The solution to unemployment

It's now virtually an article of faith that the the US economic system is a marvellous engine of job creation, especially when compared with Europe, and that the source of this vitality is its flexible labour market and relative lack of social welfare. As I've mentioned previously, what is less well known is just how huge the US prison population is (around 2.2 million, or many times higher per unit population than any other wealthy country), and how this affects our view of unemployment.

Bruce Western at Princeton has tried to account for the effect of the prison population on unemployment numbers, and among other things, has found that the Black male unemployment rate during the 90s boom was a whopping 39%. Put this alongside France's much publicised 20% rate for its minorities, and you have the seeds of an interesting debate about which country is actually doing worse for it's “underclass”. Along with Katherine Beckett, Western has also shown that if you account for prison numbers, US unemployment was consistently higher than Europe's in the 90s. This is a remarkable turnaround of the conventional wisdom. Writing in the mid-90s, when the prison population was a mere 1.6 million, Western predicted that to keep official unemployment low, the prison population would have to rise further. Indeed, in the decade since, it's gone up a whopping 37% to around 2.2 million.

But why should we account for incarceration when we are interested in unemployment? I think the answer to this lies in thinking for a second about why it is we care about unemployment in the first place. We care about unemployment because it is unpleasant to be unemployed. That's it. It's the well-being of the jobless that is the issue. If the unemployed, were, for some reason, perfectly happy to be without work, and if the rest of the labour market was functioning just fine without them, the issue would cease to be of consequence.

Yet being incarcerated is surely at least as bad as being unemployed (and taking into account endemic features of violence, sexual assault and psychlogically devastating things like solitary confinement probably much worse). At the time the standard measures of economic well-being were formulated the prison population was so small - as it still is in most of the world - that it was unnecessary to account for it in national measures of economic health. But the population affected by the criminal justice system in the US is now so large that neglecting to account for it means missing out a huge part of the labour market in that country, and, in my view, leads to a much too rosy view of unemployment there.

These prisoners are not only not gainfully employed, but deprived of basic liberties, and in many cases lose many rights for life. Furthermore, their sorry outcome, unlike that of the unemployed in Europe, is simply erased from the economic accounts (well, actually all the guarding and prison building actually adds to GDP, but that's another story). Personally, I find the way in which the outcomes of these millions of people are effectively erased from US measures of well-being really disturbing, because mass incarceration not only reduces well-being, but perversely gives the impression of increasing it.

Viewed in this way, perhaps Europe's greatest "failing" is actually trying to count all its citizens in economic measures. How much better would European unemployment look if we simply imprisoned a large chunk of the poor and unskilled, and hired some of the remainder to guard them?