The current employment statistics in America look pretty good, they say that we’ve basically reach full employment. That’s great, right? But the poverty statistics, and fates of various industries are not so sure about that.
One might expect that with high employment, there would be more economic activity, investments, more major purchases, like homes, more families, a natural population growth, etc. But that’s not what’s happening. The generation that is of child rearing age isn’t replacing itself the same way the previous generation did. They’re not buying homes the way their parents did. And numerous industries which sell products aimed at families and kids are feeling an economic pinch.
Before getting into the weeds about demographics and markets, let’s take a good look at our initial point of concern, and that’s the employment factor. While we might see a statistic that looks fantastic in its generality, we’re not seeing the benefits of such a reality because of the fact that what we’re not getting here is quality of that employment. How much of that employment is full time, how much of it pays a wage that someone can afford to live on? How much of it is part time? How much of it might actually be qualified as a sort of side-gig? How much of it matches the qualifications of its workers? The list goes on.
Frankly, the answer to these questions, and more, is that for a substantial number of people, it doesn’t do any of that, except provide some pocket change and take up time.
Jack Kelly over at Forbes gives a brief description of what the scenario entails:
The government and media have been reporting that the job market is remarkably tight. The unemployment rate is at 3.8%—a historic low. Economists contend that 5% unemployment is deemed full employment. This means that pretty much anyone who wants a job already has a job or could easily attain a job. The rationale is that it is anticipated that there will always be a given number of people out of work—not because the job market is soft, but rather due to miscellaneous reasons that leave a number of the population without a job. There is always going to be a certain number of people between jobs, but that does not fundamentally reflect the soundness and strength of the job market.
Since we are at 3.8%– which is lower than 5% (I’m pretty good at this math stuff), we should be celebrating. Sadly, I don’t believe the hype one bit.
We are not getting the full story. If we have better-than-full employment, the following things should happen:
- Wages of current workers should rise, as there is pressure to keep employees from being poached by rival corporations due to the shortage of workers. It’s “Economics 101” (my son just took this course as a college freshman, so I’m an expert on the matter). If qualified employees are scarce and in short supply, the cost (i.e. salary) should rise. But employee wages are stagnant and not increasing.
- Companies should be offering a premium to recruit workers since they are in short supply, but they’re not. Most firms are not offering attractively high offers to job seekers. This doesn’t make sense if there is full employment and a shortage of talent. If the job market was so tight, companies would be forced to offer higher starting salaries to people to entice them to join their company. However, this isn’t happening, so why would current candidates leave their current position for a new firm?
- If there is truly a shortage of candidates, companies would have to lower their standards and hire people without all the requisite qualifications. Because of this, they would offer the incoming candidates training to help them learn the job. However, this is not the case. In fact, if you look at job descriptions lately, the requirements listed are ridiculously long and the compensation is far less than the job calls for.
What I think is happening is that people are working, but we are not given the full truth.
- Millions of millennials are working at McJobs—jobs that are debasing and unfit for their $200k education. Yes, they may be working, but it is not the type of job they want nor does it measure up to their educational investment.
- Millions of people have dropped out of the job market and are not counted in the government data. If you stopped collecting unemployment checks, you simply disappear; the government doesn’t include you in their data. Therefore, even though you are looking for a job, you are unaccounted for. These unemployed folks have conveniently fallen through the cracks.
- Similarly, millions of people have simply given up hope. As a result of age discrimination and other perceived injustices, distressed job seekers throw up their hands in defeat and abandon their job searches entirely. Maybe they’ll settle for some part-time work or try to live off of their savings. Unfortunately, the outcome looks bleak for these folks.
- We have witnessed the ascendance of the “gig” economy— a “side hustle” or whatever sexy-sounding title you want to assign it. People are pushed into working short-term, going-nowhere contractual engagements. It is scrapping and clawing to constantly find consistent work.
- Also, the data doesn’t count a person who is working and just holding on by the skin of one’s teeth. They come to work each and every day worried about losing their jobs, having to relocate to a cheaper location or another country, being replaced by someone younger and less expensive or superseded by artificial intelligence.
- Baby boomers are desperately clinging onto whatever jobs they have. Without corporate pensions and having lost money in the financial crisis to reinvest into the bull stock market, they don’t have the money to retire.
The objective for this piece is to provide a more realistic perspective on the job market. Job seekers can become very depressed, disheartened and discouraged when they read the headlines about how great the job market is, while they themselves are either unemployed or underemployed. They feel alone in these circumstances, but, alas, they are not. I hope that, while I’m not offering you an answer today, at least you can have some comfort in knowing that it’s not just you, but rather a bigger trend that’s impacting millions of others just like you.
What America has here is a wage problem, and Trump is taking the long way, around the world, to solve it. Imagine if you’re in Ohio and you want to get to New York. Instead of heading East, you go West and circumnavigate the globe to get there. That’s exactly what Trump is doing by starting trade wars in the hopes of bringing jobs into America. But even if he is successful in motivating industries to open up in America, as it currently stands, the industry that is currently in America only pays its workers around $18,000 a year, with those workers still having to rely on food stamps for their survival. In the end, Trump is not solving for X, he’s simply moving it from one side of the equation to the other.
The wage problem would still have to be addressed. Trump is part of the baby boomer generation, and in their memory they remember manufacturing jobs being good paying jobs. In America’s time of greatness, post WW2, when America had this amazing prosperity, the average manufacturing laborer in Detroit was making the equivalent of $50/hr by today’s standards. But, at the same time, the average menial worker was on average earning $20/hr by today’s standards. What’s happened here is that the fruits of labor are no longer earned by the laborer, but end up in the hands of an investor class of shareholder, rendering today’s American economy to little more than usury.
There are two sorts of wealth-getting, as I have said; one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural.
– Aristotle, Politics
While many may perceive that a living wage is economically infeasible, this is inconsistent with the mode of compensation and labor in that post WW2 period. If living wages were the death knell of a company, no company which operated at that time should have survived. But they are now some of the world’s largest and richest companies today. When America was ‘great’, Americans were earning a living wage as a minimum wage. The American president who took America through the Great Depression, when he instituted the minimum wage, expressed how he perceived it
“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country…. “Without question, [the minimum wage] starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.”
In the end, the problem of employment is not merely its quantity, or the quality, but also in its capacity to render compensation for labor rendered. Without tackling this issue, increasing the sheer number of jobs does not address the core problem of poverty or of jobs meeting the needs of the population.
It looks like Trump should take a few pointers from Russia’s Putin, who has brought Russia from an economic nightmare to being a world power. Putin knows that Russia can’t be great if its people are impoverished.
Some may believe that America is at a disadvantage and therefore cannot offer a living wage due to its trade deficit. But this is a mistake, because America does have an export: dollars. Thanks to Breton Woods, it exports dollars. This is what gives America its global hegemony. This is what makes America the richest country in the world.
America chooses to concentrate its wealth not at the ground level, but in an elite class of usurers. To change the fate of the American citizen, one does not need to bring about the end of the post WW2 era, but merely to usher in some updated policy changes.