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Jewish World Review Oct. 14, 2009 / 26 Tishrei 5770 The country's been losing jobs for long enough. Something needs to be done — now By Mort Zuckerman
http://www.JewishWorldReview.com |
America has always been a country that thrives on hard work and not merely hard work but also thrift and self-reliance. We have long promoted hard work and the pursuit of wealth. We have all absorbed Benjamin Franklin's maxim "Early to bed and early to rise, makes a man healthy, wealthy, and wise."
Job creation has long been one of our unique historic achievements. In a literal application of the economist Joseph Schumpeter's notion of creative destruction, the United States lost some 44 million jobs in the last two decades of the 20th century but simultaneously created 73 million private-sector jobs. A stunning 55 percent of the total workforce by the end of the past century was in new jobs, some two thirds of them in industries that paid more than the average wage. This is no fluke. It is because we benefit from a unique brand of entrepreneurial bottom-up capitalism.
Today, there is no evidence of job creation. Quite the opposite: Unemployment is rising, and millions of jobs have disappeared. In the place of thrift we have become a nation of debtors, staggering beneath mortgage loans that exceed the value of our homes and credit lines that exceed our ability to pay for them. But the Great Recession, as the current downturn is called, has also changed the nature of unemployment.
About one third of the 15 million workers now completely jobless have been out of work for at least six months — the highest proportion since records were first kept in 1948 — and more than half have been out of work for three months or longer. Meanwhile, those in jobs find their workweek reduced to 33 hours, again the lowest in 60 years. Firms are cutting hours, wages, and benefits rather than laying off still more workers. In the first half of this year, the increase in all private wages and salaries was a measly 1.3 percent, one third of what it was in the first half of 2007. Today, all elements of total labor income — jobs, hours, and average hourly wages — are under pressure.
Many Americans who have lost their jobs now have no way to replace their lost income. Take unemployment benefits, which pay around a third of one's regular salary. Generally, the requirement for the benefit is to have worked full time on the last job for at least a year. But more than half of the unemployed do not qualify for benefits because they had been in their jobs for only six months to a year before the ax fell, were working part time, or were independent contractors or free agents of some sort. This leaves only 43 percent eligible for unemployment benefits. The anxiety is intense: Sixty-one percent of the unemployed say they are concerned their benefits will expire before they find a job, and half said it was the first time they'd ever been out of work.
These men and women are too well aware that long-term unemployment will cause their human capital to deteriorate, making them harder to re-employ. These are the jobless who've failed to augment their on-the-job skills. Their fears are justified since there are now nearly six workers available for every job opening — up from 1.7 workers per job opening when the recession began. This is driven home by the dramatic increase in those who are dependent on government food stamps. Since the recession began, this category has risen by over 6.2 million, to the point where food stamps now feed a near record 1 in 9 Americans.
The mix in the labor force has also changed. The number of people over age 55 who are working has grown by some 8 percent. They have felt they had to hang on to their jobs as the net worth of their homes and stocks declined. In fact, 63 percent of workers ages 50 to 61 expect they will have to push back their retirement, thereby restricting openings for younger workers. By contrast, during the two previous recessions of 1990-1991 and 2001, people in their mid-40s to their mid-50s continued to show employment gains, while it was younger workers who felt the biggest impact of the cutbacks. Of course, this time younger workers have not escaped either: A quarter of teenagers, or about 1.6 million of them, are without work. The unemployment rate
for young Americans has skyrocketed to 52.2 percent, a post-World War II high. In previous recessions, the unemployment rate among 16-to-24-year-olds never went above 50 percent. This time, even employment in the 45-to-54 age group has fallen by more than 1.2 million. These are the very people who are in the prime of their wage-earning years. Because of their experience and generally higher wage requirements, it will take these older workers much longer to find jobs, and some will have to settle for considerably less pay. The other consequence of the prolonged recession is that many more men than women have been losing jobs. The women's share of the workforce may have reached a record 50 percent last month, probably because women are still paid less and tend to occupy less remunerative jobs.
