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Macro vs. Micro Thinking

Here’s a letter to the New York Times:

David Leonhardt says that unemployment remains high in the U.S. largely because “American employers operate with few restraints….  Many companies can now come much closer to setting the terms of their relationship with employees” (“In Wreckage of Lost Jobs, Lost Power,” Jan. 19).

Only six paragraphs later, though, Mr. Leonhardt reports that “In this country, average wages for the employed have risen faster than inflation since 2007, which is highly unusual for a downturn.”

If American employers are so powerful, why are real wages rising despite high unemployment?  One explanation is that employers magnanimously pay more than they must to get the workers they need.  A better explanation is that competition for workers remains intense.  If true, this fact suggests that workers are not so interchangeable as they are believed to be by Mr. Leonhardt and others who advocate simplistic programs to “share” existing jobs.

Unemployment will fall only when new jobs – new opportunities – are created for the specific talents of workers now unemployed.  Surely if businesses were as powerful as Mr. Leonhardt asserts, they would already have jumped at the opportunity to profit by tapping into the talents of today’s millions of unemployed Americans.

Donald J. Boudreaux

It’s important always to keep in mind the perspective suggested by Arnold Kling’s acronym PSST: patterns of sustainable specialization and trade


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