November 08, 2003

Jobs, Jobs, Jobs

Reading along through Free Republic this morning, I came across a post linking to an article on some of the Congressional responses to the improving job market.

The responses were pretty much what you would have expected: Daschle tries to twist it into a negative, and Hastert tries to tie it directly to the tax cuts (although he is correct in asserting that raising taxes now would kill the recovery).

One of the commenters on the post really caught my eye though:

Expect to hear that the jobs created are merely "hamburger flipper" jobs and not of the same quality as those 'created' under Clinton.

I hate to say it, but his statement, obviously meant as a sarcastic one, is dead on accurate. The jobs being created right now are going to be, for the most part, minimum wage jobs - not the high salary jobs that came into being in the late 1990s. But it's not Bush's fault any more than the quality jobs were Clinton's.

Right now, we starting the climb out of a recession. As the economy begins the process of expansion, it is faced with a lack of consumers and a surplus of labor. So when companies hire, they tend to be very conservative. They hire people for minimum wage to try to keep costs contained.

As more people re-enter the workforce, consumer demand begins to expand pushing the economy solidly into the growth phase of the economic cycle. As demand for consumers increases, so will demand for labor until that point is reached where the economy is running at full employment.

Once full employment is reached, wages offered will begin to rise as the labor supply and demand curves cross. As wages rise, people begin job hopping and companies are forced to create "quality jobs" to recruit or maintain quality employees.

Eventually a point is reached where the whole process reverses itself, cost control becomes an issue for companies again, and the cycle starts into decline heading towards recession again.

It's simple economic cycle theory. Yes the jobs being created right now are "burger flipping" jobs. But the idea is that they will eventually lead to more spending (increasing the velocity of the money in the system) which will in turn lead to quality jobs. Like it or not, the burger flipping type jobs are the foundation of our economy. To build a strong economy, we have to start at the bottom.

Which is why I think if this recovery continues and if Bush is re-elected in '04, he will eventually end up being viewed as a President who "created" high quality jobs, just like Clinton is now.

And in neither case will the perception be accurate. They will both be the beneficiaries of an improving economy over which they exerted very little control. It's not accurate, but the perception is what it is. And in politics, perception is often more important than truth.

Posted by Chris at November 8, 2003 11:48 AM | TrackBack | Linked by:
Comments

That is exactly what the Bush Campaign wants you to think. Did you know that in October the pace of layoffs at U.S. corporations spiked by 125%a>, with employers announcing some 171,874 job cuts, from just 76,506 in September? How about that 150,000 new jobs are needed monthly to just to keep even? And the killer, Bush supports this through his actions and inactions, UC Berklee has reported that a second wave of outsourcing U.S. jobs will endanger 17 million jobs, 11% of the workforce, averaging a little less than $40K a year. The higher level management jobs are usually given to the Outsourcing Companies' managers who are here on L-1 Visas because it is cheaper to bring them here on their company salary and pay additional living expenses that it is to hire an American.

CEOs at companies with the largest layoffs, most underfunded pensions and biggest tax breaks were rewarded with bigger paychecks so don't even start to believe there will be better jobs here until the fears and objections of the anti-protectionist crowd are dealt with.

Don't get me wrong, the line is not political, it is economic. There are just as many Democrats as there are Republicans cashing in on globalization and free trade at the expense of us, the working herd. If we found a way or got desperate enough to work cheaper then they would move the work back here and the economy would improve even more.

So practice flipping those burgers and making fancy coffee drinks, those might be the most sought after jobs by 2007.

Posted by: Jim Moran at November 8, 2003 01:25 PM

Nah, the Bush campaign wants me to believe that we've moved past the recovery stage already and are already into the growth part of the cycle.

Recoveries always start by the hiring of low wage workers as the economy starts going again. As the excess labor supply is employed, wages start to rise and more management jobs are created. Every true economic recovery (and hence true turn in the economic cycle from contraction to growth) follows this pattern.

I used to ask diehard bulls in the late '90s, when they were swearing to God and Heaven above that the market wasn't coming down, "What makes this time different than all the rest?"

I pose the same question for you: What makes this time different? Globalization may cause the recovery to take longer and it may force a painful restructuring of the economy, but I don't see how it fundamentally alters the basic laws of economics.

I don't like globalization as it is currently enforced by the WTO. I think the WTO is generally an anti-American organization interested more in redistributing American wealth to third world nations through tariffs and selective trade barriers.

But I also don't believe that we need to go back to the protectionism of the 1930s. That would be taking a short term gain at the detriment of our long term economic health. And I don't think that that is a good idea.

Posted by: Chris at November 8, 2003 04:34 PM

"What makes this time different?"

1. It is now a global workforce in both management and production.

2. CEOs who produce profit by relocating labor costs get rewarded more significantly than CEOs who don't.

3. There is nothing in place to stop or even regulate the exporting of jobs.

4. The middleclass has historically absorbed and cushioned any job loss and been the economic group where more jobs were created. It is the same middleclass that could lose the highest number of jobs in the next few years. Are you telling me the higher income groups are going to make room for them?

Of course the lower wage jobs are first but look at where they are. Temps abound and with the exception of some Tech the rest are social and medical support services.

If the Berkely Report is right, the BPO outsourcing will probably happen like the Tech did. Companies like Tata and EDS, with US bases, will create Management positions but fill them with L-1s like they have this time.

The basic laws of economics were developed with countries jealously guarding their own interests. It is a global corporate world now and cheap labor builds new markets full of new consumers. The geography and politics are no longer issues as in the past.

Posted by: Jim Moran at November 8, 2003 06:44 PM


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