. “The” Unemployment Rate

As Margaret Hoover noted that the unemployment has been hovering between 3.8% and 4.1% lately, Ocasio-Cortez's detractors have noted that as well. Some conservative commentators have described this as an all-time low, and some have even credited President Trump for this supposed achievement.

The idea that the U.S. is currently experiencing all-time low unemployment rates is false. Around the year 1970, the unemployment rate hovered around 3.5%, which is lower than it is now. Since the unemployment rate's history began in 1948, the lowest unemployment rate ever measured was 2.5%, in 1953.

Additionally, the decline in unemployment numbers began long before Trump took office, near the beginning of the Obama administration.

Alexandria Ocasio-Cortez was correct when she implied that the decline in the unemployment rate has to do with the way they're measuring it.

You see, when people say "the unemployment rate", that's a misnomer, because there really is no single way that the U.S. government measures unemployment. But what is almost always meant by "the unemployment rate" is the so-called "official unemployment rate"; a measurement called "U3". According to the Bureau of Labor Statistics, the "Current U3 Unemployment Rate" is defined as the total number of unemployed people, as a percent of the civilian labor force.

The Bureau of Labor Statistics measures unemployment in a variety of ways; known as U1, U2, U3, U4, U5, and U6. There have been conflicts between presidents, the Congressional Budget Office, and the Bureau of Labor Statistics, about how to measure unemployment, and these different ways of measuring unemployment reflect some of those differences of opinion.

The Bureau of Labor Statistics defines U6 as “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force”.

Using U3 instead of U6 is basically a way to “fudge the numbers” on unemployment, resulting in a lower “official” unemployment rate than the “real unemployment" rate (U6). And U6, itself, represents a number of workers that's about half as much as the total number of people who are out of the work force and could potentially be employed (we might call this the "real real unemployment rate").

The U3 unemployment rate excludes a lot of people who aren't technically “unemployed” in the sense that they have filed for, and collect, unemployment benefits from the government, and are currently searching for work, and have not yet become discouraged enough to stop looking. Such people are “non-employed”, but they are not “unemployed”. People who are between jobs, and think they'll find a job soon, and never file for unemployment, fall in this class, and so do college students who do not work due to having support from their parents.

The U3 excludes not only non-employed people, but 1) underemployed people; 2) structurally unemployed people (whose industries or professions are uncertain or struggling due to long-term changes in the economy); 3) seasonally unemployed people; and 4) “non-attached workers” who work on-and-off, and also couch surfers who lack a permanent residence, some of whom might work in the gig economy; as well as homeless people who cannot file for unemployment benefits because they have no permanent residence.

The U6 unemployment rate is about 90% higher than the U3 unemployment rate. If you factor-in everyone I mentioned in the last two paragraphs, then the real unemployment rate might be four times higher than the stated unemployment rate of 3.8% - that is, 15-16% - if not more than that. In fact, to prove that Donald Trump is wrong that unemployment is low, I'm going to cite one of his harshest critics, Donald Trump. In an August 2015 interview for Time Magazine, Trump told Pete Schroeder that he doubted the official unemployment rate, saying “our real unemployment rate is 42 percent” because “ninety-three million” people “aren't working”.

In summary, we're measuring unemployment the wrong way, and the official unemployment rate (U3) is not the best way to measure the general economic woes of the country as it pertains to obtaining quality employment. Again, that's because U3 includes neither the non-employed, the structurally unemployed, the seasonally unemployed, non-attached workers, the underemployed, nor the homeless.

4. Working Overtime

Ocasio-Cortez's critics also took issue with her claims that “people are working sixty, seventy, eighty hours a week”. Again, at no point did she claim that the number of people who work long hours is at or near an all-time high. Whether her critics have alleged she said that or not, her critics are not wrong to point out that the average number of hours worked per week is near its all-time low.

That is correct; however, the Obama presidency saw an overall rise in the average number of weekly hours worked. Under Obama, that number did not quite rise to the numbers seen under Bill Clinton and George W. Bush. For the past twenty years, the average number of hours worked, has ranged between 34.25 and 34.5 hours, with a brief but significant dip to 34 hours in 2009.

Average weekly hours worked is near its all-time low, but nevertheless, it is true that many people still do work sixty hours per week or more. I work as a private security guard, and I do know people who work such long hours like that. The fact that historically few people work long hours, should not distract from the fact that there are many individual human beings who are working long hours; just like the fact that historically few people work multiple jobs, should not distract from the fact that there are many individuals who are working multiple jobs.

It is certainly a good thing that many people work less than forty hours a week, and the facts show that a 34-hour week is not only possible but the norm. Weekly hours worked could be much lower, especially if we utilize technology to its full potential and allow automation to flourish. Nearly 250 years ago, Benjamin Franklin predicted that a 20-hour work week would soon be possible, and Franklin D. Roosevelt declined to sign a bill that would have established a 30-hour work week about 85 years ago.

Another thing to consider is that low average weekly hours worked, might not even be desirable, especially if it is caused by policies that incentivize people to work fewer hours than they want to. Examples of these policies include: 1) laws limiting the number of consecutive days which may be worked (which can negatively impact farm laborers); and 2) Obamacare's exemption of “part-time workers” (defined as people who work less than 30 hours a week), a policy which arguably gave employers an incentive to cut employees' hours in order to avoid being legally required to provide them with health insurance.

5. Additional Factors in Employment

Here are some additional factors which indicate the general prospects of the American people as it pertains to obtaining employment, which do not directly relate to unemployment, but which affect non-employment nevertheless.

First, fewer people on unemployment benefits might simply mean that people have stopped looking for work, and have declined to file for unemployment benefits.

Second, lower unemployment numbers could also mean that more people have given up trying to become self-employed, given up trying to start their own businesses, and given up trying to make money through investments. In general, that they given up looking for other ways to get by without selling their labor to an employer (which arguably indicates desperation to find a job; desperation to prostitute themselves to potential employers by giving up rights to organize on the job, rights to full pay, etc.).

Third, even if it were true that the economy is fine, and that the low unemployment rate reflects that, then more people having jobs is still not necessarily a good thing. Remember, a lot of the jobs people are getting, are jobs in industries that were given multi-trillion dollar bailouts just a decade ago. The jobs might be in industries which are being favored and privileged and bailed-out by the Trump Administration.

The jobs might be in industries which are destroying our environment for profit. Maybe some of those jobs aren't all they're cracked up to be. The employees at the job in question might be overworked. The employees might be working multiple jobs, or might hope for full hours or raises, so that they can avoid taking on a second job. The workplaces might have safety and health hazards. Not every job is respectable; not every job saves lives; and not every job and industry should be subsidized, protected, and bailed-out by taxpayers.

Alexandria Ocasio-Cortez is not “mad because people have jobs”, nor mad because low unemployment numbers are accurate and prove her wrong. She is “mad” (read: heartbroken) because when someone who already has a job takes a job that somebody else needs, it doesn't change the unemployment rate. Similarly, when someone who needs Food Stamps loses them because the government throws them off, it's counted as a success, as though they stopped needing Food Stamps and got off the S.N.A.P. program voluntarily. And that affects people's ability to feed themselves and their children.

There are many people, who struggle to feed their families, whether they are working or not, and whether they are on government assistance or not. Some people are on government assistance even though they have jobs; not always because they're lazy and greedy, but often because their job doesn't pay them what they need to subsist. Alexandria Ocasio-Cortez is in the spotlight now because the electorate is ready to hear from a candidate who considers these issues to be serious problems, even if these problems are not as bad as they have ever been.