New book investigates the "cruel math of unemployment"

Is unemployment a liability or an asset? It's not an asset to the worker in search of livelihood, of course, but mainstream economics acknowledges that some joblessness helps to keep prices down. From the corporate point of view, it also helps to keep profits up.

That’s part of why most economists argue that unemployment at zero isn’t actually ideal. And it’s one of the critiques of the economic system we live in that Clara Mattei, a professor of economics at the University of Tulsa, outlines in her new book, “Escape from Capitalism: An Intervention.”

She recently joined “Marketplace Morning Report” host David Brancaccio to discuss what she calls the “cruel math of unemployment.” The following is an edited transcript of their conversation.

David Brancaccio: What's the cruel math?

Clara Mattei: The cruel math is that unemployment is not a problem for our system, but it's actually a solution for it.

Brancaccio: It's not a bug; it's weirdly a feature. It's like the standard math of economics in our market system insists that, unlike eating Reese's Peanut Butter Cups, there can be too much employment. Businesses and regular economists get nervous if — what? — too many of us have jobs?

Mattei: Us having jobs means that the bargaining power of workers goes up, and workers can be empowered to actually start problematizing why they have to go work for a wage that is so low and might start mobilizing for a different socioeconomic system, which is very bad for a capitalist economy.

Brancaccio: We just had this big natural experiment in some of this when we were coming out of the COVID pandemic. The unemployment rate got really low, and employees or potential employees could say, "Hey, you want to hire me, you gotta pay me more." The way we reported this was what sparked a lot of destructive inflation. You're saying, what? If you have to pay employees more because a lot of people are employed, why couldn't that come out of shareholder profits, not necessarily putting it into prices?

Mattei: In 2023, when unemployment was 3.4%, all the technocrats running central banks were freaking out, and they were able, by increasing interest rates, to increase the unemployment rate to much higher. And this is the point is that increases in interest rates — which is fundamental austerity policies — don't necessarily work to actually cure inflation. But what they do work for is to cure the rate of exploitation. Because, in fact, by dropping wages because of higher unemployment, there is more profit share over wage share, meaning that more value is extracted from workers.

Brancaccio: Let's talk about the world we live in now in the United States. It isn't really these technocrats who are in full power. The current powers that be are led by President Trump, who's working very hard to stop immigration. That lowers the ranks of the unemployed and does, in fact, do what I think you want to have happen, which is — in part — a move to raise compensation in America.

Mattei: The scramble for resources is not between the peanuts that those at the bottom get, but it's really the very, very, very rich people who not only accumulate millions a day, they also don't pay taxes. Because we know that capital — so long as it's invested — is not taxed. Capital gains are really taxed to very low levels. Corporate tax rates are constantly going down. This is part of austerity. So the problem here is really at the top, not at the bottom. So the idea that people will do better if we kick out the immigrants is just a way to fool people into thinking that the problem are not those who benefit from a system that is based on war, suffering, and exploitation.