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Peter Orszag makes the case for Germany

M1X00061_9.JPGConferences should have purple backdrops more often.

"We don’t really have a jobs policy," writes Paul Krugman. "We have a G.D.P. policy." Unlike Germany, we have not prioritized keeping workers in their jobs. Instead, we've prioritized measures to increase economic growth. As Larry Summers said, “It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

But has anyone told Peter Orszag? In his speech at New York University, Orszag made an argument that sounded like a very effective brief for devoting significant resources to protecting workers from layoffs:

Consider the effect of what economists call an "exogenous labor shock" -- but normal people call a "lay-off" -- on the life course not of those laid off … but on their children.

A range of studies have found that having a parent experience unemployment is significantly associated with whether you graduate from high school, whether you go to college, whether you get a job after college, and how much you get paid in that job. And the effect is persistent -- with higher high school dropout rates and lower college enrollment rates evident even years later.

Reflecting this, the children of workers who were once laid off have lower average wages as adults -- even decades later -- than those whose parents never experienced such setbacks.

Photo credit: Andrew Harrer/Bloomberg.

By Ezra Klein  |  November 13, 2009; 3:50 PM ET
Categories:  Economic Policy  
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"But that’s not as desirable as expanding the total amount of work."

Bzzzt. "Productivity gains" don't necessarily mean "more jobs." Often, it just means more work by the same number of people (or even less).

Wasn't he around in the 90s? Sheesh!

Posted by: ajw_93 | November 13, 2009 4:13 PM | Report abuse

I'm at a workforce development conference in Washington, and we had the pleasure of hearing both Labor Secretary Solis and her Assistant Secretary for Education & Training, Jane Oates. Now obviously both are going to focus on jobs, being Labor officials, but they were also pretty clearly articulating administration policy (based on their comments on ARRA and health reform). They focused VERY much on the recovery's impact on jobs (mainly voicing their displeasure at the continued loss of jobs), and this combined with what others in the administration (Orszag included) have been saying is a good indication that the White House is worried about employment and not settling for GDP growth. For what it's worth, they didn't say a word about Treasury or the president's economic advisors.

Posted by: kordsmicah | November 13, 2009 4:57 PM | Report abuse

The speech was given I guess around 11/3/09. The stimulus was passed in March 09.

Peter Orszag is smart but late there.

Slowly people will realize, Obama Tax Cut of $200Billion order in that bill was the real looser. If that money was used for employment, it would have helped. President wanted shield from Tax Cut Republicans and he insisted on that. If I remember correctly, I did not find Congress enthusiastic at that point for that too.

Now we do not have money as well as time is lost.

Sometime this President is very adamant for his campaign promises (tax cuts to lower class was his promise) and things go waste. Lower class would have most helped if jobs were retained (theirs or someone else too) rather than meager $8 per pay check or so.

Now Peter has chance to listen the earful in President's job forum in December.

As Churchill is quoted - America will for sure do the right thing, only after she has taken all the wrong detours before that...

Posted by: umesh409 | November 13, 2009 5:12 PM | Report abuse

"As Larry Summers said, 'It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.'"

I know we're in a major recession and excess work isn't quite the front-burner problem, but somehow I don't think Summers is ever going to change his tune, the tune that leads to the situation Tony Judt summarized a couple years back:

"Americans work much more than Europeans: according to the OECD a typical employed American put in 1,877 hours in 2000, compared to 1,562 for his or her French counterpart. One American in three works more than fifty hours a week. Americans take fewer paid holidays than Europeans. Whereas Swedes get more than thirty paid days off work per year and even the Brits get an average of twenty-three, Americans can hope for something between four and ten, depending on where they live...."

Spreading the existing work pie around would actually be better than expanding that pie for both reasons: 1) more employment and 2) more quality of life for the employed.

Posted by: JonathanTE | November 14, 2009 7:38 PM | Report abuse

Summers: "But that’s not as desirable as expanding the total amount of work."

Increasing GDP has little to do with "expanding the total amount of work". That economists keep making nonsensical statements like that and keep getting away with it as disgraceful as it is indicative of the superstition inherent in most conventional economic theory. As long as anybody listens to these high priests of an irrational cult, things are not going to get any better.

Posted by: carbonneutral | November 14, 2009 8:38 PM | Report abuse

Super. Ten months into the administration, this guy gives a speech about how unemployment is bad, with no remedial specifics, and Ezra writes a post praising how smart he is.

Posted by: redscott | November 16, 2009 9:34 AM | Report abuse

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