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The Future of American Jobs

Monday, 12 April 2010 19:09
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

any of my students at Berkeley who will be graduating in June are worried about the job market. I understand their worries. But they and other new college grads have less cause for concern than most American workers. Let me explain.

Since the start of the Great Recession in December 2007, the U.S. economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who'd rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they're in.)

This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began.

Given how many Americans are unemployed or underemployed, it's hard to see where we get sufficient demand to support a vigorous recovery. Outlays from the federal stimulus have already passed their peak, and the Federal Reserve won't keep interest rates near zero for very long. Although consumers are beginning to come out of their holes, it will be many years before they can return to their pre-recession levels of spending. Most households rely on two wage earners, of whom at least one is now likely to be unemployed, underemployed or in danger of losing a job. And even households whose incomes have returned are likely to be residing in houses whose values haven't - which means they can't turn their homes into cash machines as they did before the recession.

While consumers have been shedding their debts like mad - often simply by defaulting on loans - their remaining burdens are still heavy. At the end of last year, debt averaged $43,874 per American, or about 122% of annual disposable income. Most analysts believe a sustainable debt load is around 100% of disposable income, assuming a normal level of employment and normal access to credit - neither of which we are likely to have for some time.

Some economic cheerleaders say rising stock prices are making consumers feel wealthier and therefore readier to spend. But most Americans' biggest asset is their homes. The "wealth effect" is felt mainly by the richest 10%, whose net worth is largely stocks and bonds. The top 10% accounted for about half of total national income in 2007. But they were only about 40% of total spending. A vigorous jobs recovery can't be based on 40% of what was spent before the economy collapsed.

What's likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

The Great Recession has accelerated a structural shift in the economy that had been slowly building for years. Companies have used the downturn to aggressively trim payrolls, making cuts they've been reluctant to make before. Outsourcing abroad has increased dramatically. Companies have discovered that new software and computer technologies have made many workers in Asia and Latin America almost as productive as Americans, and that the Internet allows far more work to be efficiently moved to another country without loss of control.

Companies have also cut costs by substituting more computerized equipment for labor. They've made greater use of numerically controlled machine tools, robotics and a wide range of office software.

These cost-cutting moves have allowed many companies to show profits notwithstanding relatively poor sales. Alcoa, for example, had $1.5 billion in cash at the end of last year, double what it had on hand at the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of its work force. But for workers, there's no return. Those who have lost their jobs to foreign outsourcing or labor-replacing technologies are unlikely ever to get them back. And they have little hope of finding new jobs that pay as well. More than 40% of today's unemployed have been without work for over six months, a higher proportion than at any time in 60 years.

The only way many of today's jobless are likely to retain their jobs or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you'll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn't trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

This shift also helps explain why the unemployment rate for Americans with college degrees is now only 5%, while it is 10.5% for those with only a high-school degree, and 15.6% for Americans with less than a high-school diploma. The jobs of well-educated Americans, although hardly immune to foreign outsourcing and technological displacement, have been less vulnerable to these trends than the jobs of Americans with fewer years of education.

The likelihood, therefore, is that as the economy struggles to recover and today's jobless begin to find work, the median wage will continue to fall - as it did between 2001 and 2007, during the last so-called recovery.

More Americans will be working, but for pay they consider inadequate. The approaching recovery will be tepid because so many people will lack the money needed to buy all the goods and services the economy can produce.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

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Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including "The Work of Nations," "Locked in the Cabinet," and his most recent book, "Supercapitalism." His "Marketplace" commentaries can be found on and iTunes. your social media marketing partner