Alas, the prospects for re-employment are diminished by the fact that many jobs — in the worlds of finance and auto manufacturing, for example — may not come back. This means that growth alone will not fully employ America again. If there is any growth in jobs, it will come mostly from healthcare, education, restaurants, and hospitality services. Healthcare alone made up all the net jobs created in the past decade. Such service jobs cannot, however, support growth and innovation.
We know the skies have darkened, but now we learn the unemployment figures are worse than previously thought. This is the only recession since the Great Depression to wipe out all job growth from the previous business cycle. In the broader measure of unemployment, the so-called household index encompassing people who are unemployed and underemployed, we see a record level of 17 percent. The household survey, which tries to find out whether people are working by asking individuals about their job status rather than asking the companies that employ them, revealed staggering job losses for September of 785,000. It includes about 571,000 people who dropped out of the workforce last month, presumably because they despaired of finding a job. If they had kept looking, they would have been counted as unemployed.
Similarly, unemployment for the 12 months that ended in March was understated by 824,000. We lost about 3 million jobs in the first three months alone. We have lost jobs for 21 months in a row. That's the longest losing streak since publication of monthly numbers started in 1939.
Numbers from the Bureau of Labor Statistics are artificially low because of its definitions. For example, if people haven't looked for a job in the previous four weeks, they don't count as unemployed. Absurd! If they have stopped looking for various other reasons like school or family responsibilities or healthcare issues, they are described as "marginally attached" to the labor force, representing an estimated 2.2 million discouraged workers who are also not counted in the unemployment numbers. If they had been included, the unemployment rate would be 11 percent — not just 9.8 percent — and this doesn't include an additional 1.8 million who have left the labor force completely, because they have either retired or become stay-at-home parents. Nor does it include a million people who once worked in residential construction (which has declined by 75 percent), because these are people who didn't show up on the employment rolls when they were working and therefore don't show up on the unemployment rolls when they are out of work. These are the people who are in the country illegally. Nor does it include the approximately 2 million people who have entered the labor force since the recession began and are still without jobs. If it were not for the enforced shorter workweek of 33 hours, the same work could be done in the normal workweek with probably 3.5 million fewer employees, which would drive the unemployment rate up by another 2.5 percentage points. It would have been unthinkable three years ago.
No wonder job anxiety has soared. Surging unemployment numbers have undermined the confidence that we might be nearing the bottom of the recession. A recent Gallup Poll found that 31 percent of workers are worried about being laid off, compared with half that a year ago; 32 percent think their wages might be cut, double the number a year ago; and 46 percent fear that fringe benefits will be cut. Fully 84 percent of those let go received no severance package or other compensation from their employers.
The outlook is bleak since if there is a recovery, firms will first cover additional workloads by adding hours to the truncated workweeks and eliminating furloughs of their current employees before they do any hiring.
Since spending has to come from income and income will have to come from employment, it becomes critical to determine whether or not a weak labor market will continue. Given the level of household debt, the drop of confidence, the decline in home values, the pressure on all elements of total labor income, and the new tightness of credit with credit cards largely being tapped out, if not cut back, it is hard to see how consumer spending will rise enough to change the economic prospects of a weak recovery and the ensuing problems with renewed employment.
These head winds in the labor markets have not been seen in more than 70 years. The unemployment rate will shortly cross 10 percent, particularly if local governments continue to cut jobs and half of U.S. retailers stick with their plan to add few seasonal jobs this holiday season. We may be looking at long-term, double-digit unemployment, with official unemployment figures that understate the extent of the problem.
Only massive programs are equal to the challenge of restoring a long-range, stable growth to our economy. One such program would be to establish a National Infrastructure Bank, advocated by Felix Rohatyn, to which the government would assign the typical annual appropriations that are allocated to support infrastructure programs nationally. This is approximately $65 billion a year. The bank would have the capacity to borrow annually, with federal guarantees, an additional $200 billion. This program would ensure a rational rather than a political investment in infrastructure. It would provide long-range infrastructure development on a major scale with a maximum multiplier effect on the economy.
A second program would be a 100 percent tax credit for all increases in research and development by American businesses. In this way, we can stimulate and incentivize the capacity for innovation and technical creativity and thus produce another Schumpeterian period of growth for America. There is no time to lose.
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Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. © 2009, Mortimer Zuckerman |
Arnold Ahlert | |||||||||||||
