The paradox is that the low labor costs which attract work abroad are now being visited on the American worker. In the past six months, according to a Bloomberg study, 70 percent of job openings have been in mostly low-wage sectors, including healthcare, leisure, hospitality, and retail. And some 7.7 million workers are stuck in part-time jobs, their pay inadequate for entry into the middle class. Why so much temporary employment? Because companies do not wish to pay for healthcare and retirement in a very uncertain economy, so they hedge their bets with short-term help.
Remarkably, as David Rosenberg, chief economist of Gluskin Sheff, has reported, two thirds of the employment growth rate has been in the 55 and older age cohort. Since the recession began in December 2007, employment in this age group is up 4 million, even as total employment for everyone else is down. What's going on here? The boomer population, Rosenberg notes, has seen its wealth destroyed by the bear market in equities and housing, and these people are now recalculating the date when they can retire with some sense of financial confidence and dignity. They know that if they quit without another job they face the real prospect of never working again, certainly not at their former pay levels, and that being without work means that they will receive lower retirement benefits from Social Security. So much for job mobility in America.
This creates a bottleneck for younger workers, especially young minorities. The jobless rate for workers ages 20 to 24 is over 13 percent; teenagers, 25 percent; Hispanic teenagers, 30.5 percent; and black teenagers, 37.9 percent.
Even people with a college education face unemployment rates of about 4.2 percent, which is about double the norm for this group. Those with a certificate from a community college or at least some college coursework have a jobless rate of 7.5 percent, again about double the norm; and people who did not finish high school have it worst at almost 13 percent.
Each month more Americans lose hope, permanently alienated from the workplace, their savings exhausted. The gradual expansion of the economy is too little to hope the cavalry is riding to the rescue. Real, authentic job creation will not come from Washington. It has to come out of the energy and spirits of the private sector. Two thirds of our employment is concentrated in 6 million small and medium-size businesses. We are not going to create jobs until they are in a state of mind to do so. They are not yet, and in part that's because of policy uncertainty that has depressed or confused them.
According to the Heritage Foundation, private sector hiring through June 2011 was 10 times slower following the passage of President Obama's healthcare bill compared to the prior 16 months. Economists at Stanford University and the University of Chicago estimated in the fall of 2011 that policy uncertainty has cost more than 2 million jobs since early 2010. These estimates reflect the small business community's reluctance to make new hires until employers know exactly what the law means in practice. The high level of temporary employment is a reflection of the same uncertainty. Businesses hedge their bets with short-term help.
We need 1 million new businesses every year to keep us on the right track. Instead we have only about 400,000 firms starting up. We need a labor market that creates over 400,000 jobs a month. We haven't seen anything like that. In fact, through the first few months of 2012, layoff announcements have risen 18 percent from a year ago, and hiring plans have dropped 82 percent.