The Emperor’s New Clothes and the New Economy

Some weeks back, the Dow enjoyed a sharp upswing, prompting a network news program’s giddy observation that “until today, the U.S. economy was on a roller coaster.”

Which struck me as an odd sort of thing to say in light of the fact that such dizzying ups—and downs—are what define roller coasters. Was I missing something? I checked in with some well-informed friends, who quickly confirmed my reaction. (And, indeed, in the next few days, stocks plunged once again.)

All of which is to say that over the past few years, I’ve started to feel more and more like the kid in “The Emperor’s New Clothes”—the one who interrupts a parade of purported royal finery to say that the emperor is naked. The fact that I’m hardly an expert in economic affairs makes it all the more disturbing that I’m so often right.

I got to thinking about this once again as yesterday’s New York Times heralded the addition of 200,000 jobs to the U.S. labor force last month. “Maybe it is time to start calling the glass half full,” the report began.

Really? Because, as the Times notes further down, the gains are still not enough to restore employment to prerecession levels (for more on this, see Paul Krugman’s post on the same topic), and the accepted broad measure of unemployment is still a whopping 15.2%.

Moreoever—and here’s my real gripe—this story, along with the vast majority of others, virtually ignores the fundamental question of how much these new jobs pay.  A job doesn’t necessarily mean a living wage—just ask the 30% of all working families earning less than 200 percent of the official poverty threshold.

For a bit more perspective, consider the fact that the vast majority of new jobs created during the so-called recovery have been in occupations paying a meager 7.51 to $13.52 an hour, according to a 2011 report by the National Employment Law Project. At the same time, job losses were concentrated at the high end. (Kudos to Steven Greenhouse for his incisive summation of these findings last July in the New York Times’ Economix blog.)

In other words:  Good-bye stable middle-class job. Hello, McDonald’s.

The obsessive focus of mainstream media—including, sadly, my beloved NPR—on job creation numbers without due attention to  job quality is hardly the only aspect of our economic discourse that strikes me as being on a collision course with common sense. Equally mysterious is how rarely we seem to question the belief that economic growth is somehow the key to widespread well-being.

In Lewis Carroll’s Through the Looking Glass, the Red Queen famously dismisses Alice’s claim that she can’t believe impossible things. “I daresay you haven’t had much practice,” the Queen airily responds. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”

I can’t help but feel that this talent is in increasingly high demand. In particular, I’m thinking of oft-heard assertions that older workers will simply need to work longer (even though it’s well-established that theirs are among the most intractable cases of long-term unemployment) and that, given the precarious state of Social Security, not to mention our decimated 401(ks), we all just need to save more (even though many of us are hard-pressed simply to get by).

While I myself have only a passing familiarity with economic concepts, I’m fortunate to count among my friends some who study and teach such things, and I often turn to them for questions or help making sense of data. I’m hoping that after they read this piece, they’ll tell me that I’m wrong. But based on past experience, I’m not exactly counting on it.

Note: The  quote in the first sentence of this post is a paraphrase from memory.

Edited 1/8/12: to add “(for more on this, see Paul Krugman’s post on the same topic)”