Without more workers paying taxes, we will never have the tax revenues we need to fund even limited government. We squander far too much on tax breaks for the rich, subsidies for oil companies, wars conducted by our "Defense" Department, and tax exemptions and deductions for the upper-middle and upper classes. Meanwhile we spend far too little on the investment programs that will create good new jobs for the future.

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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.

It used to be that only our manufacturing jobs were being sent overseas.   But now growing numbers of our white-collar jobs are being sent over as well.   Tens of thousands of lawyering jobs, medical analysis and research jobs, as well as engineering jobs steadily flow out of this country, to be done by English-speaking professionals who in many cases have better educations than most Americans now have, given the ever rising cost of getting a decent college education in the USA -- now approaching $250,000 at some universities.   And who gets the large majority of   Ph.Ds in engineering at American universities?   Asians.   And then they go back to Asia and ultimately start businesses that eat our lunch.

Discovery, which used to be one of the classic things that young lawyers did, is now something that is increasingly being done by computer programs.   If you are running a law firm and you can replace a $150,000/yr lawyer with a computer program, you'll do it in a heartbeat, because it's huge cost savings for you.   So, even in professions like law, computers and technology are replacing people at an ever faster pace .   (See "Jobs: Some Light at the End of the Tunnel.")

Back in 1979, General Motors provided 618,000 jobs in the United States.   Today, in 2011, that number has shrunk to 77,000.   Facebook, a $50 billion company, employs only 2,000 people.   Computers, automation and technology are replacing workers as never before.  

The new world economy, globalized in ways it never was before

There is now a single world market for both the production and consumption of   many goods and services;   they can be made or sold anywhere.     Over the past 10 to 15 years, about 400 million people -- from China, India, South Africa, Indonesia and elsewhere -- have entered the global labor force, offering to make the same things Americans make, but for a tenth the price!   That's why economic growth by itself won't create enough jobs.   Explanation:   The US economy increasingly has the capacity to grow nicely -- but without adding any significant number of workers .   America's largest companies have over $2 trillion in cash on their balance sheets.   Yet the average American, who has seen his or her wages decline over the past decade, simply cannot find a decent job.   Six people now search for every available median-income job.  

Growth and employment will likely continue to diverge, for these reasons, in this way, for the next few decades in the U.S.   Over the past decade, the large majority of our job growth was in just two sectors -- government and health care -- but neither is likely to grow dramatically over the next decade.   And without a massive new infrastructure building program, accompanied by the massive federal spending that it would take to finance it, neither is any other likely to grow to any significant extent.

Bottom line:   forget about the debt ceiling, Pakistan and Afghanistan.   The crisis of our times is the employment crisis.   But there are solutions:

We need to focus on five things that will create jobs:  

• helping small businesses,
• increased immigration of the most talented,
• retraining of the middle aged,
• something like the G.I. bill of the 1940s and 50s,
• a national bank that can greatly facilitate the rapid construction of the trillions of dollars worth of infrastructure that this country so badly needs.

 

The disconnect between economic recovery and employment growth is new

Since World War II, recoveries from recessions have followed much the same path.   After the crunch, the economy bounced back vigorously, often growing at a rate of around 6%, and employment started picking up steam accordingly.   As a nation, we seem to be banking on that same pattern recurring.   Except that it isn't.   Two years into the recovery, growth is about 2% and job creation has reached around 250,000 a month, which might sound high but is actually barely enough to keep pace with all the new workers entering the job market for the first time.   (See how the U.S. ranks in the Legatum Institute's index of prosperity.)

If unemployment doesn't drop a great deal, fast -- as it shows no signs of doing -- problems will proliferate in all directions.   The "new normal" of slower growth and insufficient job creation means lower tax revenues and more unemployment and health benefits to be paid out -- hence a much larger deficit.  

There is a way for wealthy countries to keep their manufacturing jobs

If Germany can bring unemployment down sharply, to an astonishing 20-year low, in the midst of a global recession, so can we.   The German path is simple to describe but hard to follow.   Here are the requirements:   Focus on technical education, technical institutes and polytechnics, as well as apprenticeship programs.   Specialize in high-end, complex manufactured products that can command a premium price.   Call it the BMW model.   Or, for that matter, the Pratt & Whitney model.

So what else can we do about the problem?

