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Comment by rmrfstar | Hacker News Reader

Fair point. Chomsky has a tendency to exaggerate, but it's a difference of degree.

"Continued low levels of inflation and inflation expectations have been a key support for healthy economic performance...Looking ahead, the members of the FOMC expect inflation to remain low and the economy to grow appreciably further. However, as I shall be discussing, the unusually good inflation performance of recent years seems to owe in large part to some temporary factors, of uncertain longevity... Atypical restraint on compensation increases has been evident for a few years now and appears to be mainly the consequence of greater worker insecurity... The low level of work stoppages of recent years also attests to concern about job security. " [1]

It is telling that Politifact left out that last sentence in its analysis of Chomsky's statement.

[1] https://www.federalreserve.gov/boarddocs/hh/1997/february/te...

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"Insecurity" in that quote is describing a perception on the part of workers which, the quote discusses, doesn't seem to be validated by actual job market data. In particular, Greenspan is offering it as a reason why there isn't as much wage inflation given the relative tightness of the labor market. He says workers aren't changing jobs to capture increases because they'd rather stay put.

It's worth asking why workers felt insecurity when the statistics suggested there shouldn't be any. A related, worthy question is why increasingly lower unemployment rates in the 90s (and even the 2010s) didn't show up in the Phillips Curve predicted increase in wages. My read of this quote is Greenspan speculating at an answer. I don't know if it's correct. I don't even know if economists today agree on an answer. In any case, he certainly doesn't seem to be cheering for precarity.

> It's worth asking why workers felt insecurity when the statistics suggested there shouldn't be any.

Probably because they aren't saving enough to be able to weather bad times, because a serious medical issue may ruin them, because no matter how much you save, housing, college, and medical costs will grow in tandem, and because despite official unemployment being low, most employers aren't willing to compromise on worker-hostile policies. [1]

The answer to your puzzle may be that employers have become a lot better at bargaining, lobbying, and union suppression than they were a few decades ago. It may also be the case that the government has become better at maintaining a high enough level of unemployment (through monetary policy) to prevent workers from gaining too much in a boom economy.

[1] Any of the tech folks on HN try asking to not be subjected to an open office hell, prior to this COVID thing? How great of a bargaining position did the software-engineer shortage give you in that conversation?

> Probably because they aren't saving enough to be able to weather bad times, because a serious medical issue may ruin them, because no matter how much you save, housing, college, and medical costs will grow in tandem, and because despite official unemployment being low, most employers aren't willing to compromise on worker-hostile policies.

Noting that this was in 1997, this is basically the same point Greenspan was making - he is speculating they felt insecure and so weren't willing to do things like go on strike. It seems a reasonable theory although it's difficult to test if it is correct or not.

Either way, it most certainly doesn't indicate that Greenspan saw this insecurity of workers as a goal.

So, to make a different criticism from Chomsky, I will note that regardless of whether insecurity of workers is an end goal, an explicit goal of the fed is to maintain 'low' but non-zero unemployment. This, at least, is well-documented.

The left, naturally, points to that as an example of how the government is actively taking steps to depress the labour market (during good economic conditions).

Would you find that criticism to be more on-the-nose than Chomsky's claim?

> an explicit goal of the fed is to maintain 'low' but non-zero unemployment. This, at least, is well-documented.

> The left, naturally, points to that as an example of how the government is actively taking steps to depress the labour market (during good economic conditions).

I'm left leaning and I'd say anyone who thinks zero unemployment should be a goal is naive and uniformed.

Zero unemployment means for example forced employment of unmotivated employees, and zero market dislocation from geographic mobility.

https://theconversation.com/why-the-unemployment-rate-will-n... is a good discussion of this.

There are many unemployment rates. Generally speaking, the unemployment rate that we are talking about in this thread is 'What percentage of people who are actively looking for jobs can't find jobs?'

Getting it to zero does not require any forced employment, or any restraints on geographic mobility, or babushkas with home scales weighing you for five kopeks at the entrance to the Leningradski railway terminal.

No that’s not the unemployment rate we’re talking about, because you are using it to critique Fed policy, and that’s not the Fed’s definition of unemployment rate.

The Fed’s goal is in fact to promote maximum employment, and a non-zero unemployment rate is necessary for that: https://www.federalreserve.gov/faqs/money_12848.htm

Related to the discussion on insecurity, it is a good outcome to have an economy where people quit jobs and spent months on a careful job search. 0% unemployment means that nobody does that.

The link fails to argue for why it is necessary for that. Instead, it just says that's the fed's mission.

> it is a good outcome to have an economy

It's a good outcome for employers, not employees. If I can quit my job in the morning and get one I'm happy with before lunch, that's good for me - but it also means that employers are desperate for labour.

A sober, careful, multi-month job search is not a good thing for most people. They can't afford it, because they have bills to pay this month, not next year.

> It's a good outcome for employers, not employees. If I can quit my job in the morning and get one I'm happy with before lunch, that's good for me - but it also means that employers are desperate for labour.

> A sober, careful, multi-month job search is not a good thing for most people. They can't afford it, because they have bills to pay this month, not next year.

Your first case (quit and get a job before lunch) is bad for the economy because it means production is constrained by the availability of labor. That is bad for employees even in the short term because it forced employers to find alternatives.

I agree a multi-month job search is a bad thing, and I absolutely agree that avoiding that should be a goal of economic policy. Low, non-zero unemployment addresses this well: if there are many people spending multiple months on job searches then unemployment rises.

Production being constrained by the availability of labour doesn't mean one whit to me. I don't benefit from increased national production. The overwhelming majority of my expenses go towards things that aren't constrained by national production.

Employers always want to find alternatives to paying people for their labour. That's also not my problem.

It's an incredibly weird argument to be making. Employers need a thumb placed on their side of the scale, because otherwise... The country will produce fewer goods then it otherwise would? And because otherwise, they'll seek to reduce their costs, by employing fewer people? They are always motivated to do that anyways, and they are in a much worse position to do it than if they could trivially fire and replace their workforce, and if they are slower at accumulating profits.

Plausible. Do you know if healthcare, higher ed, and housing are industries where cost trends are convincingly explained by neoliberalism, i.e. some combination of deregulation and promotion of free trade and free markets? Or are you saying that the problem of affordability in these sectors can and should be entirely resolved by higher wages?

Well, all three are heavily subsidized by the government, so I would argue it is the opposite of the promotion of a free market and deregulation.

I wouldn't blame education costs or housing costs on neoliberalism, I'd blame them on availability of low interest, little down credit for housing and student loans. Which, while being a bit of a neo-liberal policy is not a cornerstone of neo-liberalism (nor is even controversial among the left, much to my chagrin).

Medical care is, of course, it's own awful mess.

Higher wages wouldn't fully solve either problem on a society-wide level. If you chang nothing else, I'd expect that costs of all three would rise until they soak up every spare penny of the middle class.

It's absolutely "pant's on fire" level of misleading to label a fairly reasonable attempt at root cause analysis as a goal by anyone.

I can say "the rise in house prices before 2008 appears to be mainly the consequence of permissive loan policies by banks" without meaning that I think either high or low house prices or permissive or non-permissive loan policies are good or bad.

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