America isn't working. The grim reality of today's economy is that 23 million people who want to work cannot get a job. That's an astounding number. We won World War II with fewer people: A total of 16 million Americans served in the U.S. Armed Forces. Think what they accomplished, and what might be achieved by the modern army of the unemployed—7 million more than the WWII personnel in the Army, Navy, Air Force, Marines, and Coast Guard.
Put it another way. More men and women are out of work in the United States than the entire population of Australia, and more than the populations of 150 other countries. It is shameful, an insult to the millions and to the very ideal of America. And that is just for starters.
Nearly 5 million of the new army have been idle for six months or more, 3 million, for more than a year. That's a level of long-term unemployment that has not been seen since the Great Depression, and we thought we'd learned so much from that terrible experience, which wasted too many lives.
The way the unemployment figures get headlined has given the impression, month after month, that such bad old days are behind us. We look back on October 2009, when the official jobless rate hit a peak of 10 percent, and take comfort from the fact that in three years the rate has fallen 2.2 points to 7.8 percent. Where's the cloud to this silver lining? It lies in the fact that the decline in the rate does not reflect an increase in the number of jobs in America. It is because the percentage of working-age people who are in the labor force, either employed or looking for work, has fallen. Most of the drop-outs have surely been discouraged by the search, filling in form after form, knocking on door after door. So the "labor force participation rate" reflects this with a fall from 65.7 percent in June 2009 to a historically low 63.6 percent today. Without that decline, the jobless rate would be just a shade under 10 percent today.
In the 36 months after the rate of unemployment peaked in 2009, about 4.7 million non-farm payroll jobs have emerged, an increase in total employment of about 4.4 percent. But contrast this to the 9.1 million jobs gained in the 36 months after the December 1982 peak in joblessness, when the economy and the population and the number of workers were much smaller. The significance is that the gain in the '80s was 12.5 percent. The average job creation these days is about 155,000 per month, well below the 272,000 we would need to get the jobless rate down from the current 7.8 percent to 6.5 percent by the end of the year.
What we have become good at is creating more part-time jobs. Many of the part-timers are in low-wage jobs, and manufacturing jobs have been replaced by new jobs in healthcare, warehousing, and retail that often don't allow workers to rack up enough hours to earn healthcare benefits, let alone break out of poverty. (And Obamacare makes it costly for a small business to take on more than 50 people.) Eight million workers are stuck in part-time jobs because their hours were cut back or they were unable to find full-time positions. Low-wage occupations have grown nearly three times as fast as mid-wage and higher-wage occupations, according to a recent study by the National Employment Law Project. These days employers are less willing to provide full-time jobs, since part-time work allows them to reduce costs through diminished benefit packages or none at all. Not to mention that those in part-time jobs lose training opportunities and thus limit their future.
According to the Bureau of Labor Statistics, the most rapidly growing job sectors are in healthcare, social assistance, and retail, industries that are noted for low-wage and precarious work. In the retail sector, employers need an on-call workforce that they can hire when demand is high and disband when business is slower. American retailers have gone from a ratio of over 70 percent full-time workers to at least 70 percent part-time. It is hard to believe that after the 20th-century labor struggles to achieve a 40-hour workweek, the 21st-century struggle is a fight for enough working hours to make a living.
The consequences of the weak employment market are manifold. One is that hundreds of thousands of workers who have exhausted their unemployment benefits are no longer counted in the labor pool. They have vanished into that other army, the nearly 9 million who have become disability claimants. In any month now it is a tossup whether more Americans are qualifying as disabled than are finding jobs. The numbers are inexplicable given the general pattern of longer-living, healthier Americans.
Another consequence of the lamentable jobs market is that young people have been stopped in their career track, sinking not soaring. An estimated 41 percent of those unemployed are aged 30 or under. The reason is in plain sight: Understandably, older workers have become much less inclined to retire. We have a postwar high in the number of Americans over 65 who have chosen to stay employed or are still looking for work. This has shrunk the actual employment opportunities for those in their most productive years, between 25 and 54. There are 94 million people in that category—the same as 15 years ago, in April 1997, when America had 46 million fewer people than it does today.
The young are clobbered also by the fact that they have a diminished opportunity to get ahead when the better paying jobs held by experienced older people are not becoming vacant. On top of that, with so many applicants chasing so few openings, wages have sagged. Real compensation per hour has declined at about 1.4 percent annually. Part-time penury is all too evident. According to government figures, full-time workers in service jobs average considerably more in total compensation than part-time workers—$17.18 an hour versus $10.92, including benefits. In a weak economy, it's inevitable that employers will go for part-time workers. Talk about a lost generation, with the misfortune to start their working lives at the worst possible time since the end of World War II.
