Why millions of jobs aren't coming back

The era of big labor is over.

By MSN Money Partner Aug 10, 2012 11:38AM

By Kevin Mellyn


Though recent jobs numbers seem to suggest improvement, the underlying data tells a different story. The official statistics vastly underestimate real lack of work that Americans are feeling.

 

One of the key issues in November is which candidate can credibly promise the voters he can create jobs. The problem is that anyone making such promise is not telling the truth.

 

One of the odd notions that both political parties pay homage to is that government at any level can “create jobs” other than by hiring people itself or subsidizing others to do so. The historical fact is that our modern concept of employment only dates back to around 1880 and has been dying since about 1980, along with the industrial economy that brought it into being in the first place.

 

The model of full-time secure employment in the private sector (it had always been common in the public sector) grew up in the late 1800s along with heavy manufacturing industries and utilities that needed skilled labor (like machinists or railroad engineers) rather than “hands” to do low-skill tasks (mill girls, longshoremen). Political institutions adapted to the big public companies that employed more and more of the population through both regulation of labor conditions and support of unionization. Companies tried to keep workers cheap and docile but in the end had to bargain with labor and appease politicians.

 

The result was an Iron Triangle: big business, big government, and big labor. The Iron Triangle focused on the political process in Washington to divide the loaves and fishes brought forth by unquestioned American dominance of the world economy. Conflict and compromise in Washington assumed that most people would work in large, regulated enterprises that could be compelled or induced to provide them with things like pensions, health insurance (a relic of World War II wage-and-price controls), and other protections. The list could always be expanded because American enterprises (and, indirectly, labor) were really only competing against other high-cost developed countries, most with higher taxes and more elaborate social provision and protections for workers.

 

In fact, only about a third of mankind was involved in the global market economy until the late 1980s when countries as diverse as China, India, and the former Soviet Union became to one degree or another market economies. Technology had in the meantime greatly enhanced worker productivity and, crucially, the ability of firms to contract for inputs on a global basis. The good news was that over a billion people worldwide escaped grinding poverty. The bad news was that for the first time since World War II, American workers faced a vast “reserve army of labor” capable of driving down their living standards to a global norm. This of course is why so many people in the developed world hate and fear what in loosely called "globalization."

 

Logically, these profound changes in economic reality should have led us to think beyond a political and institutional framework formed in the New Deal. In a dynamic world of global competition, high-cost producers are doomed. U.S. industry painfully restructured to confront this reality a long time ago. High wage union jobs in the private sector have been declining for a generation. However, the massive growth of consumer credit since the 1980s served as a huge bandage to cover the loss of earning power by American workers.

 

Basically, consumer debt and a huge run-up in house prices fed by cheap and easy mortgage finance became a substitute for real income, sustained a consumption driven economy and created an illusion of prosperity. Blame the banks for our troubles if you must, but the credit-driven economy that blew up in 2008 suited everyone in the old Iron Triangle just fine. The financial market meltdown of 2008 however ripped the bandage off a very old and deep wound of a hollowed-out economy and a profoundly unequal and divided society.

 

In this election year, both contenders talk as if Washington can restore the world we have lost, the brief century when secure, well-paid employment was both possible and expected. What is really needed is a complete rethink of our Iron Triangle era institutions, from public education to retirement and everything in between, especially government itself. For what’s coming is a world in which most workers will be in effect contractors or temps, and self-employment will become the norm.

 

Kevin Mellyn is an international banker and consultant at MasterCard Advisors. He is the author of Broken Markets: A User's Guide to the Post-Finance Economy (published by Apress, July 2012).

449Comments
Aug 10, 2012 9:10PM
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The author has produced a marvelous  analytical piece which places our current problems in an understandable historical perspective. Well done! 
Aug 10, 2012 9:00PM
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this is reason why most jobs left america,

in frisco, tx there was a exide battery recycling plant that was there for 40yrs, as people fled dallas due to the increasing population of illegal immigrants, they moved to frisco where land developers bought up the vacant land around the recycling plant. they built houses and sold them at 350,000 a house, those who moved in them, went to lawyers and said that recycling plant is causing thier kids health problems, lawyer took plant to court, court order the plant to clean up its emissions, trying to meet them epa put more restriction on them. lawyers keep taking the plant back to court for legal claims, so as this year ends, the plant will close permanently putting people out work. they will open new plant in another country that dont have idiots to sue them.

frisco, tx was a one horse town till it had a population growth, and land developers built house and idiots moved in them and claim they have legal rights to sue a plant that was there before they were. courts put sympathy on kids, and not hearing the truth. those people had no right to legal suets and should be held reasponsable for themselves at putting thier kids health at risk. if they didnt move near a plant that people depended on for jobs, their kids wouldnt have had health problems. its those people and land developers who should be sued for thier stupiditiness.

