The Future of American Jobs

[Ali G. 37]

The Future of American Jobs

Robert Reich - Former Secretary of Labor, Professor at Berkeley

Posted: April 12, 2010 09:36 PM

Many of my students at Berkeley who will be graduating in June are worried about the job market. I understand their worries. But they and other new college grads have less cause for concern than most American workers. Let me explain.

Since the start of the Great Recession in December 2007, the U.S. economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who'd rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they're in.)

This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began.

Given how many Americans are unemployed or underemployed, it's hard to see where we get sufficient demand to support a vigorous recovery. Outlays from the federal stimulus have already passed their peak, and the Federal Reserve won't keep interest rates near zero for very long. Although consumers are beginning to come out of their holes, it will be many years before they can return to their pre-recession levels of spending. Most households rely on two wage earners, of whom at least one is now likely to be unemployed, underemployed or in danger of losing a job. And even households whose incomes have returned are likely to be residing in houses whose values haven't--which means they can't turn their homes into cash machines as they did before the recession.

While consumers have been shedding their debts like mad -- often simply by defaulting on loans -- their remaining burdens are still heavy. At the end of last year, debt averaged $43,874 per American, or about 122% of annual disposable income. Most analysts believe a sustainable debt load is around 100% of disposable income, assuming a normal level of employment and normal access to credit -- neither of which we are likely to have for some time.

Some economic cheerleaders say rising stock prices are making consumers feel wealthier and therefore readier to spend. But most Americans' biggest asset is their homes. The "wealth effect" is felt mainly by the richest 10%, whose net worth is largely stocks and bonds. The top 10% accounted for about half of total national income in 2007. But they were only about 40% of total spending. A vigorous jobs recovery can't be based on 40% of what was spent before the economy collapsed.

What's likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

The Great Recession has accelerated a structural shift in the economy that had been slowly building for years. Companies have used the downturn to aggressively trim payrolls, making cuts they've been reluctant to make before. Outsourcing abroad has increased dramatically. Companies have discovered that new software and computer technologies have made many workers in Asia and Latin America almost as productive as Americans, and that the Internet allows far more work to be efficiently moved to another country without loss of control.

Companies have also cut costs by substituting more computerized equipment for labor. They've made greater use of numerically controlled machine tools, robotics and a wide range of office software.

These cost-cutting moves have allowed many companies to show profits notwithstanding relatively poor sales. Alcoa, for example, had $1.5 billion in cash at the end of last year, double what it had on hand at the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of its work force. But for workers, there's no return. Those who have lost their jobs to foreign outsourcing or labor-replacing technologies are unlikely ever to get them back. And they have little hope of finding new jobs that pay as well. More than 40% of today's unemployed have been without work for over six months, a higher proportion than at any time in 60 years.

The only way many of today's jobless are likely to retain their jobs or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you'll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn't trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

This shift also helps explain why the unemployment rate for Americans with college degrees is now only 5%, while it is 10.5% for those with only a high-school degree, and 15.6% for Americans with less than a high-school diploma. The jobs of well-educated Americans, although hardly immune to foreign outsourcing and technological displacement, have been less vulnerable to these trends than the jobs of Americans with fewer years of education.

The likelihood, therefore, is that as the economy struggles to recover and today's jobless begin to find work, the median wage will continue to fall -- as it did between 2001 and 2007, during the last so-called recovery.

More Americans will be working, but for pay they consider inadequate. The approaching recovery will be tepid because so many people will lack the money needed to buy all the goods and services the economy can produce.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

http://www.huffingtonpost.com/robert-reich/the-future-of-american-jo_b_534987.html?view=print

Edited April 15, 2010 by Ali G.

[one...two...tree 2,762]

There's got to be some deflation on goods and services that follows.

[Ali G. 37]

What's ironic is that I was speaking with some family members in AUS and about a recent quote for a bathroom renovation, as they were quoted $6.3k. I thought that's not too bad, until they enlightened me that the $6.3k was the cheapest price they could find for simply demolishing the bathroom. WTH! These guys are also so busy that they will have to wait for three weeks before they can start.

