Understanding the “cruel math of unemployment”
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What is the cruel math of unemployment?
The cruel math of unemployment is not about too few working, it's about too many. I'm David Brancaccio in Los Angeles. Good morning to you. First, we'll get a key measure of inflation this morning, the one preferred by the guardians of interest rates at the Federal Reserve. This is the one with the clumsy name, the Personal Consumption Expenditures Price Index. It'll be for December, and it's out in about an hour and a half. President Trump talked about prices yesterday in Georgia. Marketplace's Nancy Marshall-Genzer has more.
President Trump pointed to lower prices for things like gas to make this claim yesterday.
What word have you not heard over the last two weeks? affordability, because I've won. I've won affordability.
The cost of used cars is also down. President Trump is expected to continue talking about lower prices and affordability in his State of the Union speech this Tuesday. But inflation is still above the Federal Reserve's 2 percent target, and consumers feel the pinch, especially at the grocery store.
How does unemployment serve as a solution in the economic system?
A left-leaning think tank, the Center for American Progress, has unveiled a plan for price caps. It was written by former Biden administration economist Jared Bernstein. The proposal would freeze the price of more than 20 different foods for at least two years, including staples like meat, milk, cheese, and butter. The cap program would be voluntary. The plan would offer breaks on credit card swipe fees as an incentive for stores to participate. I'm Nancy Marshall-Genzer for Marketplace.
Question. Is unemployment able to work but unable to find work a liability or an asset? It's not an asset to the worker in search of livelihood, of course, but mainstream economics acknowledges that some joblessness helps to keep prices down and from the corporate point of view. It helps to keep profits up. It's one of the reasons that to most economists, ideal unemployment is not zero unemployment. This is one of the critiques of the economic system we live in. Clara Mattei teaches economics at the University of Tulsa. Her new book is called Escape from Capitalism and Intervention, where she calls some of this the, quote, cruel math of unemployment. Dr. Mattei, welcome.
What role does inflation play in the discussion of unemployment?
Thank you so much, David, for having me. What's the cruel math?
The cruel math is that unemployment is not a problem for our system, but it's actually a solution for it.
It's not a bug. It's weirdly a feature. It's like the standard math of economics in our market system insists that unlike eating Reese's peanut butter cups, there can be too much employment. Businesses and regular economists get nervous if, what, too many of us have jobs?
Us having jobs means that the bargaining power of workers goes up and workers can be empowered to actually start problematizing why they have to go work for a wage that is so low and might start mobilizing for a different socioeconomic system, which is very bad for a capitalist economy.
We just had this big natural experiment in some of this when we were coming out of the COVID pandemic. The unemployment rate got really low and employees or potential employees could say, hey, you want to hire me? You got to pay me more. The way we reported this was that that sparked a lot of destructive inflation. You're saying what? If you have to pay employees more because a lot of people are employed, why couldn't that come out of shareholder profits, not necessarily putting it into prices?
In 2023, when unemployment was 3.4%, all the technocrats running central banks were freaking out.
How did the COVID-19 pandemic impact employment and wages?
And they were able, by increasing interest rates, to increase the unemployment rate to much higher. And this is the point, is that increases in interest rates, which is fundamental austerity policies, don't necessarily work to actually cure inflation. But what they do work for is to cure the rate of exploitation because, in fact, by dropping wages because of higher unemployment, there is more profit share over wage share, meaning that more value is extracted from workers.
Let's talk about the world we live in now in the United States.
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Chapters
5 chapters
1
What is the cruel math of unemployment?
0:01–1:02
2
How does unemployment serve as a solution in the economic system?
1:02–2:29
3
What role does inflation play in the discussion of unemployment?
2:29–3:50
4
How did the COVID-19 pandemic impact employment and wages?
3:50–5:46
5
What are the implications of austerity policies on unemployment?
5:46–6:21