All unemployment is structural

Posted: 6 August 2010 in Uncategorized
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Dave Knerler, "Unemployed Men #2" (2003)

All unemployment is structural. By that I mean, the existence of a relative surplus population—the “industrial reserve army”—is both a condition and consequence of the capitalist structure of production.

Mainstream economists, like Mark Thoma, like to distinguish among three different kinds of unemployment: frictional, cyclical, and structural. The implication is that the first is always to be expected (as workers move between jobs), the second can be absorbed by the appropriate stimulus policies (in order to encourage a general upturn in economic activity), and the third represents a mismatch within the labor market (between the supply of and demand for labor—labor of particular experience and skills—in different spheres of production).

What Thoma and other mainstream economists don’t want to admit is that all unemployment within a capitalist economy is structural. One can no more imagine contemporary capitalism without a relative surplus population than slavery without a Middle Passage. Each mode of production, in this sense, has its own law of population. In the case of capitalism, a share of the population is redundant—it is either wholly or partly unemployed, and therefore an industrial reserve army—based on the accumulation of capital.

As I have argued previously, it is not that wages regulate the level of unemployment. Wages are the result of unemployment, in the sense that the existence of the industrial reserve army forces employed laborers (who, we are told, should be grateful for the opportunity accorded to them by capital) to perform more labor than they receive in the form of remuneration. Their participation in the valorization process, in turn, makes possible the accumulation of additional capital, which operates on both sides of the labor market. On one hand, the pace and nature of the accumulation of capital affect the level of demand for labor, by determining both the overall rate of increase of capital and its division into means of production and living labor. On the other hand, the accumulation of capital increases the supply of workers by periodically “setting them free” and by compelling those who remain employed to furnish more labor to their employers.

It is this despotism of capital that serves as the basic structure of all forms of capitalist unemployment—and no government policy (whether to stimulate aggregate demand or to make it easier for businesses and individuals to relocate) can solve it without abolishing capitalist production itself.

Follow-up

As if to confirm the compatibility of high capitalist profits and an expanding industrial reserve army, the revised employment numbers show that, in June, the United States lost 221,000 jobs (the Department of Labor originally reported that 125,000 jobs were lost in June), while private sector hiring was revised downward to 31,000 (it was originally reported at 83,000). To make matters worse, the nation lost another 131,000 jobs in July (with 71,000 jobs added compared to 143,000 cut).

For now, companies appear nervous about expanding their payrolls. “Businesses just don’t want to hire,” said Allen Sinai, chief global economist at Decision Economics. “Workers are too costly and it’s very easy to substitute technology for labor.”

He added that with corporate earnings rising partly on the back of cost-cutting, employers are reluctant to give up profits. “So while corporate earnings were spectacular,” Mr. Sinai said, “the job market just stinks.”

July’s labor numbers showed that the average weekly hours worked in private-sector jobs ticked up to 33.5 hours from 33.4 hours in June, suggesting that employers were pushing for productivity gains among existing employees.

Meanwhile, the average duration of unemployment was 34.2 weeks in July. (That represents a fall from the record 35.2 weeks in June. It’s likely, however, that the decline represents a growth in “discouraged workers” who, while they’re certainly part of the relative surplus population, are not counted in official unemployment figures.)

Comments
  1. […] Krugman provides additional evidence of structural unemployment in the way I define it, as against structural unemployment in the way conservative mainstream economists define it, which […]

  2. […] new consensus seems to be forming among mainstream economists that the structurally determined relative surplus population—the “industrial reserve army”—has grown. They now set the “sustainable” […]

  3. […] I’ve had my differences with Thoma (e.g., here and here) but I also know I couldn’t do a good portion of this blog without the links and commentary […]

  4. […] know I often argue (such as here) that contemporary capitalism regularly produces a relative surplus population or an industrial […]

  5. […] take it to be evidence of the effects of the Industrial Reserve Army. Share […]

  6. […] words, there are no structures in Sachs’s “structural” view of unemployment. As I argued two years ago (in response to Mark Thoma): What Thoma and other mainstream economists don’t want […]

  7. […] other words, there are no structures in Sachs’s “structural” view of unemployment. As I argued two years ago (in response to Mark Thoma): What Thoma and other mainstream economists don’t want […]

  8. […] and learn from other traditions within economics, concerning such varied topics as the role of the Industrial Reserve Army in setting wages, political business cycles, financial fragility, and much […]

  9. […] and learn from other traditions within economics, concerning such varied topics as the role of the Industrial Reserve Army in setting wages, political business cycles, financial fragility, and much […]

  10. […] and learn from other traditions within economics, concerning such varied topics as the role of the Industrial Reserve Army in setting wages, political business cycles, financial fragility, and much […]

  11. […] then it was called the “industrial reserve army.” I have referred to it since 2010 as the “reserve army of the […]

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