Why Isn’t The American Job Market Recovering?

Jim Tankersley asks “What Really Happened to 15 Million Jobs?”.  After pouring over statistics, he seems at a complete loss to speculate on any real answers. It seems that like so many other Washington focused pundits, he really just doesn’t want to face the quite obvious answers. I felt compelled to contribute in the comments section:

If one can manufacturer anywhere in the world; communicate instantly to anywhere in the world; find plenty of skilled educated labor virtually anywhere in the world; and ship raw materials, components and finished products at low cost thanks to still very inexpensive energy prices – then there are some very fundamental questions to be asked.

Even if one is a very dedicated American patriot, does it make sense to expand in a location with oppressive zoning, building, environmental, labor, financial and other regulations; extremely high and unreasonable litigation exposures and risk; an assertive and active legislative and regulatory environment in which the rules of the game are constantly changing; increasingly intrusive direct government involvement in businesses and markets; massive and unsustainable public deficits, debt and unfunded liabilities; already high taxes inevitably moving higher; labor costs five or ten times higher than those in China or India; increasingly business hostile rhetoric from the dominant political party; decaying infrastructure; and a pervasive culture of entitlement?

It actually isn’t any surprise at all this country is losing jobs and companies worldwide are choosing to invest elsewhere, except perhaps to those who still believe the naive platitudes of the political “progressives” who are impeding any chance of reviving any actual progress.

The gross imbalances we have enjoyed relative to most of the world are unsustainable. Pretending otherwise is foolish.  Our living standards will move into balance with the rest of the world, as will our regulatory environment, legal environment and all the other factors that influence the real competitive advantages of  locating a business in one place over another. Its inevitable.

Its time to get real about making the US competitive again. It can be done through deliberate public policy decisions or much more slowly and unhappily through unstoppable global economic forces. Protectionism or militarism will only make matters worse.

Over at the Atantic, Arvay responded to my comments:

Dialing down our society to the conditions that make China’s labor so inexpensive — few environmental protection regs, massive poverty, child labor, company housing that’s more like a Stalag than a home — if that’s the future you want, I think you should brace yourself for the inevitable revolt here. Your economies will be nullified by the internal security measures necessary to protect the elite.

Pervasive culture of entitlement? You mean Social Security and medicare? Or the swollen Pentagon budget? Which would you sacrifice?

If American business can’t figure out how to make itself valuable to a broad range of the public, especially via job creation — we’ll need to find a different model. Oh, you’ll get your Chinese type government, but I think you’ll find the public executions of executives who fail or cheat to be a notable downside.

Be careful what you wish for.

Good thoughts. Here’s how I responded:

Arvay,

I did not suggest what I wish for. I suggested why businesses choose to locate jobs where they do.

What I wish for is a more common sense approach to government. We can have environmental protection without regulations being unnecessarily expensive, arbitrary, complicated and time consuming to comply with. We can have tort reform and a responsive legal justice without huge costs for participation in the system and outrageous rewards to lawyers for things like class action suits. We can scale back the role of government in selecting winners and losers in business. We can have rational financial regulation that protects Main Street and average citizens from the voracious “too big to fail” banks, offers real competition and opportunity for small banks in our financial system, and shuts down the huge institutions that caused our financial mess rather than continuing their ongoing bailouts and subsidies. We can have antipoverty programs that don’t engender a culture of dependency and an underground economy. We can create retirement systems that aren’t based on the exact same formulas used by Mr Ponzi and Mr Madoff for funding. We can create a medical payment system that protects people from catastrophic medical events but makes us all pay for regular, routine and minor medical care so there is some natural consumer driven price control built into the system. We can have a balanced budget amendment for the Federal Government so we are forced to pay for all the largess our Senators and Representatives bribe us with rather than burdening our children with unsustainable debts. We can reverse the growth of regulation that has crossed beyond the point of necessary and effective and in sum is making our society much less well off due the the cumulative impact and drag on our economy. We can start paying the real price of fossil fuels rather then continuing the subsidy of their waste. We can get the government out of the role of skewing the economy in favor of large corporate interests rather than competitive businesses. We can dramatically scale back the military, close at least 90% of our foreign military bases and end the hopeless wars we are engaged in. We can make citizens more responsible and accountable for our own decisions. We can scale back our government, deficits, debt, entitlements and taxes.

Not only can we do all those things, we have to if we want to be competitive in the global economy. As Tankersley pointed out in his article, labor costs are a small fraction of the cost of manufactured goods. And as middle classes grow in emerging markets, wage disparities are narrowing for the right reasons – their standards of living are improving. If labor were the only factor, the advantages of being close to America’s huge market and avoiding the risk of political backlash that is emerging in our country would outweigh the labor cost discrepancy. But there are far too many factors that are within our capacity to control that we are just doing wrong. For the most part, things have been moving in the wrong direction on policy matters for decades.

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1 Comment

Filed under Best Stuff, Economic Policy, Fundamental Perspectives, Politics

One response to “Why Isn’t The American Job Market Recovering?

  1. fredunger

    Over at the National Journal where Tankersley’s article was also published, there was an interesting uncredited comment. I don’t agree with all of it, but find the general perspective a useful one – especially the last point that the only real safety net is personal responsibility:

    1) Prosperity arises from the velocity of money. Value must diffuse through all hands. 2) Social engineering confiscates from the productive and awards the deserving, with a fat cut for overhead. Near-zero velocity. Taxed money has near-zero velocity. 3) Higher education cannot cost a mortgage and also be gainful. 4) Decreeing that every job be a marvelous ride makes employment unaffordable. 5) Diversity is qualification by demonstrated incompetence. Stupidity should be lethal not subsidized. 6) Only engineering solutions matter. 7) Reality cannot be legislated into existence, for the universe wields entropy. 8.) Capital is not money. Capital is productive value. No production, no capital. 9) Appetites are not rights. 10) March or die. The only safety net is personal responsibility.

    Back at the Atlantic, MHortman suggests how challenging he finds the US culture of entitlement as a small business owner:

    We didn’t see it coming? 15 million missing jobs? If you are a 25 year veteran small business owner you know there at least 15 million native born able bodied Americans who “will not work as a taster in a pie factory” even if paid $100.00 an hour. That is the reason many businesses locate new jobs outside the borders of the USA. Entitlements have created a non existent work ethic and low morals. Entitlements have removed all incentives to “earn” a job.

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