If you listen, we are told that many of the jobs lost in this recession will never come back. But there are those that say that all we have to do is make a couple of simple adjustments to the Federal budget and Federal government policy, and the jobs will come back. They won’t.
Everyone should read an article by Fareed Zakaria in Time Magazine titled "How To Restore The American Dream" (Thursday, October 21, 2010 issue) which explains why.* Of course, there are jobs that have been outsourced to foreign countries where workers can do the job at much lower pay. Zarkaria quotes: Steven Rattner, who helped restructure the automobile industry, tells the story of getting a new General Motors plant online in Michigan by bringing management and unions together.
"The unions agreed to allow 40% of the new plant to operate at $14-an-hour wages," he says, "which is half of GM's normal wages. The management agreed to invest in this new plant. But here's the problem: workers at GM's Mexican operations make $7 an hour, and today they are as productive as American workers. And think of this: $14 an hour translates into about $35,000 a year. That's below the median family income. The whole experience left me frightened about the fate of the American worker." If a Mexican worker can do the job of assembling an automobile just as well as and American worker at half the pay of the lowest paid American worker, why shouldn’t the car be assembled in Mexico?
But outsourcing is only one part of the explanation of why many jobs won’t return. Of at least equal importance "Neutron Jack" Welch, former CEO of GE and a political conservative is quoted as saying:
First, technology has produced massive efficiencies over the past decade. Jack Welch explained the process succinctly on CNBC last September. "Technology has changed the game in jobs," he said. "We had technology bumping around for years in the '80s and '90s, and [we were] trying to make it work. And now it's working ... You couple the habits [of efficiency] from a deep recession [with] an exponential increase in technology, and you're not going to see jobs for a long, long time." Welch gave as an example a company owned by the private-equity firm with which he is affiliated. In 2007 the business had 26,000 employees and generated $12 billion in revenue. It will return to those revenue numbers by 2013 but with only 14,000 employees. "Companies have learned to do more with less," Welch said.
On top of these, we are told that there are good jobs that go begging because qualified people can’t sell their homes and move to the openings. The mobility of Americans is becoming seriously compromised.
But I am also worried that our present political system is not helping. In an age in which we should be doing everything in our power to make our workforce more competitive to the global workforce in technology, there are those who are discouraging this effort. The Democrats do essentially nothing, but the Republicans are actually negative. They have turned the word "elite" into a derogatory term and speak of our elites as not "real Americans."
But I understand the problem. As a former Republican (until the Goldwater nomination.), I understand that the Republican Party is all about the wealthy, preserving and increasing their fortunes. The idea is that you give the financial resources to the wealthy and let them distribute it as they see fit, i.e. the "trickle down" economy. There are not enough wealthy, however, to win elections so they need to find allies. The so-called Evangelicals, of course, have been one group, and of course there is some overlap in that there are no doubt some wealthy that are also Evangelicals. But much to their credit, the Republicans have coopted many of what should be their opponents, the "lunch pail" or hourly wage set of unskilled, semi-skilled, and skilled manual laborers. In doing so, however, they have felt they had to demean the highly educated and have turned college and graduate schools, especially the "best" ones, almost into an epithet by turning the word "elite" into a derogatory term. This anti-intellectualism is not helping.
Is it no wonder that much of our youth avoids what are considered to be difficult subjects like mathematics and physics and derides anyone who can solve a transcendental equation with a derogatory term like "nerd?" But Republicans and the Tea Party really don’t have to do this. The Democratic Party is the party of social libertarians and Joe Six Pack feels that the Democratic Party is unfairly favoring women, minorities, and homosexuals. Thus they feel that the Republican Party is their only hope of keeping "them" in line. It doesn’t seem to matter that under Republican control, their wages have stagnated and that many of their jobs have been exported elsewhere or lost to automation.
Alan Blinder is also worried. ....The crucial distinction for the future, he argues, might be not between highly educated and less educated workers but between those jobs that can be done abroad and those — such as nurse or pilot — that cannot. Even nurse and pilot, however, can be filled with immigrants willing to take lower pay here but which is very good compared to where they came from.
