America seems to be falling prey to the revolution of falling expectations that afflicts Europe. Far too many people are far too complacent about high unemployment. December's civilian unemployment rate of 6.9 percent marked the first time since early 1980 that unemployment has fallen below 7 percent. Is that something to crow about? Hardly. The unemployment rates that we now view as good news used to be associated with the bottoms of recessions.
I submit that we can and should do better. The average unemployment rate in 1985 was 7.2 percent. Of all the years between the Depression and 1980, only two (1975 and 1976) had an annual unemployment rate that high. To me, that says that the economy deserves no better than a C in the unemployment column on its 1985 report card. I teach my children not to be content with a gentleman's C. Neither should the nation.
The case for discontent starts, but does not end, with abhorrence for waste. Suppose the civilian unemployment rate today were 5.8 percent, which was the average rate of 1979, instead of 6.9 percent. Because fewer Americans would be unemployed and more would be participating in the labor force, roughly 2 million more people would be on jobs. In addition, fewer people who want full-time work would have to settle for part-time work. Productivity would also be higher. As a result of all this, our gross national product would be about 21/2 percent larger than it is. That's over $400 for every man, woman, and child in America -- enough new goods and services to provide everyone with a good television set or food for about two months.
And this lost output is, in Arthur Okun's apt phrase, just the tip of the iceberg that forms in a cold economy. Psychological as well as economic harm is visited upon unemployment's victims, many of whom lose their self-respect, even their hope, along with their job. No wonder crime, mental and physical illness, divorce and suicide all rise when unemployment rises.
Nor is that all. In a booming economy, people move rapidly up the occupational ladder; in a sick economy, they fall down. Discrimination breaks down faster when firms are scrambling for workers, not when workers are queueing up for jobs. It is no accident that World War II turned "equality of opportunity" from a slogan into a reality, while the Depression turned it into a farce. Upward mobility is part of the glue that holds a democratic capitalist society together. Economic slack weakens that glue.
And who doubts that a booming economy is more conducive to investment, innovation and entrepreneurship than a stagnant one? As the clich,e says, a rising tide raises all boats -- and that includes, especially, those that have been launched. From 1962 to 1973, our relatively healthy economy experienced only one mild recession, an average unemployment rate of 4.7 percent and productivity growth of about 2.5 percent per annum. From 1973 to 1985, our sickly economy suffered through two long recessions and one short one, had an average unemployment rate of 7.5 percent and productivity growth of only about 1 percent per annum. This association of low unemployment with high productivity growth was no coincidence.
The social costs of unemployment would be high even if they were borne evenly. But plainly they are not. Instead, those least able to cope with adversity are given the greatest share.
When recessions draft men and women into the reserve army of the unemployed, the disadvantaged -- especially the young and the black -- go first. The privileged go last. Americans should think twice, and three times, about the social implications of imposing such high costs on the young and a disadvantaged racial minority. For this and other reasons, the poverty rolls ebb and flow with the unemployment rolls, and high unemployment leads to a more unequal distribution of income.
A weak economy strikes yet another blow against equality, I believe, by undermining public generosity. Charity, as they say, begins at home. And it may also end at home when personal economic circumstances turn sour. It was no accident that the government's most strenuous antipoverty efforts were expended during our greatest peacetime boom (1965-1969). Nor was it an accident that public enthusiasm for the war on poverty waned as economic growth faded. Nor that the mean-spirited tone of current public policy toward the poor followed years of anemic economic performance.
General grumpiness may be one factor. But I think the main reason is that equality is a luxury good -- one the nation buys when it prospers and gives up when belts must be tightened. Sluggish economic growth helped create the "me first" society that tolerated and even applauded the redistributions of the first Reagan term. America will patch the holes in its social safety net only when prosperity is restored.
That should be our first priority.