Jobs — Can America Make A Come Back?

The UK's Financial Times has been running a series of articles called Is America Working? On December 11 Edward Luce asked Can America regain [it's former] most dynamic labor market mantle? One asks such a question only if there is considerable doubt about the outcome.

Fears persist the jobs crisis cannot be fixed, says Edward Luce

Last week, Barack Obama went to Osawatomie, Kansas, to kick off a more populist phase in his 2012 re-election bid. “This is a make-or-break moment for the middle class,” declared the US president, who chose the same venue that Teddy Roosevelt used in 1910 to call for a new progressive era. “I believe that this country succeeds when everyone gets a fair shot.”

Saying everyone should get a “fair shot” always makes political sense – particularly at a time when US income inequality rivals that of Mark Twain’s “Gilded Age”.

But it might have been a stretch for Mr Obama to suggest the American middle class is facing a unique “make-or-break” moment. In reality, the labour force has been polarising for most of the past generation in a trend that has sharply accelerated since 2000.

America used to be exceptional. Postwar, it maintained lower unemployment than the Europeans and a higher rate of jobs turnover, enabling it to get away with more meagre benefits; “a fair day’s work for a fair day’s pay” was within the grasp of most. That gave America a booming middle class that until recently was the most important engine of global demand.

No longer. Today, somewhat remarkably, US joblessness is higher than in much of Europe. And the US consumer is mired in high personal debt

.[My note: If you can not access the FT article, here's a reprint at Today Online.]

When Luce says "polarising" he means that America has been increasingly divided into a few Haves and a multitude of Have-Nots, with the middle shrinking. British reserve forces Luce to suggest "it might have been a stretch" for Hopey-Changey to assert we are facing a "make-or-break" moment for America's middle class, which has been under assault for 30 years.

Yes, Mr. Luce, it might have been a stretch.

Graphic used in the Financial Times article

Luce continues.

In short, the middle-skilled jobs that once formed the ballast of the world’s wealthiest middle class are disappearing. They are being supplanted by relatively low-skilled (and low-paid) jobs that cannot be replaced either by new technology or by offshoring – such as home nursing and landscape gardening. Jobs are also being created for the highly skilled, notably in science, engineering and management.

For the remainder of the workforce, including college graduates, it is both increasingly hard to find a secure job and tougher for those who do find jobs to be paid in line with inflation. Most people know that median US income has declined sharply since the late 1990s. Fewer are aware that real incomes also fell sharply in the same period for those with degrees. Only those with postgraduate qualifications, particularly PhDs, saw net gains (for some spectacular).

The jobs crisis has many worrying manifestations, of which three are worth highlighting. Perhaps the most troublesome is the waning dynamism of the market. People used to describe the US labour market as Schumpeterian, after the Austrian neoclassical economist who depicted the cycle of “creative destruction”. Jobs might be lost rapidly in a downturn but were swiftly reallocated to more productive sectors when economic growth resumed. That is not now the case...

The second problem stems from the first – America is employing a decreasing proportion of its people. At the start of the recession, the employment-to-population rate was 62.7 per cent. The rate is now 58.5 per cent. Last month, unemployment fell from 9 per cent to 8.6 per cent. On the surface, this looked like a welcome leap in job creation. In reality, more than half of the fall was accounted for by a decrease in the numbers “actively seeking” work. The 315,000 who dropped out of the labour market far exceeded the 120,000 new jobs...

Finally, a growing share of whatever jobs the economy is still managing to create is in the least productive areas. Of the five occupations forecast by the Bureau of Labor Statistics to be the fastest growing between now and 2018, none requires a degree. These are registered nurses, “home health aides”, customer service representatives, food preparation workers and “personal home care aides”.

Manufacturing is nowhere in the top 20, and such jobs cannot replace the pay and conditions once typical of that sector. “The food preparation industry cannot sustain a middle class,” says Dan DiMicco, chief executive of Nucor...

You're absolutely right, Mr. DiMicco, the food preparation industry can not sustain a middle class. The article continues in this vein, detailing our jobs woes, and suggests how, inconceivably, we might fix them.

What, then, can be done to revitalise the increasingly sclerotic jobs market? If the answer were simple, it would have been on everyone’s lips a long time ago. Unfortunately, there is no precedent for the challenges America faces, and thus little consensus among economists or policymakers on the best remedies. However, almost everyone agrees on how to ensure the situation does not deteriorate. Top of the list is a better education system for all stages of life.

Alas, rebooting an increasingly mediocre school system is easier said than done...

Education is usually put forward as the solution of last resort when there's nothing else to be done. Luce neglects to mention that our increasingly mediocre school system is also increasingly expensive, which puts a college education out the reach of more and more of our young people. Alternatively, they may opt to become a debt slave and then enter the sclerotic jobs market. And of course, corporate America does not want educated workers who can think for themselves. They want obedient workers.

Easier said than done. Truer words were never spoken. Luce quotes former Obama budget director Peter Orszag.

“The truth is that we don’t know how to fix the US labour market – we are in uncharted territory,” says Peter Orszag, Mr Obama’s former budget director, now a vice-chairman of Citigroup. “It would help to spend more on retraining and on infrastructure and to have a more rational immigration system. But these wouldn’t fundamentally transform the situation for the middle class ... It is not yet clear what, if anything, could.”

We don't know how to fix the labor market. It's not clear what, if anything, could be done. And when you are faced with an unsolvable problem, as Mr. Orsaz was, why not do the only sensible thing: become a vice-chairman at Citigroup. Perfect!

Thus if the question on the jobs front is whether America can make a come back, the answer is almost certainly No.

Comments

[AlT]

Dave,

Thanks for doing a great job of keeping the stream of relevant information coming.

Very helpful in staying alert and be prepared (at least mentally) to what is coming to all of us and outr children.

-alex