Certain people here swear by limitless immigration for a country of 308 million being a good thing, yet can someone tell me of one blue-collar worker that earns $6.3K for one week worth of work? Supply and demand has skewed in favor of the worker in AUS. Whereas, supply and demand has skewed in the favor of shareholders here.

Edited April 15, 2010 by Ali G.

[Obama 2012 1,714]

There's got to be some deflation on goods and services that follows.

Not going to happen.

With the value of the dollar in the toilet and with China's economy growing and using up goods/resources; therefore killing the idea that supplies might effect demand (which they are but negatively for us), we have no hope of that at this point in time at all.

Do you know why oil prices are high/gas is going up? We're actually using less oil than we did 3 years ago. However with China growing, they're now using it instead.

Unfortunately prices are going to increase still so long as other nations economies grow and their value goes up and then the value of our currency stays low.

[one...two...tree 2,762]

What's ironic is that I was speaking with some family members in AUS and about a recent quote for a bathroom renovation, as they were quoted $6.3k. I thought that's not too bad, until they enlightened me that the $6.3k was the cheapest price they could find for simply demolishing the bathroom. WTH! These guys are also so busy that they will have to wait for three weeks before they can start.

Certain people here swear by limitless immigration for a country of 308 million being a good thing, yet can someone tell me of one blue-collar worker that earns $6.3K for one week worth of work? Supply and demand has skewed in favor of the worker in AUS. Whereas, supply and demand has skewed in the favor of shareholders here.

The author of this article you posted, Robert Reich, believes that we need a steady flow of immigrants to keep Social Security and Medicare afloat. In fact, most economists will tell you that a robust economy depends on robust population. Declining birthrates in many industrialized nations have brought about more inviting immigration policies.

[one...two...tree 2,762]

Not going to happen.

With the value of the dollar in the toilet and with China's economy growing and using up goods/resources; therefore killing the idea that supplies might effect demand (which they are but negatively for us), we have no hope of that at this point in time at all.

Do you know why oil prices are high/gas is going up? We're actually using less oil than we did 3 years ago. However with China growing, they're now using it instead.

Unfortunately prices are going to increase still so long as other nations economies grow and their value goes up and then the value of our currency stays low.

Well, I know this is anecdotal, but I have noticed that we are getting a lot of special offers and coupons in the mail for restaurant chains that we'd never see 2 years ago. Restaurants like Outback, Claim Jumpers. I also see a lot of 'kids eat free' offers. If people have less income to spend, that is definitely going to have an impact on goods and services.

[Ali G. 37]

The author of this article you posted, Robert Reich, believes that we need a steady flow of immigrants to keep Social Security and Medicare afloat. In fact, most economists will tell you that a robust economy depends on robust population. Declining birthrates in many industrialized nations have brought about more inviting immigration policies.

That may be the case for smaller countries like Australia or Canada but it is certainly not the case for the United States. The country has chronic poverty, which cannot possibly be solved by allowing millions of unskilled immigrants to enter. Supply and demand is a simple concept that works well.

With more than '11 million jobs behind', how does allowing more people into the country help this?

[Obama 2012 1,714]

Well, I know this is anecdotal, but I have noticed that we are getting a lot of special offers and coupons in the mail for restaurant chains that we'd never see 2 years ago. Restaurants like Outback, Claim Jumpers. I also see a lot of 'kids eat free' offers. If people have less income to spend, that is definitely going to have an impact on goods and services.

Those offers have always been around as long as I can remember actually. Now they may 'advertise' it more than they have in the past...

That 'kids eat free' deal is pretty irrelevant though when the Bacon Burger at Chilis you paid $5.89 for 5 years ago, is still sitting at $7.29 today. Or that Lasagna at Olive Garden that was $9.99 5 years ago is sitting at $12.99 here today.

That 20% discount on your next oil change that cost you $16.99 5 years ago, that actually costs you without the coupon $24.99 today, etc..

Prices won't go down unless demand goes down or production somehow increases to overthrow the demand (which isn't ilkely). Especially when the commodity markets are flourishing on wall street and world markets as well. The fact that now days oil is regarded as a 'safe' commodity to invest in, is very dangerous in nature as well. When we saw it surpass $150 a barrel 3 years ago, it was the beginning of the end. Sure it came back down to levels of years prior, but now it's gradually going back up and will probably never go down at current rates of usage. Look at things like the price of gold as well.

