With national unemployment still stubbornly high four years after the start of the economic crisis, the time has come to ask whether the American Dream of opportunity and increasing prosperity is now out of reach for the average worker. Economists and academics haven’t reached consensus about the underlying causes of long-term sluggish job creation, but technological change and globalization are leading candidates.
There are still 12.1 million unemployed Americans; 23 million when you add those who are working fewer hours than they’d like or are too discouraged to look for work. Include these workers and the unemployment rate remains stuck at 14.7 percent as we continue to slog through the slowest economic recovery since World War II.
Perhaps worst of all, 4.8 million have been unemployed for six months or more; over half of them have been out of work for more than a year. These people suffer not only financial hardship, but also psychic trauma.
Adding insult to injury, about 2 million long-term unemployed Americans will lose their federal benefits at the end of the year if we go over the impending “fiscal cliff.” The $600 billion package of mandatory spending cuts and tax increases that will take effect at year’s end if no deal is reached to avert it eliminates federal benefits. These benefits provide 14 weeks of additional support beyond state unemployment benefits of26 weeks and up to 33 weeks beyond that in states with especially high unemployment.
Genuine understanding of persistent unemployment is more than a numbers game. The unemployed suffer from depression, anxiety and poor self-esteem, as well as the strains financial problems place on family relations. Those with jobs worry that they could be let go at any moment.
The technological revolution has created employment opportunities for many high-skill workers. But at the same time, those who perform more routine activities have been increasingly displaced. This is one reason why there are more than three million job openings in America even as we continue to suffer through high unemployment. And as the cost of technology decreases, firms have an incentive to substitute capital equipment for labor.
Globalization has also created opportunities for some workers but displaced others. Middle-skill jobs are especially subject to this type of labor competition. Inexpensive overseas labor is a temptation many firms cannot resist.
Ironically, some firms that moved production overseas are now bringing it back to America because advanced technology is making it cheaper to produce locally. The result is rising manufacturing output without a corresponding increase in the middle-skill jobs that are the foundation of the middle class.
Taken together, globalization and the technology revolution have wiped out many middle-class jobs and replaced them with positions that demand skilled human capital. The result is increasing pay for higher-skilled workers and decreasing pay for those in the middle. As the labor market becomes more polarized, income inequality rises.
These changes may represent a tectonic shift in the nature of employment in America. As Washington resumes its conversations about how to avoid the fiscal cliff and deal with pressing economic and fiscal challenges, officials may want to give some thought as to how to train Americans for the 21st century.
If we do nothing, we might as well discard Labor Day as a national holiday. If the labor market becomes even further polarized into low- and high-income jobs, we might as well do the same to the American Dream.
originally published: December 11, 2012