In Time Magazine, and on Eliot Spitzer's new TV show, Fareed Zakaria recently warned of a "lost generation" of American workers and examined the factors that are leading to that. Zakaria also has a long post on the Global Public Square. All this is summarized and integrated into the synopsis that follows.
Most of us don't realize how large the unemployment rate really is. We're told we have about 7 million unemployed. Actually, if you take into account all the people who have stopped looking for work, all the people struggling to be "in business for themselves" but failing, as well as all the people who can find nothing more than part-time jobs, and if you add them all up, you have 24 million people unemployed, not the official 7 million. Thus, in reality we currently have almost great-depression-levels of unemployment. And if we ever brought the troops home from Afghanistan, Iraq, Germany, Japan and Korea, and had an incarceration rate no greater than that of say, Holland, the percentage unemployed would soar way beyond what we had during the Great Depression. No wonder our government is hiding such facts from us! -- if such gruesome truth ever become widely known and understood, the recession (from which some say we are emerging) would take a nasty second dip -- one that would quite possibly be far more extensive than the first.
Aside from the fact that such massive unemployment means that our state, local and federal governments are already collecting greatly reduced amounts of tax revenue, and our budgets get screwed up accordingly, especially at the state level, the personal tragedy of unemployment is that millions of people are steadily losing both their skills and their work habits. The result: these people are lost as contributing members of society; society then suffers the consequences in all manner of ways. And then all notions about fixing the federal budget are completely thrown out the window. Why? Because they are based on the presumption of tax revenues from jobs and production that no longer exist.
Take President Obama's budget. It presumes that over the next decade we will create 20 million new jobs. Yet over the last decade, we created only 1.7 million jobs. So how realistic is Obama's budget presumption?! Not very.
There are two things going on here that explain all this
The first is technology. If you look at the American economy right now, we are indeed back to a pre-crisis level of GDP, which is about $13.5 trillion worth of goods and services produced annually. We're producing the same number of goods and services as we did in 2007, but with seven million fewer workers! Yes that represents a productivity increase, which is admirable. But what it also tells you is that we are achieving greater productivity primarily by firing people. In virtually every industry, technology is replacing people.
Conventionally minded economists would say additional productivity is good because it produces greater wealth, and the people who are displaced by that technology can then get new jobs in new sectors. But what's really happening here is that those people who've been displaced continue to sit on the sidelines, in America, and the new jobs being created . . are being created overseas.
Meanwhile, technological change is happening at warp speed. And in addition to the technological change, you also have growing global markets, provided by these growing millions of newly employed consumers overseas, who comprise the new and increasingly very well educated global labor supply. The result is that there are much-cheaper workers doing the same kinds of jobs overseas that Americans used to do here, and as their pay rises they are also buying ever more of the products that they and we produce. The two things together -- technology plus globalization -- mean that the average American worker is feeling a kind of push-down pressure that he's never felt before. In a nutshell, the variety and amount of finished goods that the US supplies for export are being steadily reduced as others around the world supply not just that production -- but also supply ever more of the consumption that used to take place in the USA. This is forcing ever more Americans into both unemployment and poverty.