Tell these ladies that now we’ve got record job vacancies – 830,000 and perhaps there are other jobs on offer.
This, I suspect, is an example of a longstanding and widespread error on the right.
I don’t mean merely the failure to see that what’s possible for one person cannot be possible for all. Even if every unemployed person were to magically fill one of the 832,000 recorded job vacancies, there’d still be 531,000 unemployed and a further 1.9 million people out of the labour force who’d like to work.
Instead, she’s committing what we might call the Rumsfeld assumption. He famously said “people are fungible. You can have them here or there.” But this is not true in the labour market. Just because there are lots of vacancies, it does not follow that the unemployed can fill them. If vacancies are for bricklayers or software writers, an unskilled woman will be unable to fill them. People are not fungible. They cannot move to any job that’s available. Each unemployed person is slightly different from the next, and each vacancy slightly different. What matters is that the two match up. Rightists under-estimate this problem. Take three examples of this:
- In 1981, Norman Tebbit told the unemployed to get on their bikes and look for work. He under-estimated the fact that it was difficult for jobless manufacturing workers to adapt themselves to the (few) new jobs that were available.
- During the miners strike, Patrick Minford supported pit closures on the grounds that the unemployed miners would find work elsewhere. Generally, they didn’t.
- Some Brexiters today claim that any jobs lost in exporting to the EU will be compensated for by new jobs in – I dunno – exporting to Discworld or Narnia.
In all these cases, the right over-estimate fungibility. They under-estimate the amount of sand there is in the wheels of the market mechanism, and so under-estimate market frictions. Ms McVey is following a long tradition. Here, for example, is John van Reenen and colleagues on Economists for Free Trade:
Minford uses a 1970s-style trade model in which all firms in an industry everywhere in the world produce the same goods and competition is perfect. There is no product differentiation – a German-made car is identical to a Chinese-made car. Importantly, trade does not follow the gravity equation – everyone simply buys from the lowest cost producer.
In other, words, Minford’s world is one in which everything and everyone is fungible. But they are not. Just as some leftists have a unrealistically utopian vision of how socialism works, so some rightists are too utopian about markets and thus about our ability to adapt to disturbances such as to aggregate demand or trading rules. It is no coincidence that support for Brexit and faith in free markets are so correlated: both derive from the same dubious assumption.