Fundamental changes are taking place rapidly in the US economy to the extent that the period we are in right now will eventually earn its own title like eras that have come and gone beforehand such as: the Agricultural Era, Industrial Era, Information Era. Lacking a formal name I will simply refer to it as the “Death of the Traditional Job Era“. Yes, I know its not short and catchy yet it is adequately descriptive.
Why do I believe this is true. The following seven reasons are a good start. Lets take a look.
#1 Unemployment is Massively High and Continues to Rise
Official unemployment numbers rose again last month from 9.4% to 9.7%. Another 262,000 people lost their jobs. The numbers were equally divided between manufacturing and service industries. At 10% unemployment approximately 15,000,000 people are unemployed. These numbers don’t count those who drop off the roles because their benefits period has run out or those whose ‘jobs’ didn’t qualify for unemployment compensation, or who just gave up looking, nor those ‘underemployed’ due to cut back in hours. Considering these factors, real unemployment is much larger than the ‘official’ numbers and is estimated by some economists to be 16%. At 16% one of every six employable Americans are out of work which means 25,000,000 unemployed workers. How long do you think it will take to absorb 25,000,000 workers into the American economy?
#2 Unemployment Lasting Much Longer
The unemployed remain unemployed longer than we’ve ever seen since the Great Depression. Currently 5,000,000 have been unemployed for more than 26 weeks! That is 1/3 the official unemployment number. I personally know many who have exceeded a year without finding a job. [I am one of those, however in my case it’s my choice]. After benefits are exhausted the counting process becomes highly suspect as people simply drop off the databases and are no longer counted.
Wall Street Journal tracked fifteen unemployed aged from mid 20’s to mid 40’s. After nine months only 8 of the 15 had found employment…slightly over half. Of those that found a job their new incomes ran from 30%-80% of their former earnings! One had to relocate to get the job and one was working for free as an intern in a new industry. Interesting this WSJ sample featured primarily younger workers (most in 20’s to 30’s). The issue of longer term unemployment gets worse the older the worker and the higher the pay. This is a new phenomena affecting white collar workers and they’ve not experienced this during previous downturns. Experienced workers over 50 are finding it particularly difficult to find a job even with ‘age discrimination laws’ in place. Employers frequently apply the misguided concept that the currently unemployed are less desireable candidates than a currently working applicant, no matter the facts which created the unemployment.
#3 Jobs Continue to Migrate Overseas
US companies continue to move jobs overseas to benefit from much lower labor costs and to avoid US taxes. Job migration has affected manufacturing for decades. Now however the newer twist is the migration of white collar jobs to places like Ireland, which has the lowest corporate tax rate or to India which has the best educated workforce. In a recession the pressure on business is always to reduce costs versus raising revenue and this recession is no different. Therefore layoffs continue and outsourcing will continue as well. There are no compelling economics to cause a reverse of this trend, in fact, additional regulation and taxation promised by the current administration simply creates even more incentives for companies to move work out of America.
#4 Massive Federal Spending Means Higher Business & Payroll Taxes, ie: Less Jobs
There’s no doubt the current administration is hell bent to raise taxes on ‘wealthy individuals’ and business owners. In other words taxes will be raised on precisely the people who pay them now and who employ others. No surprises here. Massive federal spending on bailouts and stimulus packages have already run the national debt to over $1 trillion and that’s without adding the burden of national health care. Business regulation is on the rise which increases the cost of doing business. Employer’s favorite solution to rising costs is to reduce expenses by reducing employees. This technique is proven to have the quickest affect on the bottom line. If business volume is down the employee isn’t needed anyway. If business volume isn’t reduced, the work can be piled onto another employee grateful to still have a job or ‘outsourced’ overseas. There is no escaping the economic facts that as government increases the tax burden on American business they will find a way to pass it on or eliminate it. In high times passing the cost to the consumer works. We’re not in ‘high times’. The only alternative is to eliminate the cost by moving labor overseas, or moving a complete operation, plant or business overseas. Business isnt evil by such moves, they are chartered to make the most money for their shareholders. It’s a business, not a ministry.