Aug 10, 2012 8:42PM
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Simply the best lead article that I have ever read on this blog.
Aug 10, 2012 8:36PM
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EVEN JFK'S DAUGHTER CAN'T LISTEN TO OBAMAS **** ANYMORE I WOULD LOVE FOR HIM TO SUBMIT TO A DEBATE WITH BOTH CANIDATES HOOKED UP TO LIE DECTECTORS AND THEN LETS SEE WHO'S TELLING THE TRUTH ON NATIONAL TV AND LET US WORKING CLASS PEOPLE ASK THE QUESTIONS.THEN WILL SEE WHO'S MOST HONEST. 

Aug 10, 2012 8:32PM
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Crap article that merely states the issues and provides no real substance, ideas for a meaningful solution.  Not saying I promote government intervention, I DONT.  It's just more BS that doesn't really say anything that we don't already know.
Aug 10, 2012 8:32PM
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Why should the co-founder of Facebook be allowed to leave this country and set up shop in Singapore so he shields his money from taxes?   That tax revenue belongs in this country.  He made gazillions here and his money should be taxed here and be funnelled back into this nation.

 

Same thing with Denise Rich who renounced her citizenship and left with her millions tax free to England.   The U.S. needs to put a stop this b.s..

 

Why should Romney be allowed to shield his vast wealth off shore to avoid paying taxes?

 

How many corrupt bankers have gone to jail over the financial collapse in this country?

 

Big business ships jobs overseas to pay lower wages.   Manufacturing used to thrive in this country.  With short sighted business acumen, thinking only of the bottom line and saving pennies on the dollar so they can set up shop in countries that employ slave labor or have less stringent employment rules.    Apple is famous for employing slave labor for making their  I Phone overseas.

 

It's time to enact legislation that protects the American worker instead of big business.  Those jobs that companies send overseas  should not be allowed.    Any company that fails to comply  should be accessed  heavy fines. 

Aug 10, 2012 8:02PM
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Most of our politicians care only about lining their pockets and getting re-elected so they can remain on the "gravy train".. We can't change anything unless we can clean house and elect some folks who are honest, moral, intelligent, modest, courageous, caring, Christian, and want what is best for the U.S. citizen..

We don't have any of that right now. This president has done all he can to destroy America and all that it stands for.

The incessant greed of unions, politicians, and management has driven companies out of this country and in many cases-out of business...

If only we could pass a law that all politicians lose their salaries, their "under the table payments", their retirement funds, their unlimited medical benefits, their pracically unlimeted travel, etc. etc. as long as the country remains "in the toilet", I think we could then see some real positive "changes"...

Aug 10, 2012 8:00PM
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I have question for everyone how do we help the old people that has put there whole life's into one company and they were ready for retirement. How do they get there money back from 41k ,life ,health  they have paid in for years and to be told we can pay you this much, but it not enough for them to retire and have go out and look for another job and they don't have enough education for most postion. Where was it fair to them. I really want someone to explain to me so, I maybe able to explain to my farther.

Aug 10, 2012 7:55PM
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This is probably the best single analysis I have ever read about the situation today in our country.  It seems bleak but unfortunately also accurate.  The days of the US as the ultimate economic power in the world are drawing to a close, if not already over.  I don't think that means we all need to go out and shoot ourselves, but we certainly need to develop a new way of thinking.  A lot of Americans have been riding the gravy train for far too long.  We need to develop more of an entrepreneurial spirit, starting our own businesses and working for ourselves.  The government can't, and shouldn't have to, take care of us.  The government is too large already and too intrusive.  We also need to get over the notion that anyone owes us anything, and learn to start taking care of ourselves.  Say what you want, but Kevin Mellyn nailed this one.
Aug 10, 2012 7:46PM
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Grey Ghost..............speaking of welfare................Why should corporate America receive government hand outs?  Why should big oil and JP Morgan receive tax subsidies? 

 

Your good at blaming Obama but the shift that has taken place in this country of protecting big business at the expense of the rest of us needs to stop and stop now.  Enough with this b.s..

