Now that the health reform bill is in the bag, the Obama administration is turning its attention to the issue of job creation. But what is it going to do? The recent uptick in jobs created was largely due to the government's hiring of census workers, jobs that will shortly disappear once the census data gathering is over with. Here again the government is pushing on a string because they insist that the jobs must be created in the private sector. Well, how is the government going to create jobs in the private sector? By lowering taxes? Taxes have been lowered for the last 30 years with the result ... that we're facing a prolonged period of joblessness.
To say that workers are expendable is to state the obvious. Private equity funds (formerly know as leveraged buyout artists) have bought businesses, and the first thing they have done is to lay off workers. Transnational corporations have outsourced American jobs to China and elsewhere. You can hardly find a profuct at Wal-Mart or Target that's made in America. American workers suddenly find themselves competing for jobs with low paid workers from all over the world. It didn't have to be this way. Government policies for the last 30 years under Republican administratrions and the Clinton administration have encouraged corporations to offshore jobs. The American interpretation of globalism is outsourcing followed by importing the products produced overseas back into the US. Government policies of free trade have encouraged this and could put a stop to it if the government chose to do so. However, they are stuck in the embarassing bind that they would have to renounce the philosophy they've been preaching for 30 years. Other countries sense this and with no philosophical irons in the fire are alrfeady taking steps to take advantage of America's hoisting itself on its own petard.
High levels of unemployment may last indefinitely. A number of economists (including this writer) have been warning about permanent joblessness, and the idea is now seeping into popular magazines.
More than 8 million American jobs were lost since 2007, based on the most recent revision of the overall job count of U.S. establishments. But that is not the worst of it, because the establishment survey fails to capture smaller businesses and the self-employed. By the Bureau of Labor Statistics’ broadest measure of unemployment, including the forced part-time workers and so-called discouraged workers, the unemployment rate rose to 17 percent from 8 percent before the recession. That is 9 percentage points, corresponding to slightly over 12 million adults. A website called Shadow Government Statistics includes “long-term discouraged” workers defined out of the labor force by the BLS, but that alternative measure has tracked the BLS broad measure quite closely in the past few years.
There are several reasons to believe that most of these jobs never will come back. That is a less contentious statement than it might appear, because the jobs lost in the recessions since 1981 never came back. Some sectors, notably manufacturing, continued to shrink, and other sectors, such as heath care and retail, replaced them. The difference in 2010 is that it is not apparent where new jobs will come from.
Manufacturing jobs as a percentage of the economy have continued to decline to new lows. At just 12 million jobs, manufacturing employment is a small and diminishing portion of the 138 million employed Americans. The only gains in employment in recent history have been in the education, health and government arenas. There have been huge productivity gains in other sectors, but this is not due to workers working harder; it's due to the automation, computerization and robotization of jobs. Machines are doing work formerly done by humans. This is nothing new, but the computer has sent the process into mach speed. Since most jobs are provided by small start-up businesses, government could encourage those businesses to form by public-private partnerships. But this would amount to an industrial policy, something the US desperately needs, but something which it remains unalterably, philosophically opposed to.
And the US, deeply in debt, doesn't have the money to encourage start-ups or do do any of a number of things to encourage employment including giving targeted tax breaks. The US needs to stop hemhorraging money. It has gotten itself into a position where the avenues it might explore to create jobs have been closed off because they cost money which the US doesn't have. The US has to do two things: it has to raise money somehow AND it has to use that money to create jobs. A similar thing was done with the health reform bill which was totally paid for by a combination of revenue enhancing procedures. The same thing can be done for job creation. Mature industries, which have outsourced most of their jobs, can be taxed and those revenues used to provide public-private partnerships to create new businesses which will employ a lot of people. The whole process could be revenue neutral.
We all know what the businesses of the 21st century will look like: green energy production including solar and wind power. Other countries have gotten these industries off the ground with generous assistance from their central governments. Only the US is lagging. China, for instance, which posseses a sovereign wealth fund which buys up US debt, has the money to invest in its own fledgling industries and has provided a robust stimulus package during the current recession. The US with an economy based on debt is not in a position to do so. But to get back on the right track the US must come up with a robust jobs creation bill which doesn't add to the debt as it did with the health reform bill. There are many potential sources for an injection of new funds. We have gone over them before in a post entitled Revenue Enhancement for Dummies. A financial transaction tax would be a great way to recoup some of the money lost to the financial sector. Tariffs on products imported by transnational corporations which have outsourced American jobs would be another. A VAT tax, a Federal sales tax, would be another. Any of these methods would face an uphill battle in Congress which is becoming increasingly reactionary instead of creatively exploring methods for turning this imploding economy around. Lobbyists will do everything in their power to keep things the way they are because it benefits the status quo.
Direct job creation by the government is also a possibility. What the Obama administration will be able to accomplish in the few remaining months before the mid-term elections is problematic. The Republicans will do everything in their power to see that nothing gets done, because they believe that that will result in the biggest political gains for them. If Obama can't take major action with at least some immediate tangible results, his goose is cooked.
