WASHINGTON (VR) – Unemployment in the United States is much higher than the 6.7 percent reported by the Department of Labor in March 2014, since the statistic does not account for the people that have dropped out of the labor force because of discouragement, according to Robert Pollin, Co-director and Distinguished Professor of Economics at the Political Economy Research Institute at the University of Massachusetts Amherst.
According to the US Department of Labor, there are currently 156.2 million people counted as part of the labor force. Officially, 6.7 percent of those people are unemployed, which equals almost 10.5 million people out of work although Pollin believes that number is closer to 20 million people.
“A reasonable definition of full employment is something like 3 ½ percent unemployment”, Pollin said, which would be about 5.5 million people unemployed or underemployed. He told Radio VR that this is acceptable because about 2 to 3 percent of the people that are unemployed are between jobs. He said that “it’s a problem but not as deep [a problem] as people that lost their jobs because of the recession or the economy’s structure changed” (e.g. manufacturing being moved overseas).
The Department of Labor records another statistic that, according to Pollin, more accurately represents unemployment and underemployment and puts it at 12.7 percent. This means that 19.8 million people in the US are either out of work or can’t find enough work.
Too Little, Too Late?
Pollin, who wrote a book entitled Back to Full Employment, told Radio VR that some things are being done to solve unemployment – but they are not adequate.
“For example,” he says, “the Federal Reserve is keeping short-term interest rates at zero percent with the aim of stimulating banks and other financial institutions to lend money to businesses so they hire more workers.”
But, one of the biggest hurdles for employment in America is that the banks are not lending the money they borrow. They are keeping it for themselves and making a profit from doing so, according to Pollin.
Robert Pollin, Co-director and Distinguished Professor of Economics at the Political Economy Research Institute at the University of Massachusetts Amherst. Photo credit: © UMass Amherst.
The banks are able to borrow money for free from the Federal Reserve, which Pollin believes is good on one hand because it provides banks with funds that they can lend to businesses and other productive enterprises, but bad on the other hand because the Fed pays banks 0.25 percent interest on their reserves. This creates an incentive for banks not to lend.
This policy was enacted during the financial crisis to help bail out banks and other financial institutions. However, since that time this has enabled banks to save an exorbitant amount of money. Pollin told Radio VR that “the banks are hoarding $2.3 trillion in cash.”
“That’s 14 percent of the entire country’s GDP”, he stated.
On top of that, Pollin said that government spending to create jobs through infrastructure development and education programs is virtually non-existent because of the deadlock between Democrats and Republicans, which won’t allow them to come to any kind of jobs deal.
Boycott the Banks
Pollin said that state and local governments can address this problem by investing in infrastructure projects, supporting job training, and organizing hiring halls where people that are looking for work know where to go to find it.
He also said that state and municipal governments could boycott the banks. “They could tell the banks, ‘if you don’t start lending at a higher rate to businesses in our community, we are going to take our business away from you’”. Pollin noted that in Massachusetts there has been some policy intervention of that sort although it was “minimal.”
Pollin used North Dakota as an example of the positive role of government in the banking system as a way to generate employment. The Midwestern state is the only one in the Union that has a public bank, which is committed to providing affordable credit for businesses.
Coincidentally or not, the state also has the lowest unemployment rate in the country at 2.6 percent, according to the Department of Labor.
