Reprinted from Consortium News
Federal Reserve Board Chairman Ben Bernanke has given Americans a glimpse of the ugly truth about their future job prospects. Simply put, companies have found that they can shed workers and rely on technological advances and overseas factories to operate with a lot fewer U.S. employees.
Bernanke told the Economic Club of New York on Monday that some U.S. companies might begin to add workers to meet rising demand, but he added that "other firms, facing difficult financial conditions and intense pressure to cut costs, seem to have found longer-lasting, efficiency-enhancing changes that allowed them to reduce their workforces. "
"To the extent that firms are able to find further cost-cutting measures as output expands, they may delay hiring."
In other words, Americans -- from blue-collar manufacturing workers to white-collar office employees -- won't be needed as much in the future by companies that are squeezing more productivity out of the workers that remain and are shifting more jobs overseas.
That means U.S. unemployment can be expected to stay high and wages low, Bernanke said.
"Given this weakness in the labor market, a natural question is whether we might be in for a so-called jobless recovery, in which output is growing but employment fails to increase," the Fed chairman said, suggesting strongly that the answer would be yes.
"Since December 2007, the U.S. economy has lost, on net, about 8 million private-sector jobs, and the unemployment rate has risen from less than 5 percent to more than 10 percent," Bernanke said. "Both the decline in jobs and the increase in the unemployment rate have been more severe than in any other recession since World War II.
"Besides cutting jobs, many employers have reduced hours for the workers they have retained. " These data suggest that the excess supply of labor is even greater than indicated by the unemployment rate alone.
"With the job market so weak, businesses have been able to find or retain all the workers they need with minimal wage increases, or even with wage cuts. " The best thing we can say about the labor market right now is that it may be getting worse more slowly."
Yet, while American jobs were falling off a cliff, productivity -- defined as output per hour of work -- was soaring, rising at a 5.5 percent annual rate this year, Bernanke said.
Put all this together and average Americans might want to rethink how they feel about their "free-market" economic system, now that many of them have been made surplus to it. High unemployment also may cause a double-dip recession -- and even more layoffs -- because jobless Americans won't be able to pay their mortgages or buy new cars or other consumer goods.
What to Do?
So what can be done? The obvious answer is for the government to intervene in creating infrastructure jobs directly and encouraging the private sector to spread the available work around (and not ship so much work abroad).
However, with the federal government deeply in debt (thanks to George W. Bush's massive tax cuts tilted to the rich and because of his two open-ended wars in Iraq and Afghanistan), there isn't much money to devote to any additional economic stimulus.
Thus, the Obama administration is faced with the dilemma of either borrowing more money or raising taxes on the rich to help pay for programs to increase jobs. Neither prospect is politically attractive, since Democratic "deficit hawks" keep banding with Republicans to block any more borrowing and many politicians are terrified of raising taxes, even if only on millionaires.
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