The Full Employment Route to Poverty Reduction by Dean Baker

https://www.commondreams.org/view/2014/06/13-3


Hundreds of people who lost jobs when the freeze hit California Jan. 12-14, 2007, lined up at state Unemployment Development Department offices, including the office in the border city of Calexico, to register for the Disaster Unemployment Assistance program funded by FEMA. (Photo: Michael Raphael / Wikimedia Creative Commons)


Efforts to alleviate poverty are often seen as being separate from the debate on overall economic policy, with the former involving a distinct set of issues that only marginally overlap with the latter. This is unfortunate, since the health of the economy, and specifically the level of unemployment, has an enormous impact on the prospects of the poor. In fact, there are few policies that are likely to have as much effect on improving the plight of the poor or near poor as a genuine commitment to full employment economic policies.

There are three separate channels through which a reduction in the unemployment rate is likely to benefit low-income people. The first is simply by increasing their probability of finding jobs. Unemployment is not evenly distributed throughout the workforce; the less-educated and disadvantaged see the sharpest rises in unemployment when the economy goes into a downturn.

In the year prior to the beginning of the recession, the unemployment rate for workers without a high school degree averaged just over 7.0 percent. Its average for 2010 was 14.8 percent, an increase of 7.8 percentage points. For workers with high school degrees the unemployment rate went from 4.3 percent to 10.3 percent, a rise of 6.0 percentage points. By contrast, the unemployment rate for college grads rose by just 2.7 percentage points, from 2.0 percent to 4.7 percent. While everyone got hit by the downturn, clearly those with less education saw the greatest increase in their risk of being unemployed.

There is a similar story about race. The unemployment rate for whites rose from 4.1 percent in the years before the downturn to 8.7 percent in 2010, a rise of 4.6 percentage points. The unemployment rate for African Americans rose from 8.2 percent to 16.0 percent in 2010, a rise of 7.8 percentage points. The unemployment rate for Hispanics went from 5.6 percent before the downturn to 12.5 percent, an increase of 6.9 percentage points.