In 1948, the U.S. Bureau of Labor Statistics began publishing an official unemployment rate based on its Current Population Survey, and over that span of time, never has unemployment been such a persistent problem as it is now. Unemployment first cracked the eight-percent level in January 1975. It remained above 8% for the remainder of that year. The next bout with high unemployment occurred during the early 1980s, when the figure rose to historically high levels, spending 10 straight months above 10% and a total of 27 consecutive months above 8%.
And then there’s today. In July, the U.S. posted its 42nd straight month of 8%-plus unemployment. While the survey has altered its methodology over time, most of these changes suppress the official rate vis-à-vis historical measurements, so it’s fair to say that, since World War Two, the United States has never dealt with such a persistent crisis of this kind. Furthermore, when one examines the average rate of the pre-1975 era, it is clear to see that we have had structurally higher unemployment for a generation. What we deem to be a low rate today probably would have been unacceptable to the Eisenhower administration.
Blah Blah Blah Jobs
The convention season kicks off next week in Tampa (weather permitting), and there is sure to be no shortage of rhetoric aimed at the jobs situation. Republicans will claim that excessive government regulation and poor fiscal policies have conspired to raise the rate of unemployment. The following week in Charlotte, Democrats will counter that greedy corporations send good jobs overseas and seek to erode the quality of the jobs left behind. What you won’t hear from either side is the truth: high unemployment is here to stay, regardless of public policy.
Technology-fueled gains in productivity and foreign competition in a global marketplace have drastically altered the employment landscape, but we approach the jobs issue as if it were 1970, pretending that small, isolated changes in public policy will create jobs. This simply is not the case. The jobs that have left the U.S. did so, primarily, because they were no longer economical. Textiles, furniture, white goods, consumer electronics…the list goes on. Why pay a laborer $20 an hour plus benefits when the same work can be done overseas for a tiny fraction of that? No change in public policy short of outright protectionism will change this basic fact. Call the offending corporations greedy if you must, but consumers have voted with their pocketbooks – they prefer cheap, crappy Chinese products over more expensive home-grown varieties.
The global economy is in constant evolution, and we could well see a repatriation of some manufacturing jobs should wages in the developing world escalate, but don’t hold your breath. If jobs should return, they will be few and not as well-paying as the ones that left.
As for the argument that job creation is being reduced by excessive regulation, there might be something to the charge in certain industries in certain places and in businesses of a certain size, but it’s probably not that big of a deal to the largest companies. Large corporations have the resources to eat regulatory costs or to simply skirt them. Besides, if one were to take corporate earnings and cash on the balance sheet as proxies of employment capacity, we should be seeing a far higher rate of hiring than we see today. Never before have large corporations had such deep pockets, but they are not investing in people, at least, not in people in the United States. They’re investing in technology and overseas markets, or they’re simply building “fortress” balance sheets to withstand future macroeconomic shocks. If corporate earnings were truly a proxy for hiring, then the unemployment rate should have recovered as quickly as earnings did after the financial crisis , but that is far from the case. In the chart below, you can see the aggregate earnings of the S&P 500 since 1871; note the rapid bounce-back of corporate earnings in 2010 and 2011.
Some feel that the so-called “fiscal cliff” is hampering efforts to boost job creation, and that is probably the case; however, the damage has already been done. Most businesses are planning their 2013 budgets right now, and while the lame-duck session of Congress could help matters by resolving this issue, it won’t affect 2013 as much as people might think. The uncertainty created by the fiscal cliff is already being built in to 2013 budgets. Besides, the long-term structural problems of the U.S. labor market are far more pressing than any short-term policy issue like the fiscal cliff.
Simply put, the major political parties in the U.S. have not put forth policies to counteract the long-term trend toward higher structural unemployment, and I’m not sure that such policies are even possible within the current political and cultural paradigm.