 

We the voters need to have the Citizens United Law overturned.  Corporations are not people just greedy s.o.b.s who want to keep taking and not pay their fair share of Federal Tax, infringe on worker rights, raid or destroy pension plans.

 

Next in line for elimination is the 501(c) 4 organization that allows for paid political advertising by unnamed donors. 

 

Time to throw the bums out of corrupt  Congress that run a country club on Capitol Hill and caters to big business.

 

The workers in this country have taken it on the chin and it's time elect political leaders who truly care about the middle class, every day hard working Americans.   Romney is not the answer. Obama has his faults but atleast he cares.   Romney will continue the GOP's mantle of destroying this country so they can continue to prop up big business, the 1 percenters with more tax cuts, special interest groups.

 

 

 

Aug 10, 2012 7:27PM
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Ghost,

 

You keep singing the same song, anyone that isn't prosperous is that way because they are lazy, on the dole, Obama Democrats.  It's just not true, watch the evening news any night of the week and there will be a story about someone who's lost their job then their house and then ... everything.  Look in their eyes and you see shame, despair and zero hope.  They have been forced their by bad and predatory economic policy. 

 

Before deregulation, NAFTA, GAT, dropping of tariffs, lowering taxes on the rich we had jobs in this country we had a relatively stable economy.  As corporations and the 1% got more powerful and trickle down economics became a catch phrase the middle class has become a endangered species in the United States.  We The People need to change that and get back to sound Government Policy that protects the PEOPLE not the Wealthy and Multi-National Corporations.

Aug 10, 2012 7:08PM
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It doesn't matter who is rulering our great counrty because who was in house first mess it up and then the next person made worse than when you try get someone in there to try make a difference he doesn't have a chance, because he has fix all the other mistake first then go on. Them maybe the next person can see what that person seen and contuine with his work and make things better. But all comes down to one thing the people in house, they don't listen to the amercian people. We all have idea and some are really great, but these idea came from people without high education and they should be heard like the rest.
Aug 10, 2012 6:56PM
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When the government of a country works to kill industry and production.....Those jobs are gone. All the companies that supported and supplied that industry and production are also gone. The left seems to think that we can operate OK on retail, credit cards, gov programs and more and more debt.....Instead we are again on the road to disaster.
Aug 10, 2012 6:45PM
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look,it's written by a banker,of course he wants you to accept the fate of a lower standard of living!
he probably had a crooked smile when he wrote the article!

Aug 10, 2012 6:20PM
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Oh, it is so refreshing to see the comments by Joseph, martin, kcchallenger, Stu, Colin , etc.   How did so many people who GET IT wind up on this page at the same time?  I can only imagine it's because the article was refreshingly honest, but spoke to what we all knew.  I'd like to add that Europeans work fewer hours for more pay than Americans.  They have labor representatives at the top, and those reps don't allow out-sourcing.  They seem to be doing just fine, although the Union is struggling, as fiscally responsible Germany doesn't want to pay Greece's debts.  It is why America should never form a similar union with other countries.  We are the wealthiest country, and therefore have the most to lose.  However, the Europeans have a saying: "Europeans work to live, but Americans live to work."
Aug 10, 2012 6:19PM
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worker productivity has risen because of the personal computer and the internet. in the old days we had to go over to the library if there was something that needed research. now, all you need to do is a quick web search.

 

and after massive layoffs, companies learned they can get the work load done fine with fewer people.

 

in all, it doesn't paint a nice picture for us older people caught in an 'obsolete' model of employment.

Aug 10, 2012 6:09PM
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So how do we fix this mess?   Do we wait for the politicians to make promises they can't keep!  We have had enough of all that. Personally I get sick of watching these ads where one party totally  trashes the other. GROW UP!! This is a huge crisis in this country. People are starving in our streets, Families are loosing everything. But you would never see that in Washington D.C.  They think everything is just peachy cause they don't feel it, nor to they see it.

 

We need to work together and help each other. Set aside all our differances, because unless we figure this out, and do it quickly None of us are going to make it through this mess!

Aug 10, 2012 5:56PM
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isnt nafta working great.we went from trade surpluses[more jobs for americans] to ever increasing trade deficits[fewer jobs for americans].our government knows exactly how they are hosing us

Aug 10, 2012 5:44PM
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Well written analysis. Of course the dummies on the right will object and just revert to name calling!


Whatis good for the goose is good for the gander!
Aug 10, 2012 5:42PM
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we have a choice.continue free trade and the demise of our countries standard of living or go back to tariffs.protectionist legislation is the only thing that can protect our standard of living.

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