CAUGHT

Alexandria Ocasio-Cortez’s error on unemployment shows why politicians need to listen to economists

Alexandria Ocasio-Cortez isn’t playing it safe.
Alexandria Ocasio-Cortez isn’t playing it safe.
Image: AP Photo/Mark Lennihan
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I would not wish being thrust into the national spotlight at age 28–as the future of a major political party, no less—on my worst enemy. Congressional candidate Alexandria Ocasio-Cortez, with fiery talk of democratic socialism and ending “wild West hyper-capitalism,” is attracting a level of scrutiny that all our elected officials should get. Few rarely do.

During a recent interview on PBS’s Firing Line, Ocasio-Cortez got two things wrong about the economy. First, she got the definition of the unemployment rate wrong: She said the rate is low, currently hovering around 4%, because many people are working multiple jobs. Actually, the number of jobs people work does not impact the unemployment rate. It is the ratio of people who have no job and are seeking work to the number of people in the labor force (people with jobs and people looking for jobs). Second, the share of people working multiple jobs nationally is only 5%, hardly an epidemic. There has been a steady increase in Americans, especially young Americans, doing gig work or side hustles, to supplement their income, but it is still a relatively modest share of workers’ time.

Nonetheless, it would be a mistake to dismiss Ocasio-Cortez’s broader message. Years of stagnant wages coupled with increasing health care and education costs means that the booming economy is still leaving many hard-working Americans behind. Their anxiety deserves more attention and bold policy solutions.

Some of Ocasio-Cortez’s solutions, like a guaranteed job program and free college for all, would be misguided. The jobs guarantee could cause more harm than good by crowding out private jobs and impairing the development of skills the market demands. Free college for all, a promise Bernie Sanders has also made, actually tends to benefit richer students (a better solution would be to charge students based on their ability to pay.)

There are lots of economist-vetted policy solutions that can help achieve Ocasio-Cortez’s vision of a more equal society, including wage insurance, expanding the Earned Income Tax Credit, paying for the entitlements we already have, and reforming labor markets. Many of these solutions also involve costs and trade-offs. Improving the economy requires economically literate politicians who are willing to level with voters.

Politicians, not just Ocasio-Cortez , often get the economy wrong, even basic definitions. As an economist, I’d love to see more politicians be subjected to interviews like the one Ocasio-Cortez got on Firing Line. We all need to learn about trade-offs involved in fixing the economy and hold our elected officials to higher standards.