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+14 # Guest 2010-04-13 02:14
I get it. Many jobs will never come back because so much work has been outsourced to other countries and technology has advanced such that fewer workers are needed in industry.
Well maybe the solution is that ALL work sent overseas, by law, must be returned. With regard to new technology replacing workers, more workers need to be hired to help rebuild/maintai n/improve the infrastructure of our country. Maybe the fact that our executive class is paid the highest on earth relative to what labor is paid needs to be looked at and be reduced to ratios other successful industrialized nations pay such as Japan and western Europe. Maybe the fact that the tax rate on the wealthiest droped from 90% in the Eisenhower Administration to the current about 35% needs to be reconsidered and doubled to 70%. Maybe the government needs to aggressively promote labor unions and workers rights. Maybe our ONLY exports should be things we've manufactured ourselves, and nothing else, instead of our jobs.
+8 # Guest 2010-04-13 05:01
Foreign outsource jobs will never come back as long as we let foreign goods come in freely. I know for a fact that most countries have a vat of 20% or more on imports, yet they pretend there is no duty. Time for us to stop pretending and tax imports...the founding fathers weren't as dumb as they looked!
+2 # Guest 2010-04-13 05:35
At last....the truth of the county's real state of the future.

The future is war forever..suppli ng all the other countries with war materiel.

With the majority of "workers" going into the military as the only "growth" industry.

The President better get with the program if he wants a second term.
+17 # Guest 2010-04-13 06:41
Would anyone consider that the decision to outsource jobs, and the manipulate the workforce to lower wages un american and unpatriotic? I know that most Americans view not saluting the flag or wearing a stars and stripes pin on their lapel as unpatriotic, but in my little mind I think the moneyed class, with their political supporters, destroying the country in the name of profits is treasonous. But who am I to think such a thing when the corporate media, the educational system, and the government dismiss such thoughts as unfounded and childish?
+4 # Guest 2010-04-13 13:17
Bravo Shabaka! You are precisely correct! Very few people realize that American corporations (actually international corporations) have no loyalty to our country and its' citizens. Any allegiance they express is a pretext to their actual agenda which is to profit in any way they can, even if it sucks the life blood of the very nation they live in. It is nothing but un-American and unpatriotic to savage the American economy for the purpose of corporate profit. The global corporate economy respects the bests interests of no citizen of any country anyway.

As for such thoughts being deemed unfounded and there any possible explanation for why the rich are getting so much richer while our nation is so obviously being pauperized? To heck with the nay sayers! Do they have a better explanation? I don't believe so.
+5 # Guest 2010-04-13 23:06
I would agree with half of it. It is un-patriotic, but it is, unfortunately very american.

This country was founded on a capitalistic system, and this is the natural result of that. We have moved into an unregulated free market capitalism. This was accomplished by the ability of international corporations and a power elite to gain full control of the government over many, many years. Free Market Capitalism is only interested in the accumulation of wealth.
+3 # Guest 2010-04-13 07:19
The long-term trend, regardless of US policies that exacerbate the wage problem, is that most people will be self-employed in the future:
+4 # Guest 2010-04-13 11:04
If most people will be self-employed in the future, then we will need to lower the barriers to opening a business. As it stands, unless you have plenty of money and lawyers, competing with large companies is almost impossible. The number of regulations and restrictions are daunting to most small businesses and actually serve to make big businesses the only ones left standing in many communities. Besides, unless your parents have run a small business, most people have no experience or education to help them. We DO need to teach entrepreneurism in our schools, but we do need to lower the barriers to opening small businesses since the idea of a "job" may be a thing of the past.
+3 # Guest 2010-04-13 18:58
We need access to universal, portable health insurance and retirement accounts. Our politicians don't seem to get it. It's ridiculous that we have to depend on an employer to provide subsidized health insurance. This prevents lots of people from going out on their own.
+2 # Guest 2010-04-13 16:31
And for that, we will need affordable universal healthcare coverage, no?
+7 # Guest 2010-04-13 07:47
Sooner or later, the correlation between the 'job-loss' phenomenon, and the influx of Corporatist-Rep ublicans into the goverernment will become clear, and we can resume paying attention to the people who make America great.
If anyone in America needs to be on welfare, it's a fat-cat Republican.
+3 # Guest 2010-04-13 14:55
Let us not be blind to the equally profit-mad corporatist Democrats. The subversion of true democracy by corporate money and myopic growth driven ambition is the real threat to the liberties of all, and is not constrained to a single political party.
+3 # Guest 2010-04-13 08:14
Ah, FINALLY, Bob is talking structural shift. Please continue in that direction of analysis - the gutting of whole sectors is in the multipliers. Free trade w/o balanced trade is irresponsible - treason. Keep describing the structure and then explain why consumerism will not return jobs to Americans.

