With everybody writing about the tragedy in Tucson, House and Senate procedures, President Obama’s wonderful 50% approval rating, and Sarah Palin’s intentions I’d like to focus on the much mentioned but little understood subject of what can be done about jobs. Lets take three time frames.
1. The Crisis. With the 2008 financial crisis we went from an historic nominal 5% unemployment rate to about 10% where we remain today. Government intervention did prevent much higher numbers: the automobile industry would have been much worse; the stimulus plan did allow state and local governments to avoid layoffs; the extension of unemployment insurance did help consumer spending. Each had their faults, but they did help employment. That was then.
2. The Economic Cycle. We now have had about a year and a half of modest GDP growth, the stock market has recovered from its post-Lehman Brothers collapse lows, and corporate profits and cash holdings are strong. But some things make recovery more difficult than usual: banks received a “near death” experience and are cautious; states and public employee pensions are broke; housing will not recover until we work off the excess inventory built over the last decade; and the weaklings of the Eurozone were exposed. Business people think in the future and like certainty before they commit capital or hire. The Democrats have provided no budget, no appropriations bills, no plan for individual or corporate tax rates, no plan for Medicare, no plan for Social Security, and no plan for eliminating trillion dollar deficits. Instead we have environmental regulations, costly health care mandates, financial regulations, and a lot of rhetoric about punishing Wall Street and “the rich”. Over the next few months the new Republican House will do everything that it can to correct these problems. Their success is key to Obama’s reelection.
3. The Undiscussed Long Term Structural Problem. Technology took the United States from a country with 75% farmers in 1870 to one where 2% of our people can produce more than we consume. Since 1980 manufacturing employment has decreased by seven million (37%) while manufactured output has increased by 75% and we are still the world’s largest manufacturing nation. Over the last few decades the information revolution has followed the manufacturing revolution, eliminating swaths of jobs. So with the companies and the majority of the people doing just fine, the question of great moral and political consequence is “what do we do with the workers that we don’t need?”
The primary answer: shrink the work force.
– Some of this will happen as Baby Boomers retire and are replaced with a less populous generation. Politically neutral.
– Some will happen if we keep young people in school longer – a side benefit of their getting the skills that they will need. Politically popular.
– Some will happen if people retire earlier. Unfortunately the financials of the Social Security system and the individual damage of the 2008 financial meltdown push in the opposite direction. Politically difficult.
– Revert toward one income families. In 1900 20% of women were in the work force; now it is about 75%. The numerical impact of women entering the work force over the past half century has largely played out, but some reversal would be helpful (for either spouse.) Politically incorrect and difficult.
– Reduce the number of hours that people work per year: where 40 hours per week at 50 weeks per year would be 2000 hours, the US has stayed steady since 1980 at about 1800 while the Europeans have dropped from parity with us to 1400 to 1700. Politically possible.
– Control immigration. Extended unemployment benefits mute the movement, but willingness of American workers to take jobs as cab drivers, field hands, factory workers, dish washers, and gardeners would get us back to historic unemployment rates. Politically difficult, but a looming factor.
Rather than class warfare about punishing the rich, the national debate should be about how to make the economics work for people who are working less.