An economist recently released an interesting study about employment in America since 1900. The graph showed wage increases and decreases and what might have influenced the changes.
When the graph starts, you can see very shallow growth in wages with a big drop during the great depression. After WWII wages climbed rapidly until the mid 1970's then it flattened out and has now been on the decline for the past decade.
This economist suggest that because Europe and Japan were destroyed and America was not harmed, thus we became the only supplier of goods to the world. American business had no competition. With this came great prosperity as these countries rebuilt. Labor unions covered over 50% of workers in the US and thus helped the middle-class obtain salary increases regularity and faster than inflation. Thus the average person had more disposable income for all the new technology items being developed. Home appliances, automobiles, airplanes, TVs and radios, stereo record players, etc. etc. etc.
But in the '70s, several things came about that altered this growth. Europe and Japan had completed their rebuilding of their factories and infrastructure, most designed to be more efficient and have a lower cost of operation than the legacy industry in America. These countries became very competitive in producing goods at a lower retail price. Remember when buying Japanese made goods was much cheaper than American made goods? American businesses saw this change and started to move manufacturing to these countries to save money. Steel plants closed and moved, the auto industry closed plants all over as Japanese and European cars started to flood the US market at a cheaper price.
At the same time computers were being introduced in a big way into corporate operations. This eliminated a lot of jobs that were no longer needed. Bookkeepers, data analysis, engineering, etc.
Also in the '70s, American opened easy immigration to Latin and South American citizens, as well as most other countries. Part of Nixon's international engagement policy. They came by the thousands flooding more people into the work force.
Nixon opened China to US businesses. It took a little while, but they got the hang of capitalism and the race was on. By the 1980's the trickle became a gold rush to move jobs to China. China was handing out huge sums of money, borrowed from America, to give to corporations to move their factories to China. Part of Reagan's continuation of Nixon's policy to bring China into the western capitalistic economies. They paid off those loans by converting those notes into US treasury bonds, so we now owe them now.
We also had the huge number of baby boomers coming out of high school and college and entering the work force in the 1970s. I being one of them.
Another major event was women's liberation. More and more women were hanging up the apron at least part time and then full time to have a career. This added more people into the work force, and thus we entered into a recession and high inflation.
Since there were so many people looking for work, it was an employers delight. Wages and benefits started to decline as people were willing to accept less than before.
One more factor in the '70s is that is when the world reached its maximum output of oil. Raw supplies of oil in the ground have been declining ever since. With this has come the rapid increase in energy costs. This has greatly impacted purchasing power of consumers and increased operating cost for business.
In the '80s robotics started being used in manufacturing. This again has displaced millions workers in the past 30 years. This automation of industry has only acceleration faster every year as technology improves its capabilities. Even in the food processing business, it takes fewer people to harvest and process our food because of technology. Japanese automobiles captured the market even though they are now on par in price. However, the quality and reliability was superior to US made cars. More jobs lost.
We saw a slight up swing in the '90s with the improved economy and dot com bubble. But when that crashed in 2000, so did the wage increases and it threw more people out of work.
Than came George W Bush and his economic policy that made it more attractive to manufacture in Asia, than in America. He, as did Ronald Reagan, wanted to crush the labor unions so to void their power in assisting the Democrats win elections. Additionally he very actively instituted the Starve the Beast economic policy of reducing taxes, mainly on the wealthy and corporations and increasing spending at record level to drain the treasury to the point of the huge debt we have now. This would then force the government to eliminate most every service it provides, especially the social safety nets such as Social Security, Medicare, Medicaid, Unemployment Insurance, Veterans Benefits, etc.
With this economic policy going at full steam, companies were shedding jobs at a rate we had not seen since the Great Depression. Then the mortgage and stock market collapse, and more jobs are lost form company failures and the downward spiral when you have large numbers of workers loosing their jobs and homes, they no longer buy but just the basic necessities. Without demand for goods, companies can't stay in business.
So now we are left with a situation that we still have huge numbers of people entering the work force every six months, seniors are having to work longer before retiring, thus no openings for the new job seekers and we still have huge immigration, both legal and illegal that add to this over supply of labor.
The private sector can't produce enough jobs for all these people to obtain employment. Even if manufacturing returned to America, it will take years to do so, huge investment in infrastructure that we are not doing, and even then the system can not absorb the number of people entering the labor market and re-employ all those who have lost their jobs.
It is estimated that it would take over 800,000 new jobs every month for the next ten to fifteen years to reach our prior 4.5 unemployment rate. The current 100,000 to 200,000 new jobs will not achieve this end. So we will have a permanent high unemployment rate.
Lowering corporate taxes and that of the wealthy will not generate new jobs. Why? If there is no demand because wages are at survival level and there is high percent of the population unemployed, who is going to buy the goods and services, if a company increases output of goods without demand? What, have a high cost of warehousing product that is not selling? I don't think so...
What's next? Out migration. A significant number of the work force will have to move to other countries for employment. However, most of the developing countries, like China and India, are already over crowded and need every job for their own people, so finding a job there will be near impossible, unless you have some skill they desperately need. This out migration could lead to a brain drain, meaning, the very smart and creative people who have been the backbone of American ingenuity will move to other countries for employment taking their skills with them. America use to attract the smartest and brightest to work here.
Look at Japan, it has been in a recession and high unemployment for nearly 16 years now. Why? very much the same reasons as here in America. The good days of post WWII rebuilding have gone. Over population of the earth has created more workers than are needed. Computers have reduced the demand for labor for the same output as before computers and robotics.
There is nothing President Obama or Congress can do to make any major effect on this situation. We can throw more government money to create infrastructure, which we need to do and that will help, but President Bush left us with such a high debt that we can't afford this model to recover sufficiently enough to attract businesses back to America to do business. Tax cuts alone will not be enough to bring them here. It will require our wage scale to decline to the point it is equal with China, India, Indonesia and maybe very soon North Africa, as well as other developing countries.
So what to do with all the unemployed? Let them live on the street begging for coins? It could easily be hundreds of thousands if not over a million and could become homeless. The warm climate communities will feel the impact the most as that is were they will gather. We will see the soup lines like we had in the Great Depression. You will see children roaming the streets, worn out cloths, dirty, hungry and depressed. This is the future, there is not much we can do about it in the short term. Especially with the lack of care by the Republican Party and misunderstanding of the economic situation we find ourselves in.
You will need more than a three year food supply to weather out this storm.
Hope for the best, but plan on the worst.
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