The U.S. economy has shed an unprecedented number of jobs during the past 2 years and it will probably continue losing a steady stream of jobs over the next decade in all industries. Most of these jobs will never return because of changing technology, increased robotics and massive outsourcing overseas. The U.S. private sector will inevitably create some new jobs so the overall unemployment rate will remain steady. Many of those new jobs will be essentially worthless.
Future jobs will be at significantly lower salaries, with far fewer benefits such as healthcare, pensions or paid vacations, and more temporary and contract positions. Large Corporations and their paid political representatives in Congress will argue that any job is good enough for most people in such a recession. Their little secret is that permanently high unemployment and global free trade work in their economic favor by putting downward pressure on labor costs and forcing more and more people to compete for fewer and fewer good jobs.
Chinese and Indian companies, both government-owned and privately-held, pay many of their highly-educated workers somewhere between $2 and $7 per hour, or about 25% of what the average American used to earn in a similar position. Most of their factory employees labor from 50 to 60 hours per week and they average less than a dollar per hour with no increases in compensation for time worked over 40 hours, nor do they get any meaningful healthcare or retirement benefits. The cost of living is far lower in these countries with respect to food, housing, energy, clothes and most everything else because there is a limited amount of money churning around in their economies that can be devoted to consumer goods.
Savings rates are noticeably high in China and many foreign countries because people still have to plan for health expenses and eventual retirement without any governmental social assistance. Most consumer products they manufacture must be exported and sold overseas in order to match the exaggerated output of their modern factories. However, profits associated with the value-added components of most products generally inure to the top executives in China and the U.S. who control the factories and the marketing and distribution of the products to the end consumers. All of Apple’s new electronic gizmos are made in China or Taiwan.
The most obvious reason underlying the low wages in China, India and elsewhere in the developing world is that they have huge labor surpluses. China and India have total populations each exceeding 1.3 billion and their respective workforces are both about 600 million adults. Still more than half of their citizens live in extreme poverty and working in agriculture. Their citizens continue to move in massive waves to urban areas to seek work and a better future. Their governments are under extreme pressure to keep people fed and employed, and thus avoid violent revolutions. The sheer sizes of their total populations make these goals daunting tasks.
By comparison, the U.S. total labor force is between 150 and 170 million people out of a total population of around 310 million. Children under 18, full-time students, over 65 and retired, and the permanently disabled and infirmed of all ages, are not part of the total workforce. Currently about 15 million Americans are unemployed and another 10 million are working part-time, far below their skills and experience in low-pay positions, independent contractors whose business clients have dried up, people who have given up looking due to the long recession, and finally others who never qualified for unemployment benefits or who have exhausted them.
Historically in the U.S. manufacturing jobs paid far higher than service positions, though they have fallen steadily as a percentage of the total workforce from over 20% of the workforce in 1979 to just over 10% today. Over the past 20 years, the U.S. private sector has outsourced the majority of our manufacturing jobs to low-wage foreign countries.
Professional positions pay the best but only so many are needed in any society or economy, and a limited number of people are qualified through education, licensure and experience. In the aggregate top business executives, governmental chiefs, attorneys, accountants, engineers, and architects constitute about 10% of the total U.S. workforce. During the past 10 years, many professional and highly-skilled technical positions have also started a slow but unrelenting exodus to lower-paid yet highly-educated foreign workers.
It is amazing to see the relatively high rate of unemployment and under-employment in this deep recession among U.S. computer programmers and technicians, architects and engineers, MBA’s, attorneys, and many educated individuals who once worked in banking, finance, newspapers, and real estate. Their prior positions may never return to North America and thus they must transfer their educations, skills, and experiences into completely new fields of endeavor. If the Internet permits work to be conducted anywhere in the world, it’s a lot cheaper to maintain a corner office in Bangalore than Chicago.
The construction industry has been severely battered by this recession and it provided many high-paying jobs, both unionized and non-union. Salespeople, who are found in every industry from cars, insurance, business products and services, medical/pharmaceuticals, travel, construction, and consumer products, were never paid large base salaries but they depended upon sales commissions for their livelihoods. Lower overall economic activity has depressed total sales and thus their commissions. Failing to make ever-higher quotas – regardless of outside economic factors – are often reasons behind the large layoffs among essential sales staffs.
Service and clerical workers in businesses, restaurants, stores, hotels, auto repair, customer service, janitorial, childcare, and other similar positions are principally low-paying jobs and these workers have also been hard-hit by the recession. Medically-related positions have survived well so far, but again most are in low-paying clerical, billing, nurse-aides, geriatric care, and other support services. There are only a limited number of openings for highly-compensated physicians, nurses, researchers, special assistants and top administrators available in the healthcare industry.
The U.S. economy is not creating many new high-paying positions in manufacturing, constructions, research, education, computers, or other professions. Instead, most private and governmental economists anticipate that the nation will at best create a decent number of low-paying jobs in clerical support, nursing care for the elderly, billers and collectors, commission-based sales jobs, restaurant workers, and support staff for the limited number of licensed professionals who still have enough clients. These support jobs generally pay from minimum wage to around $15 per hour.