In between are the skilled manual workers and those in white collar operations like sales and office management. These jobs represent the beating heart of the middle class. Those in them make a decent living, usually above the median family income ($49,777), and they mostly did fine in the two decades before 2000. But since then, employment growth has lagged the economy in general. And in the Great Recession, it has been these middle-class folks who have been hammered. Why? Autor is cautious and tentative, but it would seem that technology, followed by global competition, has played the largest role in making less valuable the routine tasks that once epitomized middle-class work.
Zakaria continues: Fundamentally, America needs to move from consumption to investment. Everyone agrees that the best way to create good jobs in the U.S. is to create new industries and companies and to innovate within old ones. This means large investments in research, technology and development. As a society, this needs to become our strongest focus. The only good jobs that will stay in the U.S. are jobs related to knowledge and innovation. Additionally, in the 1950s, America was the only research lab in town, accounting for the vast majority of global scientific spending. Today, countries around the world are entering the arena. Two weeks ago, South Korea — a country of just 50 million people! — announced plans to invest $35 billion in renewable-energy projects. We should pay for this with a 5% national sales tax — call it an American innovation tax — which would be partly offset by a small reduction in income taxes. This would have the twin benefits of tamping down consumption and yielding some additional funds. All the proceeds from the tax should be focused on future generations, because we need to invest massively in growth.
If American citizens are not interested in science and technology, there is still a solution: The often overlooked aspect of investment is investment in people. America has been able to create the future in large measure because it has tapped into the energies and work of immigrants. It has managed to invest in human capital by taking smart, motivated people from around the globe, educating them in the planet's best higher-education system and then unleashing them in a dynamic economy. In this crucial realm, the U.S. is now disinvesting. After training the world's best and brightest often at public expense we don't find ways to make sure they stay here by giving them a green card but rather insist that they leave and take their knowledge to another country, where they will invent, inspire, build and pay taxes. Every year, we send tens of thousands of the smartest Indians and Chinese back home, which is a great investment in the future of those countries.
"Most jobs that will have good prospects in the future will be complicated," says Louis Gerstner, the former CEO of American Express and IBM. "They will involve being able to juggle data, symbols, computer programs in some way or the other, no matter what the task. To do this, workers will need to be educated and often retrained." We need more and better education at every level, especially job retraining. So far, most retraining efforts in the U.S. have not worked very well. But they have worked in countries that have been able to retain a manufacturing base, like Germany and parts of Northern Europe. There, some of the most successful programs are apprenticeships — which cover only 0.3% of the total U.S. workforce.
There are advantages to the U.S. system. We don't stream people too early in their lives, and we allow for more creative thinking. But the path to good jobs for the future is surely to expand apprenticeship programs substantially so industry can find the workers it needs. This would require a major initiative, a training triangle in which the government funds, the education system teaches and industry hires — though to have an effect, the program would have to be on the scale of the GI Bill.
There is much more to Zakaria’s solution in the Time article including fiscal sanity, the tax code, corporate tax rates, and benchmarks. The article concludes with a paragraph on reasons for optimism. You are urged to read the full article. But one thing is clear. There are no fast solutions. Decreasing the size of government in the short term, at least, will have a negative effect on the economy because people will be put out of work, adding to the unemployment picture, and contracts will be terminated, hurting contractors. But as he states, medical costs and state retirement plans must be brought under control.
*http://www.time.com/time/nation/article/0,8599,2026776,00.html
Note added 08-29-2011: The electioneering is already on for the 2012 presidency by the Republicans. It is shocking what some of the candidates are saying. Some of this is covered by Paul Krugman in "Republicans Against Science:" http://www.nytimes.com/2011/08/29/opinion/republicans-against-science.html?ref=opinion&nl=opinion&emc=tyb1
Note added 08-30-2011: George Will in Rev The Scientific Engine, Washington Post (January 2,2011) has tackled this question of "educational elites" that are so despised by conservative populists: "America has been consuming its seed corn: From 1970 to 1995, federal support for research in the physical sciences, as a fraction of gross domestic product, declined 54 percent; in engineering, 51 percent. On a per-student basis, state support of public universities has declined for more than two decades and was at the lowest level in a quarter-century before the current economic unpleasantness. Annual federal spending on mathematics, the physical sciences and engineering now equals only the increase in health-care costs every nine weeks."
