Posted on 09/20/2004 1:45:17 PM PDT by Willie Green
For education and discussion only. Not for commercial use.
The U.S. Department of Labor´s new report, “America´s Dynamic Workforce,” could and should have provided a serious look at the many changes in the rapidly globalizing U.S. economy. The report is a major missed opportunity.
The department´s Bureau of Labor Statistics is a gold mine of information. No private sector or academic economist can do any serious research without the mountains of data made available by the BLS. Unfortunately, though the new DoL report is filled with colorful graphs and tables, it was clearly produced as a campaign document meant to boost the re-election efforts of President George W. Bush and not as a serious assessment of the challenges facing the American economy.
Secretary of Labor Elaine Chao opens the report by proclaiming, “America´s workers are the most dynamic and productive in the world. They are the backbone of the American economy, which is constantly evolving and producing new jobs and new opportunities.” This tribute to the American worker sounds good, but has not been matched by policy. Indeed, the Bush Administration in general and Secretary Chao in particular have shown no interest in advancing the living standards of employees. And in the matter of job opportunities, President Bush will be going into the election as the first president since Herbert Hoover at the onset of the Great Depression to see the number of Americans working actually decline during his term in office.
Secretary Chao´s background may have suited her to manage a large organization like the DoL, but not to make policy. She has an M.B.A. from the Harvard Business School, and was Vice President of Syndications at BankAmerica Capital Markets Group and a banker with Citicorp. To bankers, workers are considered merely “factors of production” whose cost must be kept to a minimum. No wonder she shows so little concern about the outsourcing of jobs overseas, or the movement of production to foreign lands. It is all quite natural to her, and just adds more “dynamic” elements to the U.S. labor scene.
To its credit, the DoL report faces the most grim of facts on page 1: “Manufacturing employment increased by 91,000 since January 2004. Before the recent gains, manufacturing employment had declined for 42 consecutive months, and the industry lost 3 million jobs from July 2000 to January 2004.” But then the spin begins.
On page 2 is a chart unlike anything that the BLS in its professional capacity would create. It compares the unemployment rate of one month, July 2004, with average unemployment rates for three past decades. A month versus decades? To say this is apples and oranges is too kind a criticism. And the use of decades as a measurement of anything is meaningless. Economic events do not occur in synch with the calendar.
Unemployment in the 1970s averaged 6.2 percent, but within that decade it fluctuated from a low of 4.9 percent in 1970, when the labor market was tight due to military conscription and higher defense production during the Vietnam War, to a high of 8.5 percent in 1975 as the economy reeled under the impact of energy price hikes when OPEC tried to use oil as a weapon.
Unemployment in the 1980s had its own pattern. It hit highs of 9.7 and 9.6 percent in 1982 and 1983 as a deep recession put an end to years of high inflation. Unemployment then started a long fall through the rest of the 1980s, reaching a low of 5.3 percent in 1989. The 1990s were calmer. There was a mild recession in 1992 which sent the rate up to 7.5 percent, but by 1999 it had fallen to an exceptionally low rate of 4.2 percent. The DoL report says average unemployment for the 1990s was 5.7 percent, but only one year was actually near this number: 1995 at 5.6 percent.
The political purpose of comparing the lowest month of the Bush Administration with the average of past decades is to make the current number look better. If one wants to look at averages for political purposes, they should be collected by presidential terms, not decades. Looking back at the last 20 years using this method yields the following: Reagan 1st term (1981-84): 8.6 percent. Reagan 2nd term (1985-1988): 6.5 percent. Bush I (1989-1992): 5.8 percent. Clinton 1st term (1993-1996): 6.0 percent. Clinton 2nd term (1997-2000): 4.4 percent. Bush II (2001-July 2004): 5.5 percent. With the exception of Clinton´s second term (which we now know was built partially on a speculative bubble), President Bush does not fair badly in this comparison, which is a more valid calculation than the one used in the DoL report. By overreaching, political hacks only lose credibility.
Unemployment rates naturally tend towards “full employment” when not subject to external shocks. This is because people have to work to survive, so will take whatever jobs are available. It is the composition of the economy that determines job opportunities and the standard of living workers can obtain. Here the record of the U.S. economy presents a picture far more disquieting than indicated by unemployment figures.
The DoL report (page 9) touts, “High labor productivity is one of America´s strongest assets. Increased productivity benefits workers through high compensation and lower prices.” In other words, real wages should go up as workers become more productive with the application of new technology, better education, and capital investment. Yet, BLS data indicates that real wages have been stagnant for most workers during the last 20 years – a time period when new technologies were providing new tools beyond the imaginations of previous generations.
