Thursday, September 23, 2010

Unemployment: Getting Blood from a Turnip

American unemployment was 4-7% (average about 5%) from 1994 to the end of 2007, then sharply rose to the current 9.6% level in the final year of the Bush administration.  This national average unemployment rate of 9.6% is very misleading.  In ten states unemployment continues within that pre-2008 typical range (below 7%), while in seven states it has risen staggeringly high (Nevada’s is 14.4%).   Most of the remaining 33 states are experiencing a 1-3% increase in unemployment over the pre-2008 levels, which isn’t great, but it is not the wide-spread disaster portrayed daily on television evening news.  There are nonetheless pockets of high umemployment within states and regions that are otherwise doing well economically, especially where construction and manufacturing had been major employers.

During economic recessions minority workers and those with disabilities are often among the first to be laid off.  The Autism Job Hunt website reports that the unemployment rate for people with autism is 75% – 97%. Because of limited social and communication skills, intolerance for changes in routines and other autism related issues, people with autism tend to get places at the tail end of the job line. [see]   Economists call these structural causes of unemployment, i.e. people’s skills don’t match with available jobs.  Job training and providing supported employment help up to a point, but long term solutions involve improving the overall economic outlook since all ships rise with a rising tide.

Why has it been so difficult to reduce unemployment in the US more generally?  An article by Jen Mystowski in the Seattle Post Intelligence described one of the key factors in our employment woes, outsourcing.  Not surprisingly, 80% of Americans think outsourcing is hurting our economy, and it is.  There is no question outsourcing leads to US job losses. Outsourcing has horribly detrimental effects on individuals who face job loss, and often subsequent long term employment insecurity.  Proponents of outsourcing, including most economists who think in macroeconomic (not individual) terms, argue that shipping American jobs to countries with lower wages brings down prices for products sold in the US, so therefore benefits American consumers.  It also creates pressure for lower wages in the US as a by-product.  So next time you stroll down the aisle at Wall Mart or Target (or Niemann Marcus!), try to take comfort from the fact that the somewhat lower prices for the stuff they are selling you means that you and your neighbors may be out of work, possibly for a very long time. Not too comforting is it?

In the European Union regulations provide protection against such massive job losses due to outsourcing. Labor laws in the US are not as protective as those in the European Union, to our great disadvantage.  Even major business leaders are finally acknowledging outsourcing has to be reigned in. Jeff Immelt, CEO of General Electric called for the US to increase its manufacturing base of employment by 20% because the US has outsourced too much and can no longer rely on consumer spending to drive demand. Would you rather have a job and pay more for stuff, or be chronically unemployed, and maybe be a bit more frugal with your money?

The second reason for persisting unemployment and underemployment is that businesses are using the recession as an excuse to lay people off and to pressure existing workers to work harder, often for less, which means employers don’t need to hire.  Many employers  had wanted all along to cut costs by getting rid of workers, and the economy provided their excuse.  Lay offs have exceeded recession-related reduced demand. Employers tell workers who complain about excess job demands and often at lower wages, if they whine, they will be replaced by one of the many people looking for work.  It’s like squeezing blood form a turnip. The average hours of work per week per full time worker in nearly all sectors of the economy exceeds 40, which taking into consideration many people are forced to work reduced hours. means that lots of other people are working overtime. If forty people work an hour of overtime, that replaces one full time employee.  Remember, no whining if you want to keep your job.  That's what happens when there is no collective bargaining. 

Then there’s the problem of part time workers.  According to the Bureau of Labor Statistics, the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the previous month to 8.9 million. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. By hiring one or two part time workers at lower wages with no benefits, businesses can make more money without hiring you or your neighbor full time. The losers are the people who could be working full time and the employer who has an unstable and less productive workforce.

The third reason for persistent unemployment is fear. People are terrified of being unable to pay their bills or buy their medicine. Some of the fear is irrational, leading them to hold onto their money for dear life.  They don’t spend money on anything unless they absolutely need to have something right now. That leads to lower consumer spending, which starves the economy.  Fear is being stoked by the 24/7 television network reports that oversimplify the economic news, like a 9.6% unemployment rate, which sounds terrible.  Most Americans are not at grave financial risk, but you would never know that from watching the evening television news or listening to the radio. This morning I heard a Minnesota Public Radio report about the one or two counties in Minnesota that are suffering serious unemployment, but reporters neglect to say the rest of the state is actually doing pretty well. Reporters almost never highlight the good news among workers in industries that are growing more rapidly.  The mantra of television news producers, in particular, is “keep it simple.”   The newsies don’t like telling viewers there are only seven of fifty states that have very high unemployment rates, while most of the rest of the country is experiencing some pain, but no more than the 1980 or 1991 recessions.  The television news people hate telling good news that muddies the water, like that the number of long-term unemployed (those jobless for 27 weeks and over) declined by 323,000 over last month to 6.2 million. Employment has actually risen in several sectors of the economy, news that has been difficult to find in daily doom and gloom reports that stoke further fear. Better to keep the populace hanging by their fingernails from the economic precipice, and hiding their dollars under the mattress.

The final reason for unemployment is the lack of replacement manufacturing and construction jobs in the green infrastructure economy to replace lost jobs. Finland, Sweden, and Japan aren’t waiting to develop alternative sources of energy to drive their economies.  We shouldn’t either, but the US ranks 23rd among “green” economies, right behind Latvia.  Many displaced manufacturing and construction workers could be productively employed by private manufacturing and construction businesses if a commitment were made by the US government to move forward expeditiously in developing alternative green energy, including the necessary infrastructure, such as a new electricity grid designed to accommodate wind and solar power.  We need strong leadership in the White House and Congress on a green infrastructure initiative.  It’s at the heart of creating long-term increases in employment.

In the meantime, employers could stop trying to squeeze blood from their employee turnips.  Just because they don’t scream ouch, doesn’t mean they aren’t hurting.

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