#5 Technology Plays a Key Role in Reducing the Workforce
Computer technology has advanced so dramatically in the past decade that companies are more efficient and employees can accomplish more in a work day. Remember how the industrial robot reduced the number of factory workers at GM. Look inside non-manufacturing businesses for example at administrative support. With the spread of PC’s, ‘Office’ software, networks and email, the role of administrative assistant is non-existent today except for the most senior executives. Worldwide communication networks (private and internet) allow access around the globe, around the clock, eliminating geographic requirements and providing access to special skills no matter where located. That’s why an executive (or anyone for that matter) can use an India based Virtual Assistant to do most anything he/she needs done. Even small companies can afford top notch Virtual Assistant talent at $10-15/hr to build a website, handle customer service functions, schedule appointments and still order flowers for the spouses’ birthday! The Virtual Assistant’s rate isn’t “burdened” by pay for Holidays, Vacations, Sick Days, nor the additional costs for FICA/Medicare/Workmens Comp/Unemployment Insurance/401K/Health Plan, etc. The rate is the rate….that’s it. The effectiveness of remote support (Virtual Assistance) due to today’s technology presents an irreversible trend which permanently affects an increasing number of job categories.
#6 Two Income, Now Divorced, Households (TIND Households)
A factor affecting traditional employment is the dual affect of the workforce migrating from one breadwinner per household to two income earners coupled with a high divorce rate. Looking back a generation or two, demographics were dramatically different. A household typically meant one breadwinner ( father) while mother typically remained home raising two children. As we evolved to both parents working we became accustomed to living on two incomes. Introduce a 50% divorce rate and family economics change dramatically.
With divorce the ‘traditional family’ is split and lives in two homes doubling housing costs for the ‘family’. Imagine mother or father losing their job. The same ’family’ has one income to support double the expenses. Imagine both losing their jobs. Now you have 2 sets of living expenses and 0 income. Can you say “Foreclosure”!
This doesn’t account for the fact we have so many more ‘needs’ (expenses) today that werent even available to prior generations such as cell phones, cable TV, computers, household services from pool service to pest control, alarm systems to landscaping. Our standard of living is so much higher so the fall is much more dramatic.
The critical aspect to the topic of (TIND) families is losing jobs for an extended period frequently means Foreclosure, then Bankruptcy, then loss of Confidence and Self Esteem and feeling of Self Defeat. It’s very difficult to be up for a job search with all that ‘baggage’. It’s also very difficult to recover from such dramatic economic hardships as extended periods without a job , foreclosure, perhaps bankruptcy.
Core to this crushing financial scenario is that we’re living with so much more debt, living beyond our financial means in the good times so for many when the bad times come their is little or no cushion. This isnt directly attributable to unemployment, it simply makes the blow of unemployment much more crushing.
#7 Jobless Economic Recovery
There are some signs of economic recovery such as the stock market breaking 9,000 (remember when it was over 14,000) oil prices rising, gold rising yet unemployment continues to climb. The media and government celebrates improvements in unemployment if the monthly rate of new jobless is less than 500,000! Imagine how the 260,000 laid off last month felt when they heard the economy was improving because only a quarter million people lost their jobs. That’s insanity! The term ‘jobless recovery’ is being batted around these days to indicate the economy can recover even though unemployment may remain unacceptably high. This has never happened in the history of the country but global economics have never played the part they do today.
How can a jobless recovery happen?
-It happens when you have a global economy where manual labor can be outsourced to cheaper labor in other countries.
-It happens when you have global distribution systems that can ship your product worldwide overnight.
-It happens when computer and communication technology is so sophisticated that most all impediments are removed for having your ‘workforce’ spread throughout the world.
-It happens when well educated, English & Spanish speaking workforces become available in other nations.
-It happens when the tax laws of your country become so burdensome that you seek relief outside your native country for the sake of profitability and survival of your company.
- It happens when you have grown to such a size (economy of scale) that you have eliminated much of your ‘local’ competition [small/local business gobbled up by big business]
-It happens when an ‘economy’ is based on paper transactions instead of producing real goods and services.
In summary, those are the 7 Reasons the US doesn’t favor a return to traditional employment, even when the economy improves.
Pulling out of past recessions has always been followed quickly by full jobs recovery where unemployment settled between 4-5%. It did that rapidly in all recessions up to 2001. In that recession the jobs recovery was slower and incomplete. According to the Wall Street Journal, the US has been experiencing increasing unemployment since mid 2007…over two years now. The most current forecasts say that we may see a net increase in employment by 250,000 jobs by mid to late 2010! In other words a year from now we would still have rampant unemployment (over 9.5%) although the economy is “improving”!
What Does All this Mean to You?
What it means to me is that everyone whether currently employed should figure out alternatives to a lifetime of traditional employment, so they’re not caught unprepared.
That’s what we’re about at Get Going 2 Get Growing, helping people find alternatives to traditional work to improve financial security, freedom and independence from a certain decline in jobs that will last for years to come.
