Fed Chairman Testifies to Congress
Americans can expect high unemployment in the years to come, according to congressional testimony by the Federal Reserve chairman on Wednesday.
“It will be several years before the unemployment rate has returned to a more normal level,” Chairman Ben Bernanke said, describing the decreasing demand for manufacturing workers in the knowledge economy.
The problem for coming years is that unlike past business cycles, economic recovery from the recent financial crisis may not create opportunities for displaced workers to be hired into the same types of jobs they lost. This mismatch between the needs of employers and skills in the labor force defines a structural unemployment that differs from the cyclical unemployment named for the periodic behavior of typical business cycles.
Job Losses Resulted in Riots
The last time Americans were faced with a similar situation was after the financial crisis of 1873, when a combination of decreasing demand for agricultural workers and an increase in manufacturing activity led to social unrest during the nation’s first Great Depression. In addition to being responsible for deadly riots in 1877, structural unemployment was the most important problem faced by President Rutherford B. Hayes.
Focus on Skills For the People
Warning about the economic effect of an extended downturn on workers currently displaced by cyclical unemployment, Bernanke added, “The risk is that if it goes on long enough, it will start becoming structural as people lose their skills and their connection to the labor force.”
Bernanke’s testimony is further evidence of ineffective economic policy from Barack Obama, who The Washington Post reports “doesn’t know much about what he has just seen” on a factory tour.
It’s time for an effective executive who understands the economy and can influence action to help the record number of Americans in poverty achieve middle-class dignity.
Paul Polak, Out of Poverty: What Works When Traditional Approaches Fail (San Francisco: Berret-Koehler, 2008).