The BLS uses 1982 as the base year for computing its consumer price index, which is the most common way to figure “real” wages over time. In July 1982, the average person working in the private sector of the economy earned $271.77 in a week. In July, 2004 in real terms (1982 dollars), the average person earned $278.48 in a week. That´s not a real gain considering all the vaunted high-tech productivity amassed over 20 years – only $6.71 per week! In goods-producing industries, where advanced industrial techniques should have had the most impact, real wages have gone nowhere. In July 1982, the hourly earnings were $9.04; in July 2004, $9.08 in real terms. A four cent an hour raise over 20 years is hardly progress.
Material living standards have been improving not as the result of workers being better paid for their greater output, but because families have put more of their members into the workforce. As the DoL report proudly (?) states, “72 percent of mothers with children under 18 are in the labor force today, up from 47 percent in 1975.” And then we wonder why there are so many social problems among children today, so many “latch-key kids,” so many teenage pregnancies, so much drug use and gang violence. Society has been paying a heavy price for the failure of business firms to pass down to workers the value of their greater productivity so that they can afford to improve their living standards without placing the integrity of their families at risk.
Polls have consistently shown that most mothers of young children would rather stay home and raise them than go out and work, but they feel that the family cannot do without the extra income. The DoL reports that a higher percentage of Americans are working than in Europe or Japan as if this was progress rather than a measure of how much harder American families have to work to make ends meet and get ahead.
Instead of using productivity gains to boost wages and reward workers, businesses have used them to compete with foreign rivals, who use not only the same new technologies but also direct government aid (subsidies and protectionism) and very low wages to compete in the open American market. Americans may be the most productive workers in the world as the DoL claims (at best a questionable claim since there are many well-educated workforces with access to the same technologies and capital), but they have been losing market share not just overseas, but in their home market in the United States as well.
The DoL claims that labor productivity gains are at an all time high, but so is the trade deficit, which is on course to top $600 billion in red ink this year. And the projected areas of future job creation in the United States set out in the DoL report – nurses, truck drivers, sales representatives, maintenance workers, and retail sales managers – are all in service slots, which by nature are shielded from foreign competition (but not from our current policy of unlimited immigration). In effect, Americans are being pushed into “non-traded” occupations because they are not able to compete in the global market. And in large part this declining competitive position is the failure of Washington to craft an overall trade policy that would support U.S.-based production.
Secretary Chao is one of those most opposed to doing anything to correct America´s deteriorating international position. She is still aligned with her private sector contacts in the transnational business community and has failed to assume the duties of a national strategist that should be a major part of her government portfolio. The new Labor Department report reflects her alignment and tries unsuccessfully to gloss over her lack of vision.
William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.
"Maybe it's older, retired Americans who are willing to perform these jobs while the youth aims a little higher by acquiring some human capital - stuff that will pay off for society down the road (as long as we don't remain so shortsighted)."
If these older folks are in Bangladesh, I fail to see how it helps America.
Because when you import labor (illegal and visas) and outsource manufacturing to China and other skills to India you have increased the labor pool, thus avoiding having to raise the wages to attact local talent.
The jobs numbers are s-o-o-o cooked by the Democrats. First they tell you there's been a net loss of jobs when the population increased by 6% over the 4 Bush II years. Then they tell you that in addition to the 6% job-age growth, families are sending more and more members into the job market.. If this is al true, the unemployment rate should be at 12%!!!
Wait. I thought that it was the youth that held their noses up to these bottom-rung jobs. Can you at least keep your arguments straight or at least concede that maybe you were speaking from your arse.
And in response to what you wrote above...it frees up American labor to produce other goods and services that we hold an advantage in producing (some of which haven't even been created yet). This doesn't necessarily happen over night but it does happen and we are all better off for it. Haven't you been observing the standard of living increases over the past two decades?
Also, what do you know about trade deficits? How are the balance of payments squared away, do you know? What happens to those American dollars once the foreign banks have collected them - you know, once they (the foreign banks) have given some American the other currency in exchange for the dollars?
Do you even know what happens when foreigners start buying more from us then what we export? What happens when the capital starts flowing the other way and Americans are holding foreign currencies and assets? Strangely, it starts looking a lot like outsourcing.
See, if you had any clue about the accounting identity which states that NET CAPITAL OUTFLOW is equal to NET EXPORTS, you'd then be able to wrap your simpleton brain around the fact that you cannot retain your country's capital and also run a simultaneous trade surplus (be a net exporter). Look it up sometime!
