The Growing Job Crisis Needs Solutions Now

America has always been a country that thrives on hard work and not merely hard work but also thrift and self-reliance. We have long promoted hard work and the pursuit of wealth. We have all absorbed Benjamin Franklin's maxim "Early to bed and early to rise, makes a man healthy, wealthy, and wise."

Job creation has long been one of our unique historic achievements. In a literal application of the economist Joseph Schumpeter's notion of creative destruction, the United States lost some 44 million jobs in the last two decades of the 20th century but simultaneously created 73 million private-sector jobs. A stunning 55 percent of the total workforce by the end of the past century was in new jobs, some two thirds of them in industries that paid more than the average wage. This is no fluke. It is because we benefit from a unique brand of entrepreneurial bottom-up capitalism.

Today, there is no evidence of job creation. Quite the opposite: Unemployment is rising, and millions of jobs have disappeared. In the place of thrift we have become a nation of debtors, staggering beneath mortgage loans that exceed the value of our homes and credit lines that exceed our ability to pay for them. But the Great Recession, as the current downturn is called, has also changed the nature of unemployment.

About one third of the 15 million workers now completely jobless have been out of work for at least six months—the highest proportion since records were first kept in 1948—and more than half have been out of work for three months or longer. Meanwhile, those in jobs find their workweek reduced to 33 hours, again the lowest in 60 years. Firms are cutting hours, wages, and benefits rather than laying off still more workers. In the first half of this year, the increase in all private wages and salaries was a measly 1.3 percent, one third of what it was in the first half of 2007. Today, all elements of total labor income—jobs, hours, and average hourly wages—are under pressure.

Many Americans who have lost their jobs now have no way to replace their lost income. Take unemployment benefits, which pay around a third of one's regular salary. Generally, the requirement for the benefit is to have worked full time on the last job for at least a year. But more than half of the unemployed do not qualify for benefits because they had been in their jobs for only six months to a year before the ax fell, were working part time, or were independent contractors or free agents of some sort. This leaves only 43 percent eligible for unemployment benefits. The anxiety is intense: Sixty-one percent of the unemployed say they are concerned their benefits will expire before they find a job, and half said it was the first time they'd ever been out of work.

These men and women are too well aware that long-term unemployment will cause their human capital to deteriorate, making them harder to re-employ. These are the jobless who've failed to augment their on-the-job skills. Their fears are justified since there are now nearly six workers available for every job opening—up from 1.7 workers per job opening when the recession began. This is driven home by the dramatic increase in those who are dependent on government food stamps. Since the recession began, this category has risen by over 6.2 million, to the point where food stamps now feed a near record 1 in 9 Americans.

The mix in the labor force has also changed. The number of people over age 55 who are working has grown by some 8 percent. They have felt they had to hang on to their jobs as the net worth of their homes and stocks declined. In fact, 63 percent of workers ages 50 to 61 expect they will have to push back their retirement, thereby restricting openings for younger workers. By contrast, during the two previous recessions of 1990-1991 and 2001, people in their mid-40s to their mid-50s continued to show employment gains, while it was younger workers who felt the biggest impact of the cutbacks. Of course, this time younger workers have not escaped either: A quarter of teenagers, or about 1.6 million of them, are without work. The unemployment rate for young Americans has skyrocketed to 52.2 percent, a post-World War II high. In previous recessions, the unemployment rate among 16-to-24-year-olds never went above 50 percent. This time, even employment in the 45-to-54 age group has fallen by more than 1.2 million. These are the very people who are in the prime of their wage-earning years. Because of their experience and generally higher wage requirements, it will take these older workers much longer to find jobs, and some will have to settle for considerably less pay. The other consequence of the prolonged recession is that many more men than women have been losing jobs. The women's share of the workforce may have reached a record 50 percent last month, probably because women are still paid less and tend to occupy less remunerative jobs.