Thank you
+4 # Guest 2010-04-13 08:45
But Prof. Reich talks out of both sides of his mouth. In this article he correctly points out the very likely continuing slide in living standards for most Americans. Yet in a piece a couple of days ago he called for increased immigration, which would result in more competition for the limited number of good jobs. The law of supply and demand has not be repealed! The larger supply of anything (in this case workers) the lower the cost (in this case wages) of that thing.

And, of course, more people in the U.S. exacerbates all of our environmental problems from the destruction of farmland to the depletion of natural resources to the our country's huge contribution to climate change.
+3 # Guest 2010-04-13 09:51
And if the wars of the US Empire are ended and the military reduced, and Reserves sent back to their jobs - who then will be let go? After the major wars of the last century Education was extended to reduce competition for jobs. No government can survive angry unemployed ex-military with easy access to many more weapons!!!
+5 # Guest 2010-04-13 12:36
Perhaps it would be wise to stop referring to American citizens as consumers as it relates to the economy. This label distorts the role of the citizen within the fabric of economic society, and perpetuates the endless and destructive march towards resource and material exploitation. Language is important.
+1 # Guest 2010-04-13 13:41
I, for one, believe that when America negotiates a treaty of any kind, the result will always be for the benefit of America. One thing the US does with aplomb is negotiate treaties. then if for some unforeseen reason the treaty doesn't live up to American expectations the US will always simply ignore it. So I can't understand why everyone is complaining about free trade. You must understand that American companies are making money hand over fist with these trade treaties. Their profit is greater than ever before. They love the trade treaties. So Americans, it is up to you to require that your own national and international companies not beggar your own people. The CEOs in New York, Chicago and elsewhere in the US are the ones deciding who is laid off, which companies will move their operations offshore etc., not the government.
+1 # Guest 2010-04-13 15:01
What you say sounds reasonable but I beg to differ a bit. While it is true that it is CEOs in various places who decide who is laid off, which companies will move their operations offshore, etc., it is very much the government that ought to regulate these decisions. Sure, the CEOs may act to destroy the economy by moving their operations off shore, but the government can raise tariffs in order to recoup the destruction to our economy to the point where there is simply no profit possible in going off shore no matter how cheap labor is there. In other words, it is the government, not the consumer, who can incentivise CEOs to behave more responsibly. The lie we are told is that in order to remain competative globaly it is necessary to constantly relocate manufacturing to third world nations. This is not true as I know of no American company that moved its' operations overseas that wasn't profitable here already. Greed can be made more costly and should be.
+4 # Guest 2010-04-13 13:51
If the jobs are not created - Americans can not really participate in the Real Estate Market by working in Walmart. I think it is time to stop outsourcing - who benefit from this except a few CEO from the big corporation. How we can consume everything the world creates without good paying jobs.
+4 # Guest 2010-04-13 14:27
Ah! The myth of globalization! We were all sold a bill of goods that it would be a boon to our economy. It's good for big corporations, yes, as they can increase profits by outsourcing jobs to cheaper countries, and it's good for congresspeople as those profits can be used to bribe them to keep fooling us so that they can keep their jobs then afterwards slide into lucrative lobbying jobs. But it's not good for workers....
0 # Guest 2010-04-13 14:44
Don't buy goods,such as clothing- they come from Europe. Buy stocks in the military-indust rial companies. GE, Honeywell, Boeing, to name a few. You can't beat them, you may as well join them.
+5 # Guest 2010-04-15 02:04
Why isn't there a clearly articulated "jobs policy" coming out of Washington? Maybe its because every top adviser to the President has never worked in manufacturing or a small business. They are all coming out of the finance sector. No wonder "Main Street" is getting strangled by "Wall Street."

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