Buy the dip no longer sounds sufficient to calm fears, nor will forward guidance. Jerome Powell will...
Here’s Where All the Jobs Went
09/06/2011 12:47 pm EST
The ones not exported overseas have been turned into part-time work and independent contracting, writes MoneyShow.com senior editor Igor Greenwald.
Yesterday was Labor Day, so it was seasonably right to bemoan the lowly lot of labor and express sympathy with the 16.6 million unemployed, including the 6 million jobless for more than six months and the 2.6 million who’ve stopped banging their heads against a wall of rejection.
But now that’s done, so we’re free to speculate again, as CNBC invited experts to do Friday, whether the shirkers wouldn’t be better off if we cut off their jobless benefits. Because, you know, a “job creator” had mentioned on-air that not every applicant was leaping to do his bidding.
As Friday’s no-jobs report showed, “job creators” are an endangered species. They might disappear entirely if we don’t take their every anecdote as gospel and then craft laws to make sure they’re happy.
On that note, the US Chamber of Commerce, the lobbying arm of Big Business, sent Washington its Christmas wish list masquerading as a jobs agenda Monday. It wants more tax breaks and deregulation in the name of all those unemployed.
In other words, it wants more of what has clearly worked out so great over the last 28 years, at least for the multinationals it represents.
The Chamber has been emboldened by President Obama’s decision Friday to scrap a key environmental rule (proposed by non-partisan experts) as unaffordable given the state of the economy. On taxes too, the president seems likely to meet the Chamber more than halfway in his address to Congress on Thursday.
The administration barely has more plays in its playbook than the business lobbyists. It wants stimulus spending on infrastructure, but good luck getting that one through Congress.
The House of Representatives is controlled by a party that has convinced itself that the economy was doing fine until 2009, tripped up by nothing worse than the ups and downs of the business cycle, until Big Bad Government came along with new job-killing rules for banks and health-care providers.
It’s hard to know what might dispel this fantasy for people who’ve purged 2008 from their collective memory. Convinced that government is the root of all evil, they’re blind to overwhelming evidence that the mortgage fiasco stemmed from Wall Street, with Fannie Mae and Freddie Mac acting as clueless accessories after the fact rather than key conspirators.
And so the existential crisis now gripping the American economy—one that has 31 more million people, but 2 million fewer jobs than 11 years ago—gets used to promote a political agenda.
Bernie Madoff was a small businessman until he was caught…despite the SEC’s best efforts not to obstruct private enterprise. BP (BP) was a font of jobs until it fouled the Gulf of Mexico.
Unquestionably, getting rid of the FDA would be a net gain as well: whatever food inspection jobs are lost will be more than offset by openings for morticians and snake-oil salesmen.
Those talking deregulation, like those talking infrastructure, are merely talking around the uncomfortable likelihood that most of those lost jobs aren’t coming back—ever.
The work has already come back, but what has not been outsourced overseas is now being performed by an army of part-timers and independent contractors.
The numbers bear this out. The number of part-time workers who are part-time workers by choice is down 3% over the last ten years. But the number of part-time jobs performed by people who couldn’t find full-time work has tripled over the same span. And so has the number of people in part-time work because of “slack work or business conditions.”
Overall, part-time employment is up 22% over a decade, entirely thanks to an influx of 5 million people hoping for something better, while full-time employment hasn’t grown at all.
In 1970, wages and salaries accounted for 53.1% of GDP; between 1950 and 1974 the proportion never dipped below 50%. Now we’re down to 43.5%, according to the nonpartisan Congressional Budget Office, which expects the percentage to inch up only to 45.3% by 2021.
In other words, employment has been in relative decline for decades, and no amount of deregulatory zeal is going to turn that train around.
On the bright side, there’s been a real pickup in non-wage income that’s not being reflected in the government’s job numbers. In the first ten months of the current federal fiscal year, through June, revenue from non-withheld income and payroll taxes surged 17%, reflecting the pickup of non-wage receipts in 2010 over the recession-plagued 2009. Withheld income and payroll taxes rose just 4%.
So that’s where the jobs have gone: to piecemeal work reported on 1099 forms, leaving both the employee’s and employer’s share of payroll taxes the responsibility of an independent contractor fortunate enough to be working.
In current slack conditions, employers have zero incentive to replace contractors and part-timers with the far costlier full-time help, regardless of the regulatory climate.
This won’t change until the following happens:
- Asian currencies become revalued in line with their purchasing power—and yes, that means the dollar must become cheaper to make American labor more competitive
- Health care is removed from the purview of employers, and health-care consumers are given full economic incentives to conserve a scarce resource
- Unsustainable debt is written off and banks recapitalized, reviving demand and lending across the developed world.
To pretend that private enterprise is just chomping at the bit to hire but is being restrained by government policy is lunacy masquerading as wishful thinking. To pretend that infrastructure spending is a sufficient response is nearly as deluded.
We need to get working on the chronic disincentives to employment, like an overvalued currency and an unsustainable health-care model. It’s past time.
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