Sunday, February 1, 2009

The Obama Job Plan and the Troubles Ahead

President Elect Obama has set a goal of 3 million more jobs in the first two years of his administration, which was revised upward from 2.5 million more jobs in two years. With day to day reports of mass layoffs, jobs off every month in 2008, and down 2.6 million for the year that might sound like the modern version of the impossible dream. (1)

Goals and Needs

Despite our worries 3 million new jobs over 2 years, or 1.5 million more jobs per year, is a modest goal compared to America’s job needs. The last month America had 12 months with at least 1.5 million more jobs came in July 2007, when jobs were up 1.51 million over July 2006. Between January 1990 and the present 142 out of 228 months had job gains at least 1.5 million for the preceding 12 months, also known as year over year growth.

Trouble is year over year growth averaged 2.1 million for months from 1990 through the end of 2000, but only 700 thousand for the months from 2001 to 2008. Over those 8 years the adult population has been growing at more than double the rate of establishment jobs. If the growth of establishment jobs equaled the growth rate for population, America would have 13 million more establishment jobs instead of actual job growth, which was 5.4 million.

Job growth needs to be 1.6 to 1.7 million new jobs a year just to keep up with the growth of the working age population. Spread over two years, 3 million new jobs does not keep up with population growth, or recover for the loss of 2.6 million jobs for 2008. Given America’s long term trends of population change and the future need for jobs, creating 2.5 to 3 million jobs over two years does not meet America’s needs for more jobs.

Service Jobs – Expectations and Reality

America must have more service jobs if it is to have any hope of meeting the need for more jobs. Manufacturing employment continues its mordant, mournful decline, down 4.1 million since January 2001 and now less than 10 percent of America’s establishment jobs. The entire construction industry including big civil engineering projects, along with residential and non-residential construction has only 5 percent of national establishment employment. The Bureau of Labor Statistics reports the highway, street and bridge part of the construction industry has only 345 thousand jobs. New jobs have to come in service industries, which means new service jobs have to cover the losses in manufacturing and effectively bear the entire burden of generating America’s new jobs.

Even though service jobs are 84 percent of establishment employment and climbing, only selected service sectors have more jobs. Some service sector jobs are declining; others barely increasing. For example, trade, which is wholesale and retail trade, has such slow employment growth that its share of employment keeps falling. Using computer technology for barcodes and inventory management, increases labor productivity. Sales volumes per work hour are up in retail and wholesale and sometimes at rates comparable to productivity in manufacturing.

The availability of digital technologies reduces the demand for labor in information services, where jobs are down 600 thousand since 2000, especially in newspaper publishing and selected telecommunications. Computers do more and more of the work in financial services where money is nothing but computer code and computers replace people.

The gains in productivity in selected service industries force more people out of jobs in high productivity industries into available jobs in low productivity industries. The Obama stimulus plan for new spending will create new jobs just as new spending helped recovery in the great depression, but spending our way into jobs will be tougher than it used to be.

We are now a society where restaurants, gambling, fitness centers, pet care, landscaping, temp work, security, prisons, business and personal services support millions of jobs, but also a growing percentage of America’s jobs. From 1990 to 2007 bar and restaurant jobs jumped 3.1 million. Cooking used to be one of America’s biggest do it yourself occupations. Everyone can stay home and cook, but more and more we go out. In the production-marketing chain of food this helps our employment and probably more than most people realize.

Start on the farm and lets count America’s farmers producing America’s food. Next add all the jobs in pesticide, fertilizer and agricultural chemicals, and all of the jobs in agricultural implement manufacturing. Add in the jobs at farm supply wholesalers, and farm raw material wholesalers. Then move on to food manufacturing. Add all the manufacturing jobs milling, canning, freezing, bottling, refining, slaughtering, baking, brewing, distilling, fermenting and packaging. Add them to grocery store merchant wholesaler jobs and all the jobs at grocery stores, convenience stores, liquor stores and food stores. The total comes to 6.8 million jobs.

There are 9.6 million jobs in the restaurant business including fast food outlets, bars, and caterers. The total does not include food service workers at school cafeterias, hospitals, retail stores or ball parks, museums and other recreation facilities. Add them to the total and it comes to just over 11.3 million food service jobs.

Worse, jobs from the farm to the supermarket continue to decline due to productivity growth and imports in the global economy. Restaurants are the only part of the food chain Americans can count on for new jobs. You may like to go to restaurants; you may need to go to restaurants, but American needs jobs, so now you know, you must go to restaurants. It’s your civic duty to employ America. Go out often.

Americans expect a lot from their jobs. Everyone is supposed to support themselves, no matter how good, or how bad the available jobs. The self-support requirement puts enormous pressure on individuals and families when productivity gains eliminate jobs, when a growing population and new immigrants put more and more people in the workforce, and when low paid restaurant jobs replace higher paid manufacturing jobs.

