50/50 to 20/80

I wrote this letter to the editor of my local paper some months ago. It still applies. An 'economic recovey' without sufficient job creation. The article informs why ...

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The editorial “Economic Surge” in yesterday’s Times informed us that our supposed economic recovery has been coupled with increasing job losses and declining wages. It was also stated that improving such economic indicators matters more than this quarterly rebound in GDP.

I agree. But the real question is, how likely is it that we will see an improvement in this area? A recent report released by the Federal Reserve Bank of New York provides some insight.

The report states that all recoveries combine cyclical and structural job adjustments. Cyclical adjustments are "reversible responses to lulls in demand": industries lay off workers during the recession and then rehire them when business activity picks up. With structural adjustments the losses are permanent: industries eliminate jobs, forcing workers to seek new employment in other industries and sectors.

Whereas previous recessions have seen a 50/50 mix of cyclical to structural adjustments, the current situation pans out to be 20/80 cyclical to structural. In simpler terms, 8 out of 10 jobs lost in this recession have been outright eliminated from their industry. Where are these jobs going?

One answer is that jobs are going overseas. While it is difficult to determine an exact number (last December the Bush Administration quietly axed a Department of Labor program that tracked mass layoffs of workers when factories close and move overseas) it is safe to say that the answer is, “too many”. Another answer is that jobs are moving from the well-paying manufacturing industry to the relatively low-paying service industry.

Chances are that any future ‘job creation’ will result in more low-paying service sector positions. In addition, American workers are continually forced to compete with the sweatshop wages paid in many overseas countries, further depressing wages at home. American wages and thus American purchasing power is in a long-term downward spiral.

The Bush Administration’s tax cut and pro-business policies may have sparked a one-quarter jump in GDP, but it won’t stop the bleeding of the American middle class. We need a real plan for recovery, one that encourages American businesses to hire Americans and one that requires our trading partners to pay their workers a minimum wage. I hope President Bush has the political courage to step forward with a true economic plan, instead of trying to pass off his tax-cut plan as the answer.

I doubt he does.