One should introduce different shock absorbers into the labor market instead
of the crude binary system we have today. It would be much more reasonable
to distribute the burden of shortfall of available work more equitably
than concentrating it among 12 percent of the workforce as today’s labor
market does. If designing a labor market from scratch, one would surely
design one that lowered the uncertainty associated with being underemployed
and shared the pain rather than concentrating it. Working less would
also be progressive. Progress ought not to be measured only by the amount
of income generated but also by the amount of labor time needed to earn that
income should also be considered.
A fairer and more utility-generating distribution of work would be
important not only to provide the means to making a living but also because
underemployment has adverse side effects. It has a destabilizing effect on
society both politically and socially. The underemployed generate negative
externalities such as an increase in criminality and an increase in stress and
anxiety about losing one’s job. Work is important also from a psychological
perspective: unemployment is degrading and makes one feel unwanted. The
unemployed do not consider themselves useful members of the society and
suffer from diminished self-esteem. Their skill depreciates during extended
spells of unemployment so that it becomes more difficult for them to find
a job. In other words, underemployment increases social misery. For
instance, the underemployed are twice as likely to be sad or depressed than
the employed and 50% more likely to be angry (Marlar 2010). They are also
more likely to be struggling financially (54%) in contrast to 38% of the
employed (Manchin 2012).
To liberate ourselves from the commitment to the concept of the natural
rate of unemployment is particularly important in light of the “jobless recovery”
in wake of the Great Recession. Given the strains of globalization and
technological change that considerably diminished the demand for unskilled
labor in the developed world, full employment will otherwise continue to
elude us as far as the eye can see (Brynjolfsson and McAfee 2012). Currently
the rate of underemployment at 12 percent amounts to nearly 19 million
164 Komlos
people, and if each has just one dependent, then we have some 38 million
people being directly affected by the scarcity of jobs (Bureau of Labor
Statistics 2014). That is hardly a negligible matter, especially since endemic
underemployment is likely to be with us for the foreseeable future unless
we begin to think creatively about alternative approaches to providing jobs
for everyone (Summers 2014).8 Thus, the concept of the natural rate of
unemployment “is an idea that is past its sell-by-date” (Farmer 2013). We
ought to think seriously about restructuring the labor market to meet the
needs of the twenty-first-century economy and not rely on the current system
to allocate work equitably.