Employment Solutions?

My previous blog concluded the current unemployment and underemployment situation is permanent due to infrastructure changes and technologies resulting increasingly in non manual jobs able to be conducted from dispersed locations with less expensive labor costs.  Replacement jobs are at lower wage levels than lost jobs: 58% of the new jobs are lower wage jobs (less than $14 per hour) while only 42% are at higher wage levels.  The majority of lost jobs are middle wage jobs ($14 to $21) per hour.

The employment problem is identified with the solution jobs commensurate with training levels that provide sufficient salary and benefits.  The solution space is not one unique solution, but a group of potential solutions that has major constraints: any solution is an anathema to a large group of people.  We need solutions that are not one group digging a hole and another group filling the hole, nor do we want all solutions to be one shot deals, such a building a bridge.  Many different trades employing a large number of people are needed to design and build bridges.  Less are needed to maintain the bridge.  This is similar to building a house as different skills are need full time for a short period to build the dwelling, but the electrician, roofer, carpenter, etc., are not kept on full time retainer after occupancy.

Any solution needs planning, but our society objects to long run planning.  Economic enterprises are geared to showing immediate profit on a quarterly basis with a good SEC 10-Q at the expense of long run planning.  Any idea of long run planning is a definite 'no no' as it is viewed as similar to old style communist nation five and seven year plans.  Our economic enterprises are expected to be independent of state control and are oriented toward returning profit for owners, generated by selling goods and services to the best market without Government restriction.  Currently, a private enterprise cannot be forced to sell in a given market or be prevented from outsourcing labor.  Any major change in the employment issue requires joint Government and private enterprise cooperation, which is an anathema in our society.  

This is a major change in our mind set and requires structural change to Government, especially with the plethora of regulatory commissions, agencies and subagencies duplicating efforts and bogging down implementing new ideas.  The change would be an anathema to vested interests, including lobbyists, the entrenched civil service bureaucracy and the excessive reliance of using contractors to supplement Government services.  Labor needs to realize the increased costs engendered by prevailing wage legislation limits competitive labor costs.

Government needs to be cut back and its resources reallocated to solve the employment problem.  Everyone has some vested interest in some Government program with an attitude of 'I've got mine and want to keep mine' or cut the other guy.  The cuts will include large items like 'entitlement' programs and the military.  The other approach, also unpalatable, is to raise fees and taxes.  

We can ignore the employment issue and try to make due with what we have, but in creative ways.  Firms reduce expenses by giving overtime rather than hiring more workers since a new worker means more fixed costs; we can do the opposite and have a 30 hour work week in lieu of the nominal 40 hours.  This presents problems in reduced salaries over 30 hours or increased costs if the salary for 30 hours is the same as the previous 40 hours.  Another approach to the issue is to accept a lowered standard of living compared to the past and live with facts like China will overtake up as the largest economy.  This is a third anathema since it means a destruction of the American Dream.

The only solution is to bite the bullet, play another game and have a major change in mind set of all parties.  The mind set must understand:

• Every group and vested interest will have to cut back and make concessions.  We need a war time mentality, and at the same time cannot continue to have a military costing more than the military of the next ten nations, including China and Russia.
• Certain economic freedoms will be limited. Laws need to be developed to prevent the export of intellectual knowledge.  Tariffs may be needed.
• Solutions cost.  This will mean higher taxes and more expensive consumer goods for a prolonged (decade plus) time.  The latter is due to decreased disposable income for all and the result of the inevitable trade wars due to actions of other nations.
• Social services will change.  Increased employment may be in social services, especially as the population ages and funds for entitlements decrease due to the decrease in funds incoming to Social Security. In addition, birth rates will decline resulting in a major change in our approach to education.  Social services may be needed for psychological support as we are weaned from 'consume and pay later' to a 'stay within your means' mentality.
• Risk must be faced and failures accepted.  We need more joint private and public coordination in new technologies with potential employment.  This is a major challenge given recent failures in joint efforts for solar power and electric cars.  This will be a challenge of balancing Government centralism with federalism and free enterprise.  We need to understand a failure to plan is a plan for failure.

There are five critical areas where jobs can be generated and maintained:

1. Energy Infrastructure - One of the ironies of our rapid industrial development in the past is the means of distributing energy was developed in the past.  The result is an antiquated Rube Goldberg distribution system approaching third world status.  Energy blackouts and power loses are becoming an accepted way of life, as witnessed by Sandy and rolling summer brownouts.  Current and future technologies can resolve this issue and result in a strong economic backbone.
2. Water Distribution - Major urban areas are becoming dry with a lack of sufficient water.  This is also becoming a world wide problem with increased population lacking potable water.  This is an opportunity to take the lead in solving this problem, just as we took the lead in durable consumer goods production 100 years ago.
3. Transportation - Individual transportation can be enhanced by new internal combustion engines and development of alternative propulsion methods.  Mass transportation, especially in railroads and lighter than air platforms will provide employment.
4. Road Infrastructure - Our roads and bridges get a report card grade of just passing.  There has not been a major upgrade since the Interstate Highway System of a generation ago.
5. Education - Tablets are affordable yet the school room at precollege levels is still paper based.  New technologies make it possible to have more individualized instruction including remedial education and advanced instruction catered to a student rather than a class.  This can also be applied to higher education levels at a lower cost than current college costs.

None of these critical job producing ideas are unique to this author.  Others discussing similar concerns are Jeffrey Sachs 'The Price of Civilization' and Edward Luce's 'Time to Start Thinking', both widely available in paperback.

The needed changes shouldn't be viewed as a sacrifice or an economic malaise, but as a challenge to make us better.  Sometimes tough medicine is needed.

We need to realize we have a major, critical problem.  In the words of Walt Kelly, the cartoonist of the now retired Pogo comic strip: 'We have met the enemy and he is us'.  The longer we wait, the greater the costs.