Restaurants are part of leisure and hospitality services where gambling, including casino hotels, now employ 426 thousand with 183 thousand new jobs since 1990. Include 278 thousand new jobs at amusement parks, arcades, golf courses, country clubs, ski hills, and marinas. Fitness centers have more jobs than all of gambling with employment at 508 thousand and 233 thousand new jobs since 1990.

Pet store employment more than doubled to 98 thousand, and pet care service jobs as dog trainers, trimmers and bathers more than doubled to 52 thousand jobs by 2007. Veterinarians more than doubled between 1990 and 2007, adding 166 thousand jobs.

Count 2.1 million more jobs at job placement, temporary help and executive search agencies where jobs are fine tuned to the ebb and tide of the business cycle. Add 386 thousand more jobs in landscaping services, 269 thousand more jobs in security and investigation services, 228 thousand new jobs in janitorial services, 127 thousand new jobs at telemarketing bureaus and telephone answering services. Include 89 thousand new jobs at collection agencies where employment more than doubled between 1990 and 2007.

Prisons and jails are now a major source of employment with 432 thousand jobs as correctional officers and jailers, 41 thousand supervisors of correctional officers and jailers, 19 thousand bailiffs, 94 thousand probation officers, 76 thousand substance abuse counselors.

There was an age when more manufacturing meant more manufacturing jobs. That age has passed. Trouble is Americans still think about jobs the same way they did long ago. Everyone is supposed to go out and rustle up some work and then live on the wage. Finding work will be easier the more American’s buy personal services.

Personal bankruptcies generate personal service jobs at law firms, courts, and counseling offices, where every dollar at issue in a bankruptcy was a former expenditure, all of which created jobs. In GDP accounting a dollar’s worth of lawyer’s services in a personal bankruptcy counts the same as a dollar’s worth of car, or clothes or food. With manufactured goods we get things we can drive, things we can wear, things we can eat, but a reasonable person might see more personal bankruptcies as a bad thing. Bad or not, spending ourselves into jobs makes us rely on spending for things like personal bankruptcy, a specialty where a steady flow of jobs requires a steady flow of bankruptcies.

The Bureau of Labor Statistics reports 63 thousand new jobs in depilatory, ear piercing, hair replacement, massage parlors, diet and weight loss reducing centers, permanent makeup salons, steam and Turkish baths, tanning salons and tattoo parlors. Massage parlors are similar to a variety of personal services that have several advantages for a society that must have jobs. The services cannot be imported, nor moved offshore in the global economy. The age-old difficulty in scheduling steady work continues unaffected by technological advancement so that labor will continue to be inefficient and support jobs. America will have more jobs if the well-to-do focus attention on personal services: college consultants, piano lessons, personal trainers, spa sessions, dog walkers, cat sitters, charity balls, coach camps and live in personal aides or nannies, which are also known in the Standard Occupational Classifications as Personal and Home Care Aides. BLS reports 224,000 new Personal and Home Care Aides between 2000 and 2007, double the increase for engineers.

From 2000 to 2007 there were other personal service jobs with big gains. Include 273 thousand more jobs as Home Health Aides, 117 thousand more jobs as Nurses Aides, Orderlies and Attendants, and 179 thousand more jobs as Child Care Workers. These new jobs are just some of America’s 41 million jobs with median annual wages less than $25,000. (1) These are the jobs we are taking when efficiency reduces the need for labor in agriculture, mining, manufacturing, but more and more for jobs in trade, utilities, information services, and finance.

The Obama spending plan will help create jobs, but America is a mass society that needs mass buying power to keep itself employed. A single person earning the modest, but heavily taxed, $25,000 annual income mentioned above paid $3,958.75 in Federal Income and Payroll Tax in 2007, which is before state income and sales tax, and before other tax levies. (2) With nearly 48 million jobs with median wages less than $25,000, millions earn wages too low, and pay taxes too high, for a public policy that expects America to spend its way to jobs and prosperity.

Jobs are down a disastrous 2.6 million for the year, but this year’s decline is part of a long term erosion of self supporting jobs. So many of the new jobs are for easily dispensable personal services that any decline in spending means a spike in layoffs and more jobs lost than it did just 10 years ago.

America needs new policies and new attitudes. It is time to stop thinking of America’s jobs as a survival of the fittest in a rough and tumble free for all of personal competition. Jobs and wages depend more and more on reasonable tax and social policies. It is time for adjustments to the Wages and Hours Act, and to re-think policy for the full time work week, overtime pay, the minimum wage, the payroll tax and health care tied to jobs among many job issues including taxation. But these are topics for another article.

(1) Data here from the Bureau of Labor Statistics, Occupational Employment Survey
(2) Assumes wage income and std. deduction

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