I may not know about "about the accounting identity which states that NET CAPITAL OUTFLOW is equal to NET EXPORTS," but I do know that when we buy more of their stuff than they buy of ours, the rationale for free trade evaporates.
27 - "cannot retain your country's capital and also run a simultaneous trade surplus (be a net exporter). Look it up sometime!"
LOL - you've got it BASS ACWARDS !!!
That's exactly what made this country great, and now China is doing just that, and we are losing our shrts.
When are we going to stop using payroll as our means of determining employment? There's got to be a better way. Tax returns, maybe? I don't know, I'm not an economist. Any FReeper suggestions out there?
That's exactly what made this country great, and now China is doing just that, and we are losing our shrts.
You have it backward. I can't say that this really surprises me though. Do look it up and then learn a little something about it.
Really, I would have never guessed it. But you write so matter-of-factly when you discuss (and whine about) trade deficits and outsourcing at the same time, seemingly unaware that the two of them - through the cause and effects of the accounting identity - cannot possibly happen through the same transaction. What do you expect, a foreign country to send us their goods and for us to lay claim to their assets as well. Or, put another way, but in reverse, for us to send our exports to foreign countries but still have them purchase our debt instruments and lay claim to our assets. Boy, I'd like to have those kind of trading partners in hat first example.
Spoke like a true super-capitalist who would rather see Americans out of work and suffering rather than lose a couple of pennies out of his stock dividend.
Perhaps you could post some links for statistics on how rotten these newly created jobs are. Anecdotally, in the past year, I have hired 5 people at my company, all of whom are highly paid with great benefits. These were new jobs, not replacement hires.
While we are on the subject of how rotten Bush is, perhaps you could give me some potential names of the 3 or 4 Supreme Court Justices that John Kerry might nominate as President. Lawrence Tribe, maybe? No, not good enough. I'm sure that John Kerry, with the help of his crack staff, could find a far more bitter opponent of property rights and deregulation.
If you are going to post whiny articles from John Podesta's think tank, you should expect to take some heat on FR, and do more than cast aspersions when you are losing the argument.
If someone is "out of work and suffering", what portion of it is that person's responsibility, and what portion of it is the shareholders' responsibility?
Wrong! I'd prefer to see all Americans working and for no one to experience any discomfort but that would be utopia. I'd prefer to see the children of current Americans to grow up doing even better, less tedious jobs than there parents did but unfortunately that requires change. I'd prefer to see the goods and services that we consume become less costly (in relation to our budget constraints) and more improved on there own but without competition that would be an unlikely scenario. I'd prefer to allow someone to be a drain on federal resources long enough to be fully retrained to do any job that they like and to have never had their real income fall while they went through the process but then then the incentives would be too attractive and would invite other consequences. I'd prefer to visit a conservative message board and see that everyone had the same fundamental belief in limited government and individual freedoms but sometimes the overly emotional nature of some people stands as a barrier to ideas that make sense. I'd prefer that everyone owned some stock of publicly traded companies as well as other types of securities but, sadly, many Americans do not set enough pre-consumtion budget aside so that they can participate in delayed gratification as to enjoy future consumption - sometimes the "non-squirrel" people have envy toward the "squirrel" people and attack them with cheesy class warfare rhetoric on the blogosphere. I'd prefer that I didn't feel compelled to write the same stuff over and over again but, unfortunately, those who I think need to hear it most, never seem to be around at the same time...and even when they are, they rarely seem to get it after just one or two tries.
I've read the Hawkins pieces for quite a while and I don't see as much partisanship as you do--
Rather than being "democrats," I suspect they are old-style conservatives. Were the Dems, they'd be yapping about how wonderful Kerry is--which they are NOT doing at all.
Instead, they have proposed a comprehensive trade policy which recognizes that the WHOLE manufacturing sector is important to the US--not only in creating jobs which pay well, but in the country's capacity to produce weapons, and other goods which are necessary.
The 'non-Democrat' philosophy is exposed in their disapproval of the apparent need for women to be working; this is far more a 'traditionalist conservative' than 'Democrat' position.
By the way, in the First World, the average manufacturing % of GDP is well over 25%; here in the US it is only about 13%. Are you prepared to argue that all those other guys are wrong?
What "current campaign?"
The one to preserve the US' predominance in the economic world, or the one which Kerry has already lost?
Believe it or not, Sink, not all of us are concerned with the 4-year cycle to the exclusion of greater goods.
Nicely argued.
Correct. They provided the 'trainee' with a very good overview of the Company's sales, customer base, and operational style, allowing an individual to make informed and intelligent contributions to any of those areas after a while.
Moving these opportunities to foreign countries (or making them dead-end) does not produce useful and productive US workers.
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