The Great Recession has shown employers that they can make do with fewer workers. Technology helped them manage their labor needs, as have temporary help agencies, which enable companies to hire temps almost instantly and thus reduce the need to hire in anticipation of a pickup in business. In comparison to most previous recoveries, productivity has risen more this time, increasing 3.5 percent in 2009, 3.6 percent in 2010, and continuing into this year, as companies realized greater efficiencies. They include such things as cutting out unnecessary steps in production, scrapping marginal products, or simply squeezing more out of existing employees, all in the process of re-examining everything to come up with a newer business model under the pressure of a long-term downturn.
Predictably, a lot of jobs have also gone overseas. Typically in the 1990s, multinational companies based in the United States added nearly two jobs here for every new job overseas. But in the recent decade, these U.S. firms cut their domestic workforces by 2.9 million and increased them abroad by 2.4 million.
Workers have responded in many ways. One pattern is that many have sought out permanent disability benefits from the federal government. These rolls have dramatically increased from 5 million to 8.2 million in recent years, at an annual cost to taxpayers of some $120 billion, as the share of men of prime working age on disability has grown from 1.5 percent in 1970 to 4.9 percent today.
The outlook is bleak. Over 20 percent of companies say that employment in their firms will never return to pre-recession levels. Another 40-plus percent say it would take revenue growth in the vicinity of 40 percent to return to pre-recession employment levels. Plus, most of the new available jobs don't match the pay, the hours, or the benefits of the millions of positions that vanished during the recession.
There are some very troubling trends in our underlying economy. As the Nobel Prize-winning economist, Michael Spence, points out, of the roughly 27 million jobs created between 1990 and 2008, over 90 percent were in sectors that produce goods and services that must be consumed domestically, such as government and healthcare. But in those sectors of the U.S. economy that produce goods and services that can be consumed anywhere, such as manufactured products, employment grew by a negligible 600,000 from the more than 34 million jobs in 1990. This is evidence that many manufacturing activities have moved to emerging economies, with the possible exception of the high end of the value-added chain, such as computer design and engineering.
The effect of the jobless recovery is cruel. Most everyone is facing an erosion in real wages, as reflected in the decline in real median income of 6.7 percent from June 2009 to June 2011. That's a much sharper decline in the two-year, so-called rebound than in the 18-month recession before that, when real incomes fell by 3.2 percent.
Millions of Americans are facing a lost decade, living from paycheck to paycheck, struggling to pay their bills, having to borrow money and go deeper into debt. Many blue-collar workers and many in the middle class feel they are falling further and further behind, no matter how hard they work. They seem to do poorly in good times and bad, in boom periods and bust, and face a frightening future at a time when global competition has brought into play a vast new workforce ready and willing to do the jobs of American workers. Sadly, many families are just one layoff or one medical emergency away from going into bankruptcy, given the dramatic increase in healthcare costs.
Personal balance sheets have simultaneously collapsed because of the decline of home prices that has caused the evaporation of home equity. That in turn has prompted many to realize that they have dramatically under-saved during their working lives. The week-to-week pressures facing middle-class America are unprecedented, and the political and economic results are unpredictable. Even for the millions of Americans with jobs, there is a sense of deepening anxiety and even fear.