- - Sunday, September 6, 2015


A striking facet of the economic downturn that started in 2008 and the “recovery” that continues today is the unprecedented slack in the American labor force. While statistical unemployment has dropped to pre-recession levels, labor force participation remains strikingly low and wages have remained stagnant — affecting consumer demand and economic growth.

Labor Day — the “workingmen’s holiday” — reminds us that labor once was the engine of the American economy, the most important commodity in the country. In the 20th century, America was fully employed. When workers complained, it was not because there were too few jobs but because they were overworked to the core. Seven-day workweeks and 12-hour shifts were the norm. Labor capacity was so stretched that even children were recruited to work in factories and on farms.

The stands in stark contrast to today’s labor force participation, which as of July sits at a dismal 62 percent, a 38-year low. Many people who lost their jobs during the height of the Great Recession have subsequently dropped out of the labor force or struggle to find meaningful work that provides life-sustaining income. The middle has been largely sucked out of the employment landscape, creating a barbell-shaped workforce with opportunities expanding mostly at the lowest and highest skill levels.

This new normal is reflected in America’s debate over immigration. The surging political battle over the status of an estimated 11.2 million illegal immigrants in the workforce has focused largely on the exclusion of Americans from low-skilled jobs in the service and agricultural sectors. In the latter, noncitizen immigrants (whether legal or illegal) constitute more than half the workforce.

Many economists argue that Americans either can’t or won’t take those jobs — as dishwashers, lawn keepers and farmhands — and that restricting immigration would thus hurt the U.S. economy by making domestically produced goods and services too expensive for the average consumer. Still, the political tension remains.

It is also reflected in various movements to reclassify American workers. In July, the 2nd U.S. Circuit Court of Appeals rejected a case brought by interns for Fox Searchlight Pictures claiming that they should be paid for work they did. Internships have long served as the U.S. equivalent of apprenticeships for industries in which there are no formal guilds or unions. But some question whether employers are taking undue advantage of interns’ “free” work and whether the informal structure of internship still provides a sufficient pathway to rewarding jobs. Many have decried the overall decline in unions and guilds as a harbinger of cheap, commodity labor force that even at full employment does not generate the spending power to fuel domestic growth.

At the other end of the spectrum, the tech industry has pushed the U.S. government to increase the number of H1-B visas for highly skilled technical workers by heavily recruiting from countries like India and China — which lead the world in the number of engineers produced each year. U.S. firms say a shortage of these workers is hindering America’s global competitiveness.

Then there is the economy as a whole. The Federal Reserve Board of Governors recently met at Jackson Hole, Wyoming, to discuss whether economic growth warranted the Fed raising key interest rates that have remained at historically low levels since 2009. A key driver of the interest rate debate is the true nature of the employment story. Vice Chairman Stanley Fischer said in his speech before the governors on Aug. 29, “Although the economy has continued to recover and the labor market is approaching our maximum employment objective, inflation has been persistently below 2 percent.”

This rather dry-sounding statement is about as close to a sigh of frustration as you’ll hear from the Fed, which is perplexed about how the U.S. economy can be at full employment and still experience shrinking consumer demand for goods and services, measures that almost always have risen in lockstep throughout U.S. history. The Fed is signaling that despite the numbers, significant room for robust employment growth remains. As Mr. Fisher noted, “While thinking of different aspects of unemployment, we are concerned mainly with trying to find the right measure of the difficulties caused to current and potential participants in the labor force by their unemployment.”

The current structure of the U.S. workforce is increasingly taking the semblance of a barbell — a low concentration of highly paid jobs at the top, and high concentration of low-paying jobs at the bottom — cutting out the vaunted American middle class. This picture of America is disconcerting to many, who see the middle class as the primary driver of American national identity and the engine of economic growth.

Armstrong Williams is sole owner/manager of Howard Stirk Holdings and executive editor of American CurrentSee online magazine.

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