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chapter five statistics and theory of unemployment and poverty Lessons from the 60s and the Postwar Era We cannot, finally, judge the War on Poverty or any antipoverty e√ort unless we understand the problem we are up against. Unless we understand the unemployment problem, we will be doomed to talk about poverty without eliminating it. This brief chapter steps outside the historical narrative to elaborate on the underlying theory of the book: that unemployment is much higher than we are usually led to believe, that unemployment is a major cause of poverty, and that capitalism cannot by itself cure poverty because it cannot for long do without a significant amount of unemployment. While most social scientists and many politicians know that there is a link between unemployment and poverty, not many would agree with the Marxist idea that a small class of rich capitalists prosper from a system with a fair amount of unemployment—and thus poverty. Few would agree that substantial unemployment is the norm for capitalism and that truly low unemployment is rare in peacetime. Unemployment is, of course, not the only cause of poverty. There are a variety of poverties. For example, there are people who do not work because they are too young, too old, too ill, or seriously disabled and who are poor because government income supports are skimpy. There are those whose work caring for children and relatives is not rewarded with money. And low incomes have other causes besides unemployment. Political and economic forces a√ect how much national income goes to the top and how much goes to the rest of the people. For example, when wealthy households, big corporations, and economic conservatives wield extreme influence in politics , society, and the media, an extra large amount of income flows upward 102 / the 60s through tax breaks, feeble minimum wage laws, and weak unions. Such an extreme imbalance of class power is part of the explanation for the persistence of poverty and the acceleration of inequality since the early 70s.∞ The other main determinant of income shares and of the bargaining power of employees is the subject of this chapter, the state of labor markets. Not everyone who wants work can find a job, or a full-time job, or a job that pays decent wages. Institutional and political factors, such as the strength of unions, play an important role here, as does the control of government economic policy by people who favor the rich over the poor and thus will cause high unemployment to bring lower inflation. The array of specific causes varies, but unemployment persists in periods of prosperity, and that maintains poverty. Full employment is the oddity, and many periods of strong demand for labor occurred during wartime, when authorities had no choice but to spend: World War II, the early 50s (Korea), and the mid- to late 1960s (Vietnam). In this chapter we use information from the 60s and early 70s as the raw material for a general theory of unemployment and poverty. I argue that even in the boom times of the 1960s, significant unemployment persisted. Because o≈cial rates did not fully measure unemployment, because areas of high unemployment could be marginalized as the special problem of troubled locales (inner cities, Appalachia) and social groups (minorities, the unskilled), and because liberal leaders had faith that tax cuts were bringing full employment, few policy makers or scholars understood the dimensions of the unemployment factor or why neither economic growth nor training programs could eliminate poverty. Unemployment and Poverty Poverty and unemployment are linked, but they are not the same thing. Not all the poor are unemployed; half the poor work all or part of the year. However, while only a fifth of people who experience unemployment over the year are poor, half of all poor families have had some unemployment over the year.≤ Unemployment factors hurt the poor directly in two ways and indirectly in a third way. First, unemployment leaves some people who want a job without work or steady work, and that means no or low earnings. Second, unemployment suppresses wages for employed low-skilled workers because there are plenty of jobless people available to the employer who does not want to raise pay to retain employees. Excess supply keeps the price of labor down. Third, the denial that there is much unemployment is the core argument of people who oppose government assistance to the poor. If there is little...

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