Retraining.   There are millions of Americans in industries like automobile parts in which lost jobs are unlikely to ever come back, certainly not at the pay they once commanded.   That means people -- huge numbers of them in their 40s and 50s -- need to find new jobs.   That in turn means we need to create retraining programs for an entire generation of workers.   And nothing we have done so far even begins to match the scale of the problem.   What we need is a program as ambitious as the GI Bill, which put returning veterans through college after World War II and prepared a generation of Americans for good jobs.   Like the GI Bill, it would have to be a program in which government paid a large share of the costs while educational institutions provided the services.   The private sector should also get involved by identifying what jobs the economy needs and creating apprenticeships (subsidized by the government if necessary) and internal training to match up with national efforts.

Double down on existing growth industries.     A huge part of any effort to create jobs should be to simply look at where jobs already are being created with ease, and to double down in these areas.   America is the world's greatest exporter of culture:   movies, TV programs, songs.   Why can't we increase these exports dramatically?   One obstacle is that foreign governments often block cultural imports or fail to protect intellectual-property rights.   Therefore the Obama Administration must make it a priority to press governments like China's, which has adopted an extremely restrictive policy toward U.S. entertainment products .   (See TIME's video "Why Cities Are Key to American Success in the 21st Century.")

Our contentious health care debate aside, the U.S. is a destination for people around the world who seek, and can afford, top-quality medical care.   Why not try to double or triple the number of people who come to the U.S. for treatment?  

Similarly, tourism accounts for millions of jobs, yet we have no plan to think about it as an industry and to increase its size.   Unlike almost every other major country, the U.S. has no department of tourism, no growth plan, no coordination, no national ad campaigns.   Far from trying to get more people to visit America, we spend a great deal of time, energy and effort scaring them away.   And it works.   In surveys by the U.S. Travel Association, an industry group, foreigners said the most important deterrent to traveling in the U.S. is an unfriendly visa and immigration process.   By scaring the bejesus out of us, bin Laden & company have crippled American tourism.

Small businesses.   From 1980 to 2005, nearly all net job creation in the U.S. occurred in firms that were less than five years old.   What that means:   We should focus on improving the "ecosystem" for start-ups and small businesses by:

• funding basic research,
• streamlining the patent process,
• limiting regulation and
• encouraging venture-capital and private-equity companies that fund new ventures.  

 

Perhaps the single biggest boon for small companies would be, as stated earlier, to let in more skilled immigrants.   We train the world's best and brightest at our universities (often at taxpayer expense), and then, just when they will begin to file patents, make inventions, start companies and create jobs, we throw them out, essentially giving all their talent and years of university education and training to our competitors.   Our loss is China and India's gain.

We also need jobs in the short run.   And this means infrastructure!   Now.   While all the policies outlined above are important, they will take years to develop and take effect.   The crisis, however, is with us now, so we need a short-term policy too.   The bulk of the job losses in the past few years have been in construction and housing, and so we have armies of unemployed or underemployed workers in these fields.   Meanwhile it is obvious to everyone that America's infrastructure is crumbling and has been allowed to crumble, badly, over the last several decades.   The American Society of Civil Engineers gave U.S. infrastructure a grade of   D and estimated that we need to spend $2.2 trillion to fix our airports, bridges, highways and train systems.   Senators John Kerry and Kay Bailey Hutchison have made innovative proposals that would fund infrastructure projects through a national bank, allowing the private sector to participate, as it already does in many countries .   (See "Out of Work in America: The Faces of Unemployment.")

We have bridges falling down for God sake, streets and highways that cry out for repair, underground gas lines that are exploding, sewage pipes that are leaking badly, and airports that need building.   So we've got to come up with some way to finance infrastructure that will allow us to very quickly employ hundreds of thousands, if not millions of American workers.

There are ways to do this that are not particularly costly to the general public.   We can develop infrastructure banks and forge public-private partnerships.   America is one of the few countries in the world that doesn't allow the private sector to participate in building and financing public infrastructure.   But why shouldn't we open it up so that we can get the capital we need, which will in turn help create the jobs we so desperately need?

Our entire economic conversation these days is about the country's debt, which is understandable and appropriate because our debt is clearly unsustainable in the long run.   But we also need to find ways to solve the unemployment problem;   otherwise everything else, including the debt problem, will get much much worse.   Why?   Because without more workers paying taxes, we will never have the tax revenues we need to fund even limited government.   Right now we have our priorities badly skewed.   We squander far too much on tax breaks for the rich, subsidies for oil companies, the wars conducted by our "Defense" Department, and tax exemptions and deductions for the upper-middle   and upper classes.   Meanwhile we spend far too little on the investment programs that will create good new jobs for the future.   We need to address both problems in a grand national rebalancing -- and we need to do it fast.     In short, we need to do all of these things because America faces a huge structural problem -- a jobless recovery -- and no single action will be enough to help American workers recover and prosper.

Read  more about all this.

Authors Bio:

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.