labor

Issue #44

Last Update March 2, 2006

National American Jobs by Gerry Krownstein We are in the midst of what even Republicans acknowledge is a “jobless recovery”. Despite improvements in certain economic indicators, not least of which were corporate profits and stock prices, labor statistics continue to be distressing. Last month's drop in the jobless rate was meaningless when coupled with over 300,000 people dropping out of the labor market, and a jobs creation figure so anemic that it doesn't begin to keep up with population growth, much less restore the huge number of jobs lost over the past three years. Why is this happening, and what can we, as a nation, do about it?

First, we must find out where we truly stand. Labor statistics as a measure of employment in our country are at best a rough guide to where we stand. The shortcomings in our unemployment rate figures have been obvious for decades, but improving the accuracy of these figures would expose the rosy pronouncements of our political and economic leaders to the harsh light of reality. A new measuring tool is needed: one that continues to count discouraged workers who have given up looking for jobs as unemployed; one that counts part-time workers who are looking for full-time jobs as underemployed; one that also counts laid-off workers whose replacement job is inferior to their old job in pay and benefits as underemployed. The new measure must also count those no longer in school but without a job as unemployed even if they have not started looking for a job; this would pick up those potential population-growth workers who do not enter the labor market because of discouraging conditions. Stay-at-home parents and caregivers could be counted as employed if they so desire.

Our current real unemployment/underemployment rate is estimated at about ten percent of the labor force; some economists would consider it to be even higher. Given the recent improvement in corporate profits, why is this so? Three reasons are usually given:

Employers forced to lay off people in lean times are often slow to rehire, so employment lags profit improvement, but will eventually catch up.
Increased labor efficiency has reduced the need for additional workers even as the volume of goods and services produced has increased
Jobs are being created, but are being given to employees in low-wage nations, rather than expanding our domestic employment.

The first point, time lag, has some validity but doesn't actually account for more a fraction of our current underemployment. As a self-correcting problem, the only actions that need to be taken by us as a nation are to continue unemployment benefits and other governmental subsidies to cushion the (temporary) pain.

Increased efficiency, measured as increased output per labor dollar, can have two causes: the same number of workers producing greater output through increased (unpaid) hours or heavier (unpaid) workload; or, the same number of workers producing greater output with the same level of effort (true efficiency increase). The first situation represents what used to be known as “sweating” labor, and there are well-tested mechanisms for dealing with this, from increasing unionization to redefining white-collar workers from management to labor to allow overtime laws to be effective. The second situation, real improvements in efficiency, is ultimately a benefit rather than a problem, but the problem of displaced workers (or new workers not hired) is nonetheless real. The solution to this problem is similar to the solution to the problem of jobs exported overseas.

Exporting jobs from our domestic labor market to low wage areas is not a new problem. In the 1950s and '60s, jobs flowed from the high-wage unionized North to the non-unionized, low wage South in the US. It is in some sense ironic that the American South is now feeling the pain of job flight to still lower wage areas. Protectionist measures preventing jobs from leaving will not succeed. In the long run, if markets are indeed free and not monopolistic, the problem will resolve itself as wage rates equalize. The long run, however, can be very long indeed. The appropriate response to this problem, as well as to the impact on labor from increased efficiency, is simple, and only requires the political will to refocus our primary economic priorities.

Repairing, expanding and modernizing our national infrastructure, instead of wasting our money on foreign military adventures, tax cuts for the wealthiest 1% and inefficient HMOs would both expand domestic jobs and keep the labor involved here. Schools, hospitals, mass transit, affordable housing, repair of our aging bridges, aqueducts and power transmission facilities are all neglected necessities. These are not just construction projects, but real commitments to fundamentals that make a prosperous nation possible. The raw materials, manufacturing and services required to bring these facilities up to snuff, and to provide every citizen with a quality education, decent housing and adequate health care would close the job gap that looms so disastrously for our middle- and working-class citizens. The total cost of such programs would easily be less than the total cost of the Administration tax cuts and military expansion, and provide permanent benefits to all citizens. And the jobs for these tasks would stay at home.