The average employee in the U.S. makes about $37,000 a year (about $18/hr) and the annual mean household income is $50,000 for a family of 4 with 2 employed adults (half above and half below). These income figures have remained flat for the past decade and in some studies, they have shrunk in real dollars since the late 1970’s relative to inflation.
People earning between $8 and $15 per hour don’t have much disposable income to help boost demand across the economy, and less if they are supporting any children. Salaries falling between these 2 hourly rates would put the person in the bottom half of all wage earners in the U.S. After paying for basic or modest housing, transportation, food/clothes, insurance and utilities, there is practically nothing left for savings, restaurants, travel, or many consumer goods. Much of their spending occurs at big discount stores such as Wal-Mart and Target, and certainly not at Bloomingdales or Niemen Marcus.
On top of that limited income must be placed historically high levels of consumer debt for home mortgages, credit cards, student loans and medical costs not covered by insurance, averaging between $8,000 and $18,000 per person by 2008. The majority of U.S. households are trapped in a day-to-day existence, only 2 or 3 paychecks away from financial catastrophe. This is not the way to build long-term security, predictability, and overall prosperity for the nation as a whole.
Most U.S. companies view labor costs as a controllable and variable expense, and therefore more workers will be hired as independent contractors or on a temporary basis. This saves on typical employer responsibilities for healthcare, pension, 401K, and payroll tax contributions associated with full-time direct employees.
While a temporary consulting project at a private company might net a large check, the individual is then responsible for all income and payroll taxes due, plus there is no assurance that there will be any consistent or future assignments from that company or any others. Independent Contractors and small businesses must dedicate much time to marketing their goods and services – not unlike the full-time “marketing effort” that is required of unemployed people just looking for a new job. There are no “safety nets” for the periods when there are no projects or “gigs” unless the prior contract checks were large enough. The more one saves for down times the less one has available to spend during the entire year.
Perhaps we should figure out a better way to match people to various projects, gigs, assignments and jobs in this economy. Our current mix of computerized Internet job boards, private company and governmental web pages, social networking groups, alumni and school career centers, and private placement agencies are obviously not working very well. A more comprehensive, rationale, and faster nationwide system could be designed and be profitable.
About a month ago, US News & WR cited Moody’s Economy that the top 10% of earners (Households of $125,000 or more) account for 22% of all spending and the top 25% account for 45% of total consumer spending. The bottom 50% of all earners (those living in households of $50,000 or less) provide just 29% of all consumer spending. Unfortunately, the wealthy may be right in this regard. Half the entire U.S. population is disposable and don’t help the overall economy. Should we just ignore them perpetually or help them earn more? Can we really afford to destroy the American Middle Class and remain a great nation? Can most businesses survive only on the spending choices of the wealthiest 25% of the population?
So far, the response of our wealthy and political classes to this quickly diminishing economic way of life for the majority of Americans has been to simply ignore it.
• “Just deal with it” since nothing’s going to be done thru any public or private efforts.
• You should have foreseen this recession coming and thereby earned and saved more for your unfortunate early retirement. It’s your fault you weren’t born to wealthy parents.
• You really should have gotten those extra degrees, known the jobs of the future back when you started school, and made the right personal connections to snag an ideal job.
• You should not have run up all that credit card debt, student loans and mortgages. You should have planned your future with the assumption you would have little or no income.
• You’re just lazy, ignorant and greedy. It’s your fault the economy crashed, not ours.
• That’s just life being unfair. It’s too bad that 6 or more fully qualified people are competing for the same job today. Everyone knows that either the lowest bid wins or the one with the right connections gets hired.
• If you don’t like it, why don’t you just move away from the U.S. you socialist crybabies? And don’t complain that it costs money to relocate overseas and that every nation on the planet has set up many difficult legal and bureaucratic barriers to foreigners working inside their borders. “America – Love it or leave it.”
• “Free trade” only means the free flow of goods, services, jobs and money to increase private profits. It doesn’t permit the free movement of people and their families.
• You are personally responsible for your lot in life and it’s not the responsibility of society, its government, large businesses, or the wealthy class to help anyone but themselves – and don’t give us any of your religious, moral or ethical crap to the contrary. We’re not our brothers’ keepers – We’re sociopaths devoid of consciences.
• Stop whining and bothering us. We’ve got to redecorate yet again our gated-community mansion and buy an escape home in Belize when the U.S. completely crashes.
Our country is now based upon the delusion that individuals are free to do as they please and the belief in the outdated notion of “American Exceptionalism” in that the U.S. is not subject to the laws of economics, physics or reality. You just have to want it enough, work hard enough, and anything is possible. These meaningless shibboleths only apply to about 1% of the population but those lies have kept many gullible and ignorant Americans placated for most of history.
Just close your eyes and remember America’s past greatness but you simultaneously have to deny current facts and reality. You can always fool some of the people all the time. “Some” effectively means a simple majority of the voting electorate.
What a load of crap we’ve bought. Now it’s time for most of us to learn Spanish and Chinese – whether you’re good at languages or not.
Marc Pascal, happily ranting from Phoenix, AZ.