Why millions of jobs aren't coming back
The era of big labor is over.
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).
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.
Two dark articles in as many days. Is the worm turning?
It is true that the low cost producer wins in today's world because we let them win. We allow products into this country that are made in conditions we would not tolerate. No different than Britain buying rice and indigo from South Carolina in the 1700's. Since it's happening outside our country I guess we have decided it's OK. Everybody wants that cheap Walmart stuff!
Even so, technology WILL displace most humans in the workplace. It has already displaced most of them. We will someday have the capability to provide for all of society's needs and only have a few people actually working. The few industries that did require people we foolishly allowed to go overseas. That helped the third world and screwed us. Now we have a huge and ever growing class of workers for whom there will never be jobs. Unless we move them out of the cities and back to the farms we are going to have some serious income redistribution problems in the future.
I now live in a small Appalachian town and we are farther down this road than most places. Big industry is all but gone. The people that are left mostly work for themselves. Houses are smaller, cars are older, clothes are plainer, and expectations are lower. Get used to it.
Better get a skill for catering to the last batch of retired boomers because that's the last generation that's going to have any money.
The US will continue to get shafted from it's own government unless people become more like this person.....
Your article is a lightning rod topic for anyone with a bit of knowledge. Please extend your article to cover this topic more deeply and possibly create a national debate by making it a "series" of letters akin to "Meet John Doe" in spirit of the old yet famous Jimmy Stewart movie "Meet John Doe".
Some good posts by: Colin, Cato, Martin, Stu, and others.
My fellow Americans, I was born here, received my National Defense Medal, and I pay taxes. I VOTE, and I like to share information from time to time on subjects as important as this; the economic troubles and employment issues dividing fellow Americans across the country NOW.
Immigration is not our woe, the "President elect now or several past" are of some blame, BUT it's been the evolution of competition with the whole planet (cheap slave labor, etc.) and combined with unchecked greed by my fellow Americans in corporate Ivory Towers, from Wall Street to Main Street.
1. NAFTA was ill structured. In part to agricultural interests and poor choices of subsidized crops, Monsanto political influence since the Regan admin. and among other issues, advanced technology of international transportation systems globally in foreign markets. Since WWII, until the later half of the last century, we owned the planet on developing technology and manufacturing. This led to corporate influence in politics, due to huge profits=huge power influence in "free elections". **(Prior to this: in the Nixon era: Kaiser learned how to do HMO's and really make huge money off sick and dying Americans/influencing corporate ownership of politicians today. Transferring tax dollars to private corporate pockets via cost savings.) Pretty neat! You get to buy a politician and still come out ahead, and the citizens think they're getting a good deal. Used car salesman trick.
2. GATT Treaty: Clinton Admin. This eliminated Bi-lateral trading tariff's from the "cheap labor pools" making the same products now we made. Foreign nations after WWII re-built the infra-structure of manufacturing and began competing, inching their way up the ladder to "BE LIKE USA", or in other words, finally provide stability to feed their starving mouths.
3. Technology: Computers and finance are great?! Just ask all the recently super wealthy on wall street who have gambled with others money. NO ETHICS+UNCHECKED GREED=Credit Default Swaps and retirement funds being stolen from innocent American citizens unable to ever recover. Trillions of dollars in taxes to the corporations again! They own the media, so you know it's impossible to get real news now. You're mushrooms and cannon fodder for war machines.
4. Put everyone in an endless war over resources due to BIG OIL influence and keep the media pumping the hype on immigrants and RED vs. BLUE state rhetoric and keep getting profits while the tax payer looses and the environment gets worse and the air and water become rancid and hard to clean up, year after year. And year after year, the taxpayer gets less and the corporations get more, like being humans now with voting rights. Wow.
The American Dream? or? You decide. Endless war, media fear factories and a polluted planet.
I do have answers.....
Art - Ghost,
You do realize that abandonment of the Sherman Anti-Trust Act, NAFTA, Deregulation (that allows corporations to undermine the power of the work force (otherwise known as the middle-class) and off shoring of jobs all started with Ronald Regan ... don't you? Who was in office when all this started, as this propagandist author points out, in the early 1980's? Bingo ... Ronald Regan! Not that anybody since has changed anything. And with the decision by the Roberts court (appointed by .. George Jr.) that Muti-national Corporations have the same rights as living humans and therefore can contribute freely to campaings (therefore buy elections) what chance do we have to turn the tide?
We the People must wake up and turn the tide. We have to "get it" that Left Wing - Right Wing ... it's all the same bird!
I agree with the analysis of the "globalization" reason for a sluggish job market, but I disagree with any notion that what's happening now was inevitable.
Instead, I think it was a result of bad trade and labor policy and the movement toward "free trade" with no regard for labor conditions or environmental standards.
For example, a reason why Japanese auto manufacturers opened car plants in America (thus creating jobs) was to get around trade quotas.
Cool article. The government can't save us. It's a bootstraps situation for American workers and consumers. We must buy smart. Well-made goods that last. How would this purchasing mandate help workers? Utimately, locally grown and well made local goods of craftmen quality support small American businesses. Since we (USA) can't make it cheaper, we must make it better.
The problem is so huge, complicated, and intertwined that a few simple political one liners can’t even come close to the true problem. The rich, the entitlements, government bureaucracy and regulations, taxes, immigration, subsidies, military spending, banks, Federal Reserve, stock market, the media, jobs, our evolved political system, and on and on and on. It is the entire system all of it that has become corrupted and broken. We need an Etch-E-Sketch moment back to the Constitution. We need leaders that are focused on providing the leadership and stewardship needed to ensure the survival of our nation, not political pundits following their party line or platform, not focused on buying votes and taking care of their own political aspirations, and not focused on building and taking care of their personal family dynasties. President Obama has proven he is not the one, and it is obvious Mr. Romney isn’t the one either, and both the republican and democratic parties have made it abundantly clear they are a large part of the problem not the solution. The American people need to wake up.
Tars Tarkas is absolutely correct. The post WWII period was a very special time, when the economy and manufacturing capacity of W. Europe was crippled and the USA filled this gap with a manufacturing base already revved up from the war effort. GI's came home with a determination to build families, companies, buildings and fortunes. Those born after the war have come to believe that the post-war boom was normal, but actually it was an anomaly.
The unwinding of our boom and the rise of globalization is returning our situation to something closer to the pre-WWII situation. Recent years have been much like the Roaring 20's and Great Depression 30's. Unfortunately what was created by the "Greatest Generation" has been frittered away by my generation, the Boomers. We should have been careful with our bounty in the good years... instead we overextended, then when the bad years came, we were hanging out to dry. Bad management, pure and simple. Lots of people saw it coming and used their positions to extract capital from companies and from the public... capital that they have not reinvested here, but have either stashed offshore, built huge mansions or invested in companies overseas. Our government officials aided and abetted this rape of Americans, because they are in the same Robber Baron class as those who did the pillaging.
Now they truly have us by the balls, to the extent that I believe our government is no longer truly in charge, instead it is our creditors and the big banks and big corporations that fund their reelection campaigns and give them sweetheart deals and jobs before and after office... and sometimes while in office.
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Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
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