The Truth About Jobs
With official US unemployment at nearly 8% of the workforce, and many part-time workers need to work full-time, everyone wants to create more jobs in America. There are about 133 million jobs in this country now, down 3% from about 137.6 million in 2008. (1) Yet the American Gross Domestic Product (GDP) is UP by 2.5 % (in constant dollars) over that same period! If the economy is expanding, why aren't jobs expanding too?
1. Computerization and Robotics: Not only is manufacturing done more efficiently by machines than by humans, but even service workers, such as secretaries and receptionists, are now being replaced by word-processing programs and computerized telephone answering "trees." Call any business with more than about ten employees, and your call be answered by a computer, and you will be lucky to even be connected to a real human being! Despite long-term inflation, the cost of computers has actually fallen over the past forty years, and even the smallest firms are using them.
2. Globalization: If an employee cannot be replaced by a computer or machine, an Asian employee will be cheaper than an American. This is true not only for manufacturing, but also for telephone customer service. Call for computer technical support, and I will bet that the respondent will have an Indian accent.
3. Temporary, contract and part-time employment: Even when business is so good that a firm needs more staff, it will often be more advantageous to use an employment agency than to hire workers. One reason is that "small businesses" (fewer than 500 employees) are eligible for Small Business Administration (SBA) loans and other assistance, and workers employed through an outside agency do not count toward that total. In addition, temporary and part-time workers can be added and dropped more easily if they are actually employed by an outside agency. Even the US Department of Defense had more contractors than soldiers in Iraq during the war.
4. Skills Gap: As the American workplace becomes increasingly high tech, the need for unskilled workers continues to decline. Once a typical high school graduate could get a good entry-level job at a local factory, but today many of those jobs have been shipped overseas or otherwise eliminated. In today's economy, without a college degree or specialized post-high school training (such as web-design, dental hygiene or auto repair), there are not even enough menial jobs to go around. Moreover, in cities like Milwaukee, most young men are not even high school graduates! Even a big increase in the total number of jobs will do nothing for those who are not prepared for today's workplace.
Therefore stimulating the economy through deficit spending by the federal government has only a marginal effect on unemployment. The US Government can create public service jobs, either directly or through grants to states and cities, but that will drive up the deficit, which is already too high . Only policies that significantly impact the four trends cited above can dent the unemployment problem. Given the divided government that voters have just re-installed in Washington, such structural changes are very remote.
Gerald S Glazer
(1) US Bureau of Labor Statistics.