But here's the paradox. Twenty-four million can't find work, and hundreds of thousands of employers can't find workers. The vacancy signs persist month after month because the openings are for workers with skills job-seekers don't have. Too many Americans in the army of the unemployed lack the necessary science, technology, engineering, and math (STEM) skills companies seek. This year, according to the Bureau of Labor Statistics, we will add approximately 120,000 jobs requiring at least a four-year degree in computer science. Alas, we will only produce 40,000 graduates with such degrees. And this doesn't take into account the fact that each engineering job typically leads to five additional jobs, experts say. It is astonishing that only a small fraction of the nation's high schools offer an Advanced Placement course in computer science, when 40 percent of small businesses say they have job openings they can't fill because applicants are unqualified—a percentage that has doubled in the last three years alone. This shortfall in education is the economic equivalent of a permanent national recession.
The United States ranks only 14th in the world in terms of education achievement in reading, 17th in science, and 25th in math. Many of the countries ahead of us have a lower unemployment rate than we do. Our workers with a college degree have an unemployment rate half the overall unemployment rate, but their numbers have stalled out at around 33 percent after decades of increases.
Those with less education and fewer job-related skills experience especially high rates of job loss and higher extended unemployment rates. The unemployment rate for workers over the age of 25 who do not have a high school diploma is about 12 percent, compared with roughly 4 percent for the same age group with a college degree or higher. It is no mystery, for good jobs today require at least some post-secondary education or specialized training. Workers without the requisite skills are driven into lower-wage jobs or out of the labor force altogether. The digital revolution has contributed to this. We are simply quite unprepared for a technology-driven economy that is ever more productive and may well need less and less human labor.
Lack of education, in part, is a critical component of the national employment crisis and the disturbing trend in the quality of jobs. Education means skills. Skills bolster productivity. Productivity is the key ingredient to economic success. The greater the skills, the higher the wages and the higher the employment ratio. So it is bewildering that we have continued for so long to impose immigration restrictions on highly educated engineers and scientists, most of whom have studied in America. These people are job creators, not job replacers. Restricting them is counterproductive in those very industries that are growing the most expansively. Why have the legislators become so scared when skilled immigration has historically been a crucial element of America's progress? Scared out of their wits indeed.
Low-wage industries have created over 43 percent of net employment growth, while better paying industries like construction, manufacturing, finance, and insurance have not grown enough to make up for recession losses. The manufacturing sector remains about 1.8 million jobs below pre-recession levels. And deep cuts in state and local governments hit mid- and higher-wage occupations the most.
What must be done to avoid a descent to a low-wage, part-time America? There are a whole raft of programs:
- Invest in infrastructure and high-speed Internet connections. Another dreadful feature of our times is that the country that invented the Internet—us!—is only a middling country now in terms of the percentage of households with broadband connections. (Tops? South Korea!)
- Restore—no, restore then multiply—the government funds for training programs and tie them to unemployment. Copy Sweden. The Organisation for Economic Co-operation and Development reports that a decade of investment in vocational training far bigger than its rivals has boosted Swedish manufacturing productivity.
- Increase investment in education, especially vocational training and post-secondary education. We don't have to rely on bodies and buildings; there's the Internet as a disseminator, another reason why it's so regrettable that we are only middling in access to broadband.
- Strengthen science, technology, engineering, and math in high schools and broaden access to computer science. Recruit and train more STEM teachers. At the university level, produce more degrees in science, technology, engineering, and math.
- As Microsoft has proposed, add 20,000 annual visas for foreigners with much-needed science and technology skills. It is stupid reactionary nativism to force many of our international graduates, educated at our best universities, to return home or settle elsewhere. Executive action is overdue.
- Improve the attractiveness to foreign companies of locating here through a simplification of regulation, since these companies cite regulation more than any other problem as an impediment to investing and creating jobs here.
We still remain the country with the greatest spirit, and with the most creative imagination and flexibility, which makes business cycles volatile but brings them to an end. But we can no longer afford to happily ride the roller coaster to the next rise when the vehicle has so many loose rivets.
- Read Hester Peirce: 10 Ways Dodd-Frank Will Hurt the Economy in 2013
- Read Anson Kaye: On Debt Ceiling, House GOP Puts Principle Over Responsibility
- Read Robert Schlesinger: Beware the Defaults of March