Paul Krugman: The Fear Economy

Why has Congress turned its back on the unemployed?:

The Fear Economy, by Paul Krugman, Commentary, NY Times: ... Some people would have you believe that employment relations are just like any other market transaction; workers have something to sell, employers want to buy what they offer, and they simply make a deal. But anyone who has ever held a job in the real world — or, for that matter, seen a Dilbert cartoon — knows that it’s not like that.

The fact is that employment generally involves a power relationship: you have a boss, who tells you what to do, ... and high unemployment has greatly weakened workers’ already weak position in that relationship.

We can actually quantify that weakness by looking at the quits rate... Quitting is ... a risk; unless a worker already has a new job lined up, he or she doesn’t know how long it will take to find a new job, and how that job will compare with the old one.

And the risk of quitting is much greater when unemployment is high, and there are many more people seeking jobs than there are job openings. As a result, you would expect to see the quits rate rise during booms, fall during slumps — and, indeed, it does. ...

Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy ... and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.

Is there any evidence that this is happening? And how..., at this point, after-tax profits are more than 60 percent higher than they were in 2007, before the recession began. We don’t know how much of this profit surge can be explained by ... the ability to squeeze workers who know that they have no place to go. But it must be at least part of the explanation. ...

What’s more, I don’t think it’s too much of a stretch to suggest that this reality helps explain why our political system has turned its backs on the unemployed..., the economy may be lousy for workers, but corporate America is doing just fine. ...

Too many Americans currently live in a climate of economic fear. There are many steps that we can take to end that state of affairs, but the most important is to put jobs back on the agenda.

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