At an event recently, Hillary Clinton announced that, if elected, she planned to put Bill Clinton in charge of creating jobs. If he becomes the “First Gentlemen” — or as she prefers to call him, the “First Dude,” — he just might have some success in this role. The country’s very strong record of job creation during the first Clinton administration is a hopeful sign. (Full disclosure: I served in his administration.)
But assuming he’s given the role of jobs czar, what would Bill Clinton do? The uncomfortable fact is that no one knows how to create enough jobs. Although about 50 percent of the public, according to Pew, worries that there are not enough jobs available, and virtually every presidential candidate is promising to produce more, economists are not sure how to achieve this goal.
The debate centers on why we think people are jobless. Unless we can agree on the diagnosis, we will not be able to fashion an appropriate policy response.
Some economists think that an unemployment rate hovering around 5 percent constitutes “full employment.” Those still looking for jobs, in this view, are either simply transitioning voluntarily from one job to another or they are “structurally unemployed.” The latter term refers to a mismatch, either between a worker’s skills and the skills that employers are seeking, or between where the workers live and where the jobs are geographically. (The decline in housing values or tighter zoning restrictions, for example, may have made it more difficult for people to move to states or cities where jobs are more available.)
Another view is that despite the recovery from the Great Recession, there is still a residue of “cyclical” unemployment. If the Federal Reserve or Congress were to boost demand by keeping interest rates low, reducing taxes or increasing spending on, say, infrastructure, this would create more jobs — or so goes the argument.
But the Fed can’t reduce interest rates significantly because they are already near rock-bottom levels, and tax and spending policies are hamstrung by political disagreements.
In my view, the U.S. suffers from both structural and cyclical unemployment. The reason I believe there is still some room to stimulate the economy is because we have not yet seen a significant increase in labor costs and inflation. Political problems aside, we should be adding more fuel to the economy in the form of lower taxes or higher public spending.
High levels of structural unemployment are also a problem. The share of working-age men who are employed has been dropping for decades at least in part because of outsourcing and automation. The share of the unemployed who have been out of work for more than six months is also relatively high for an economy at this stage of the business cycle. One possibility is that the recession caused many workers to drop out of the labor force and that after a long period of joblessness, they have seen their skills atrophy and employers stigmatize them as unemployable.
The depressing fact is that none of these problems is easy to solve. Manufacturing jobs that employ a lot of people are not coming back. Retraining the work force for a high-tech economy will take a long time. Political disagreements won’t disappear unless there is a landslide election that sweeps one party into control of all three branches of government.
So what can Bill Clinton or anyone else do? We may need to debate some more radical solutions such as subsidized jobs or a basic income for the structurally unemployed or a shorter workweek to spread the available work around.
These may not be politically feasible for some time to come, but former President Clinton is the right person to engage communities and employers in some targeted job creation projects now and to involve the country in a serious debate about what to do about jobs over the longer haul.