Work & Days
One interesting aspect of the changing long-term employment pattern in the U.S. is how it is unavoidably altering the way people view work. Few things in life are as fundamental to individual identity as work. For instance, my grandfather worked in the same paper mill for 40 years, something that is inconceivable to my generation. Such long, stable employment patterns surely colored his and his generation’s view of the world. It was a generation of joiners, of shared hardships (the Great Depression and World War), of community and institution building made possible by the stable sense of themselves and their place in the world. One might argue that it led to a surge in the greatest investment one can make in the future – having children. The resulting Baby Boom, then, was a reflection of this post-war sense of identity on the part of the so-called Greatest Generation.
But even the very different experience and expectations of my Generation X cohorts are quickly becoming obsolete in the new reality. We might not have expected continuous employment with one firm for four decades, but we did appear to expect regular employment somewhere. Now, the Millennial Generation has learned the hard way that even this modest expectation doesn’t square with the facts on the ground, as millions of 20-somethings languish in joblessness.
Perhaps, then, what is needed is not so much a collection of public policy initiatives, but a complete rethink of what work means or should mean in the 21st century. The central irony of our time is that amazing technological advancement has yielded as many problems as it has solved, and we don’t know how to deal with it.
At the end of Willy Wonka & the Chocolate Factory, Gene Wilder reminded little Charlie Bucket of what happened to the man who suddenly got everything he always wanted – “he lived happily ever after.”
But this isn’t Wonkaland. The realization of our wildest dreams – a virtual army of labor-saving devices – has played a large role in the current dislocation of the U.S. labor force. We have long been sold the notion that, just as some jobs will be eliminated by technological advancement, others will be created. And to be sure, other jobs have been created; however, many of those jobs require different skills and levels of aptitude than the ones we had before, leaving a huge fraction of the population unable to secure employment. It should come as no surprise that the current pattern of higher structural unemployment is hardly felt at all by those who have secured advanced degrees. It is the unskilled laborers, those like my grandfather, who are increasingly left out in the cold.
Ah, the policymaker says, then we need more and better education.
But recent studies have demonstrated that, among Millennials, even college graduates are finding it exceedingly difficult to find regular work. It seems the very definition of “unskilled” is creeping up the scale of educational attainment, which in a way, makes perfect sense given that larger and larger numbers of young people have B.A.’s and B.S.’s. What that degree in film studies or sociology gets you is anybody’s guess (and a topic for another day); however, it shouldn’t be a big leap in logic to suggest that the Millennial Generation has been ill-served by the very higher education industry that policymakers suppose is the key to future prosperity.
I’ve always rejected the notion that higher education should equate to vocational training. They are different, very different, and it would seem we need much more of the latter and much less of the former, but current levels of federal funding don’t reflect that reality. Despite some cutbacks, we continue to shove huge amounts of money toward universities. The modest increases in vocational training come on top of such a small base level as to be nugatory. To move the needle, we have to radically alter the funding mix, something that the burgeoning ranks of college administrators will vehemently oppose.
Speaking of the Liberal Arts…
We might also benefit from a more philosophical approach to work itself. For most of humanity’s existence, we have been engaged in more or less subsistence level activities. Over the past century or so, this fundamental condition of humanity has changed. Shouldn’t our concept of work change, too?
Robert and Edward Skidelsky think so. This father-and-son duo published a new book this spring, How Much is Enough?, that seeks to retrace and re-examine the reason why we work. While I disagree with many of the book’s starting points, the Skidelskys perform a much-needed exercise in cultural self-awareness, submitting the modern notion of work to very ancient antecedents, like Aristotle’s concept of εὐδαιμονία, roughly equivalent to “a life of good spirit,” or perhaps, mere “happiness.” Writing for the Times Literary Supplement, Ferdinand Mount has largely anticipated my objections with the book, so there’s no use piling on, but I will suggest that the idea of work and what it represents, with or without the Skidelskys’ commentary, is already being redefined by a whole generation of young Americans. This re-evaluation will necessarily lead folks to consider the good life, what it is or should be. Perhaps there will be an occasion to put those philosophy degrees to work after all.
In the short run, though, some things seem unavoidable: an ever-larger dependency culture that expands the role of government and an increasingly isolated class of knowledge workers who live life blissfully unaware of their fellow citizens’ travails.
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