America isn’t working. The grim reality of today’s US economy is that 24m people who want to work cannot get a job. That is an astounding number. We won the second world war with fewer people: a total of 16m Americans served in the US armed forces. Five million of the new army have been idle for six months or more, 3m have for more than a year. That is a level of long-term unemployment that has not been seen since the Great Depression. Furthermore, if the labour participation rate had not dropped from 65.7 per cent in June 2009 to the historically low 63.5 per cent today, the jobless rate would still be just a shade under 10 per cent.
What we have become good at is creating more part-time jobs, not full-time jobs. Many of the part-timers are in low-wage jobs instead of middle-class jobs. Manufacturing jobs have been replaced by new jobs in healthcare, warehousing and retail, many of which don’t even allow workers to rack up enough hours to earn healthcare benefits let alone break out of poverty. Eight and a half million workers are stuck in part-time jobs because their hours were cut back or they were unable to find full-time positions. Part-time work has increased for it allows employers to reduce costs through diminished benefit packages or none at all in a weak economy. In the retail sector, employers want an on-call workforce that they can hire when demand is high and release when business is slower. Full-time workers used to comprise more than 70 per cent of the American retail workforce; now at least 70 per cent are part-time. The retail and wholesale sector has cut a million full-time jobs since 2006 while adding more than 500,000 part-time jobs. It is hard to believe that after the 20th-century labour struggles for the 40-hour work week, the 21st-century battle is a fight for enough working hours to make a living.
The consequences of the weak employment market are manifold. One is that hundreds of thousands of workers who have exhausted their unemployment benefits are no longer counted in the labour pool. They have vanished into that other army, the almost 9m who have become disability claimants despite the general pattern of healthier Americans. On any month now it is a toss-up whether more Americans are qualifying as disabled than are finding jobs.
Another consequence of the lamentable jobs market is that young people have been stopped in their career track, sinking not soaring. An estimated 41 per cent of those unemployed are aged 30 or under, in contrast to their share of the labour force of 27 per cent. The reason is simple: older workers, understandably, have become much less inclined to retire. The better-paying jobs held by experienced older people are not becoming vacant so the younger segment of the workforce has a diminished opportunity to get ahead. Talk about a lost generation who had the misfortune to start their working lives at the worst possible time since the end of the second world war.
But here is the paradox. Twenty-four million can’t find work and hundreds of thousands of employers can’t find workers. The vacancy signs persist month after month because the vacancies are for workers with skills they don’t have. Too many Americans in the army of the unemployed lack the necessary science, technology, engineering and mathematics skills companies seek. Education means skills. Skills bolster productivity. Productivity is the key ingredient to economic success. The greater the skills, the higher the wages and the higher the employment ratio. This shortfall in education is the economic equivalent of a permanent national recession, for those with less education and fewer job-related skills experience especially high rates of job loss and higher extended periods of unemployment.
Low-wage industries have created more than 43 per cent of net employment growth, while better-paying industries such as construction, manufacturing, finance and insurance have not grown enough to make up for recession losses. The manufacturing sector remains about 1.8m jobs below pre-recession levels. And deep cuts in state and local governments hit mid- and higher-wage occupations the most. The question now is whether we are going to become a low-wage, part-time employment nation at a time when an uncertain economic climate makes it safer for companies to take on people on a part-time basis.
What must be done to avoid a descent to a low-wage, part-time America? There are a whole raft of programmes:
- invest in infrastructure and high-speed internet connections;
- multiply the government funds for training programmes and tie them to unemployment;
- increase investment on education especially vocational training and post-secondary education;
- strengthen science, technology, engineering and maths (STEM) in high schools and recruit and train teachers to broaden access to computer science in high school;
- create an additional supplementary category of 20,000 annual visas for foreigners with the science and technology skills that are in short supply;
- improve the attractiveness for foreign companies to locate here through a simplification of regulation.
The writer is editor-in-chief of US News & World Report and chairman, chief executive and co-founder of Boston Properties, a leading US real estate group