I'll give it to you straight, gang: We're in deep shit! Actually 8 to 10 million jobs deep. That's the estimate of how many jobs were lost in the current recession. The ongoing catastrophe in the Gulf of Mexico is taking media attention away from the crisis; but, the corrosive effects of long-term joblessness will affect society for decades.
That's the conclusion of Terrance Heath, liveblogging from the
America's Future 2010 conference.
Chronic Unemployment: Crisis or "Correction". Like most American parents these days, Heath is fearful about the future prospects for his children:
Like any parents, we want the best possible future for our children, and we're doing all we can to prepare them to attain it as our parents did for us. Being the grandson of sharecroppers and the son of 1st generation Polish immigrants, to us that means getting an education, being able to land a "good job" with the possibility of moving up the economic ladder, and possibly doing better than one's parents did. But the current rate of long-term joblessness, and Washington's apparent lack of political will to remedy it make me wonder if our elected officials see long-term unemployment as a crisis to be averted or "the new normal" — a "correction" that must simply be accepted.
That "new normal" comes from economist Edmund Phelps, who won a Nobel Prize in Economics for his work on the "natural rate of unemployment." That's traditionally been around 5%. Phelps is advising that the new 'floor' for unemployment is likely to remain 6.5% to 7.5%, even after the 'recovery' is 'complete.'
Heath's article goes through much of the grim statistics we've been hearing; job prospects for the class of 2010 are bleak, to put it mildly. New grads can look forward to fewer job offers and more competition. The competition comes from graduates of the class of 2009 who are still job-hunting and from mid-career workers who have been laid off and are now willing to take entry-level jobs.
Quoting from the
New York Times article that Heath references:
Worse, a deep labor recession, like this one, may be more than a temporary hardship. It could signal a long-term decline in living standards.
Where you start out in your career has a big impact on where you end up. When jobs are scarce, more college grads start out in lower-level jobs with lower starting salaries. Academic research suggests that for many of these graduates, that correlates to overall lower levels of career attainment and lower lifetime earnings.
Tough times for college grads mean even tougher times for high school graduates, because fewer jobs mean more competition from college-educated workers. In the past year, 59.5 percent of young high school grads on average had a job, compared with 70.2 percent in 2007.
A number of economic studies confirm the fact that young people who enter the job market during a recession, not only start at lower salaries, they may never catch up. I can confirm that by my own experience: I graduated and entered the workforce during the Nixon recession of the mid-1970's.
Quoting Heath again: "This is how an economy shrinks, or it's at least one way an economy shrinks, and permanently at that."
"This is equivalent to a lower standard of living. In the competition for a chance to work, the man with a lower standard of living will underbid the man with a higher standard of living. And a small group of such thrifty workers will lower the wages of that industry. And the thrifty ones will no longer be thrifty, for their income will have been reduced 'til it balances their expenditure..."
It sounds like a recipe for creating a permanent and all-but-inescapable underclass. The writer of the above, by the way, wasn't addressing the present U.S. economic crisis, or even any aspect of the global economy. That was Jack London describing the grinding poverty of London's East End circa. 1902, where 500,000 of the city's poorest citizens lived in squalor a short taxi ride away from the wealthiest areas of London, in The People of The Abyss.
Things are getting grim! Heath quotes freely from an article by Don Peck in the March 2003 issue of the Atlantic Monthly:
How a New Jobless Era Will Transform America:
The worst effects of pervasive joblessness—on family, politics, society—take time to incubate, and they show themselves only slowly. But ultimately, they leave deep marks that endure long after boom times have returned. Some of these marks are just now becoming visible, and even if the economy magically and fully recovers tomorrow, new ones will continue to appear. The longer our economic slump lasts, the deeper they’ll be.
If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.
The Peck article is long; but, it's rich with information and detailed analysis. I'd call it a 'must read' for anyone trying to make sense of what's happening to our society.
Heath makes a great point that investing to create new jobs, extend unemployment benefits, and keep people in their homes doesn't deepen our "economic hole;" indeed, putting off such investment deepens the hole.
There are other consequences for periods of long unemployment early in a young person's career. People who experienced periods of unemployment in their teens or twenties are more likely to develop habits of heavy drinking later in life and experience bouts of depression. Those symptoms continue throughout life, even in people who later find work. I can also confirm this from my own experience; I still experience bouts of depression in my mid-60's.
I'm breaking the 'four paragraphs' rule; but I am quoting from multiple sources. Here are two more paragraphs that are significant:
The effects are going to passed down from one generation to another, if nothing is done. There is much talk about our children "inheriting" the federal deficit. But if our children inherit the jobs deficit and its consequences, they will have much less of a chance at dealing with the other deficit or any number of other challenges. With the loss of employment and income comes a loss of a host of opportunities that previous generations have inherited from their middle class parents. The decline in the workforce makes it inevitable that state and local governments will make cuts in everything from education to social services that have long helped make up at least some of the difference for children of needy families -- providing, if nothing else, an education and often the full stomach needed to take advantage of the opportunity.
What our children will inherit is fewer opportunities to do as well as or better than their parents. In fact, their children will likely do worse than their parents, as they will not only have fewer opportunities, but far lower expectations for themselves, based on what they see their parents struggling with. (And their parents will probably find it difficult to exhort their kids to get an education, since it will have done the parents little good to do so. The jobless economy they are graduating into now, will be little changed if the jobs deficit persists, as there will be fewer consumers, thus a lower demand for goods and services, and ultimately no need for employers to expand. If anything, it means more joblessness.
Heath isn't despairing for his children's prospects in life; he wants all these issues addressed. He does point out that some conservatives see the new era of long-term unemployment as a "needed correction." That's the mentality of people who want to permanently lower wages for working people. Heath expects such conservatives to work to forestall government action to restore full employment.