The problem is the fact we have a "world economy" and the United States isn't the only 'productive' nation anymore in that economy. Simply put, we can't compete. No way, no how in this market with our current standard of living and the population we have.

[Ali G. 37]

The problem is the fact we have a "world economy" and the United States isn't the only 'productive' nation anymore in that economy. Simply put, we can't compete. No way, no how in this market with our current standard of living and the population we have.

This excess supply of workers is what is driving down the salaries and quality of life for most Americans. Whereas, the opposite is ensuring a high quality of life for most in countries like AUS.

[one...two...tree 2,762]

Those offers have always been around as long as I can remember actually. Now they may 'advertise' it more than they have in the past...

That 'kids eat free' deal is pretty irrelevant though when the Bacon Burger at Chilis you paid $5.89 for 5 years ago, is still sitting at $7.29 today. Or that Lasagna at Olive Garden that was $9.99 5 years ago is sitting at $12.99 here today.

That 20% discount on your next oil change that cost you $16.99 5 years ago, that actually costs you without the coupon $24.99 today, etc..

Prices won't go down unless demand goes down or production somehow increases to overthrow the demand (which isn't ilkely). Especially when the commodity markets are flourishing on wall street and world markets as well. The fact that now days oil is regarded as a 'safe' commodity to invest in, is very dangerous in nature as well. When we saw it surpass $150 a barrel 3 years ago, it was the beginning of the end. Sure it came back down to levels of years prior, but now it's gradually going back up and will probably never go down at current rates of usage. Look at things like the price of gold as well.

The problem is the fact we have a "world economy" and the United States isn't the only 'productive' nation anymore in that economy. Simply put, we can't compete. No way, no how in this market with our current standard of living and the population we have.

Stagnant or depressed wages effect consumer behavior, even for goods and services that are considered necessary or in great need and the prices will reflect that. Perhaps not across the board, but I wouldn't consider gas prices an indication of deflation. Not when so much of our oil is being imported.

[w¡n9Nµ7 §£@¥€r 123]

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less.

The personal experiences of friends and ex-colleagues says quite the opposite. People are finding work, and at higher wages. A good friend of mine just went from a base pay of 90 to a base pay of 115, after a week of being unemployed. That's one example, but it is quite representative of what I've been seeing lately.

[Darnell 8,478]

What's ironic is that I was speaking with some family members in AUS and about a recent quote for a bathroom renovation, as they were quoted $6.3k. I thought that's not too bad, until they enlightened me that the $6.3k was the cheapest price they could find for simply demolishing the bathroom. WTH! These guys are also so busy that they will have to wait for three weeks before they can start.

Certain people here swear by limitless immigration for a country of 308 million being a good thing, yet can someone tell me of one blue-collar worker that earns $6.3K for one week worth of work? Supply and demand has skewed in favor of the worker in AUS. Whereas, supply and demand has skewed in the favor of shareholders here.

That ONE blue collar worker DOES NOT earn 6.3K for a weeks worth of work.

The company receives that money, sure, but NOT the worker.

Hang in there !!

[w¡n9Nµ7 §£@¥€r 123]

That ONE blue collar worker DOES NOT earn 6.3K for a weeks worth of work.

The company receives that money, sure, but NOT the worker.

Boo Yah didn't say anything about no company.

[Ali G. 37]

That ONE blue collar worker DOES NOT earn 6.3K for a weeks worth of work.

The company receives that money, sure, but NOT the worker.

Hang in there !!

A large portion of tradesmen are self-employed in Australia. Actually, the going rate for hiring skilled tradesmen is a good $35 an hour there.

The personal experiences of friends and ex-colleagues says quite the opposite. People are finding work, and at higher wages. A good friend of mine just went from a base pay of 90 to a base pay of 115, after a week of being unemployed. That's one example, but it is quite representative of what I've been seeing lately.

In IT though right?

Edited April 15, 2010 by Ali G.

[w¡n9Nµ7 §£@¥€r 123]

In IT though right?

Yes. Do we not count or something?