Disappearance of jobs is destroying America’s middle class

If you have been out of a job for many months, it will seem like a cruel joke to be told that, in terms of economic growth, this hasn’t been a bad recovery. But the truth is, since the official end of the Great Recession in June 2009, real GDP per capita is up 3.6 percent.

That’s in line with GDP growth after most of the recessions we have experienced since the end of World War II. What’s more, corporate profits are at an all-time high. The stock market is 75 percent higher than it was when President Obama was inaugurated.

So where are the jobs? Per capita employment has actually fallen by 1.8 percent since June 2009, and that is in addition to the 5.5 percent that was lost during the recession.

The hard truth is that job creation is no longer tied to economic recovery, as it always was before 1990. Nowhere is this made clearer than in a recent study by two respected academic economists, Henry Siu (University of British Columbia) and Nir Jaimovich (Duke University). All my quotes are from that study. “The fact that employment is recovering much slower than GDP is a relatively new phenomenon; jobless recoveries have only really occurred after the recessions of 1991 and 2001.”

What has been happening – and the trend worsens with each recession – is that those holding what could be classified as routine “middle-skilled” jobs have been laid off; those jobs have never been refilled as the economy improves. “Occupations focused on routine tasks tend to be middle-waged. Thus, the disappearance of routine occupations in the past 30 years represents a ‘polarization’ of employment because the middle of the wage distribution has been hollowed out.”

“The fact that polarization is occurring should not surprise anyone who understands the influence of robotics and automation on machinists and machine operators in manufacturing. Indeed, the influence of robotics is increasingly being felt on routine occupations in transportation and warehousing. Of equal importance is the disappearance of routine employment in ‘white-collar’ occupations – think bank tellers being replaced by ATMs, or secretarial work being replaced by personal computers. … Thus, all of the per capita employment growth of the past 30 years has either been in ‘non-routine’ occupations located at the high-end of the wage distribution, such as software engineers and economists, or in low-paying jobs, such as service occupations like restaurant waiters and janitors. For this last set of occupations, this has been especially true in the past decade.”

This is a stark but I believe accurate assessment of what is destroying America’s middle class. It is not a problem that can be solved by the private sector alone. Businesses large and small hire employees only when hiring leads to greater profits and growth. Tax incentives might be helpful, but no matter what the incentives are, the local flower shop will not hire one new employee until there is increased demand for its flowers.

Until they see business opportunities that require new hires, corporations will continue to use their profit-generated cash to buy back stock, increase dividends, and increase executive pay and benefits. These are perfectly legitimate decisions, but they don’t help bring jobs back.

Clearly, government intervention is needed to expand education and job training programs. Skilled, high-end technical jobs are going unfilled for lack of qualified applicants. We can make sure they are filled if we expand education in the STEM – science, technology, engineering and math – fields.

Picking winners and losers is not the job of the federal government, but helping to create an environment that allows us to compete against other countries is something government can and must do. Let’s make sure that federal budgets allow for expanded support for the research and development that will create the businesses and jobs of the future.

There are positive signs for American competitiveness in the manufacturing sector. Our automobile industry is thriving, and much of its manufacturing is being done in the U.S. Companies like Apple and General Electric are moving some manufacturing back home. China’s manufacturing cost advantage is rapidly shrinking. Boston Consulting believes that within five years, the cost gap between the U.S. and China for many goods we now import will be virtually closed.

Admitting the reality of jobless recoveries is the crucial first step in finding new ways to create jobs. We must support government efforts to give American workers the skills and knowledge they need to fill the jobs created by new technologies and an expanding economy.

Originally published 26 January 2013 on delawareonline.com