Out of Control Policy Blog

New at Reason: Mr. President, Some Thoughts for Your Speech Tonight

Over at Reason.com, our sister site, I have a new commentary that offers President Obama a readymade jobs speech for tonight. It is not intended to predictive-though in a screwy way one could predict his speech will be the exact opposite. In any event, here are few snippets of things that would be encouraging to hear from the president tonight.

The unfortunate reality is that we will not see a return to full employment or strong economic growth for several years to come. This may be difficult to swallow, especially for those facing unemployment, overwhelming debt, and falling wages. But the very problems weighing down the American economy are misaligned skills in the work force, a debt supercycle that still requires years of deleveraging with households contributing more towards savings and paying down debt than towards consumption and investment, and transformations in the structure of economic productivity. These are not challenges that will be quickly overcome.

The heart of the matter though, is that as problematic as debt is in our economy today, the heart of the matter that today's unemployment troubles are not only the result of the great contraction. In fact, our economy is also undergoing fundamental changes. Let me try to explain:

The low-hanging fruit of innovation that helped bring America so much prosperity is gone. When Henry Ford turned his Model-T into a full-scale assembly line he started an innovative process that created millions of jobs. But today's innovations, such as Google, smartphones, and advanced medical technologies do no create the same number of jobs. Today's innovation brings great advantages to quality of life, but new technologies do more to automate and bring efficiency than to create the same large number of jobs as those previous innovations brought.

Companies today are able to do more with less. Since 1990, manufacturing output has grown 30 percent. But at the same time the number of workers employed by manufacturing companies has fallen by more than 50 percent. This indicates that the American manufacturing sector is not dying or getting shipped overseas, but instead is simply becoming more automated and less dependent on manual labor.

Unless we want to return to typewriters, or rid ourselves of washing machines to once again clean our laundry with washboards and elbow grease, this is a trend we must accept in order to meet the new challenges ahead.

A brief glance at population statistics indicates the scope of what we face. Since the turn of the millennium the number of American workers has grown by more than 10 million, yet the number of private-sector jobs has declined by two million. That is not because of the recession or contraction, but instead a sign that our economy has not adapted well to changes in the 21st century.

It used to be that employers would keep some workers on payrolls through tough times to ensure that the talent remained when things got better. But the ability for employers to find workers at the last minute to fill a need-particularly with the proliferation of job-posting websites in the past decade-has changed this labor hording attitude. That means more unemployment in today's highly interconnected economy.

The health care and technology sectors have been rapidly expanding in the past few years. However, a number of positions remain open in these fields as employers seek to find labor with the right skills. One critical component of today's unemployment crisis is that the skills mismatch between what is demanded in today's marketplace and what is available amongst today's workers.

This means retraining for manufacturing and construction workers that are unlikely to get their old jobs back even in a strong economy down the road. But that is a process which will take time and demands patience from the American people.

To read the rest of the piece, including 7 ideas for long-term unemployment change and 7 ideas for short-term job increases, see here

Anthony Randazzo is Director of Economic Research


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