George Reban
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[This is the transcript of my regular KVMR commentary that was broadcast on 28 September 2012. To this transcript I have added some obvious links not included in the broadcast commentary.]
Jobs and the economy are on everyone’s mind as we hear that our GDP growth was again downgraded – second quarter growth was reduced from an anemic 1.7% annual rate to a glacial 1.3% rate. The innumerates in our electorate just slough this off – after all it’s just numbers.
In addition to this piece of news, we hear that new job creation is at historic lows, and that there are over 3M jobs in the country going unfilled. Let’s take a look at why that is, and what hurdles face our new workers trying to find a job. In sum, there are four stiff headwinds that affect each of the over 4M new young people hitting the job markets every year. Never mind the 24M plus currently un and under employed; to absorb the new yearly crop of would-be workers our economy must create between 200 and 250 thousand jobs each and every month. In recent years it has not come close to that number.
The first headwind is the inexorable increase in worker productivity that is driven by technological advance. In the aggregate, each American worker now produces more dollar value of goods and services per year. This productivity growth is currently at a 3.75% annual level. Our workforce grows at approximately 1.5% annually. To absorb these new workers year in and year out, our GDP would have to grow at more than 5% annually. Recall that in good years our GDP has expanded only at a 3% annual rate. The result is permanent or systemic unemployment. [More on these data and their ramifications are found in the previous post ‘The real jobs problem – shhh!’.]
The second headwind is worker dumbth – our educational system outputs workers who not only don’t have sellable skills, but they also are not very smart. All this is due to the way government operates our public schools, which the unions have made sinecures of teacher seniority and not teaching ability. Consider that the recently striking Chicago teachers scored lower on the state’s ACT test, required of all high school juniors, than do the students taking the test. These highly paid and poorly trained government service employees turn out students who can neither read nor have the rudimentary communication skills in spoken English to take the over 600,000 so-called ‘soft skills’ jobs that remain unfilled today. This process is duplicated in all the big metropolitan areas of the country.
The third headwind is the nation’s regulatory and tax environments. Both of these are complex, expanding, unpredictable, and harsh. They disincentivize the creation of American jobs. People who understand how an economy works know that businesses compete to sell the best product and/or service to their customers at the lowest price. The labor or jobs component of such output is a cost that successful businesses must minimize. Today government makes hiring a permanent employee a complex, expensive, and risky undertaking. Employers are driven to find all kinds of alternatives to creating new jobs that include using new technologies and outsourcing. Taking a chance with a new employee who is not very bright, has a mistaken notion of self-worth, and is pumped full of information about workers’ rights is definitely something that an employer wants to avoid.
We emphasize the unpredictability component of this headwind. Employers today face the most uncertain future they have seen since the Great Depression. We are heading into draconian storms with incomprehensible government debts and unfunded liabilities, unimaginable and unknown tax increases, and governments at every level mangling free markets with mandates and diktats handed down by depressingly ignorant bureaucrats. All this has reduced Ameirca’s standing with competing countries in terms of the ease and expense of doing business and creating wealth on our shores.
This brings us to the fourth headwind – globalization. The easiest and surest way for American companies to avoid the heel of government is to go overseas with as much of their enterprise as possible, starting with the exporting of jobs. This is especially true of companies that produce product for export – why go through the hassle of making it here, when we can make it closer to where our products are used? And since our government double, or actually triple taxes profits, these companies keep their earned profits off shore, instead of bringing them home to build more things that require the creation of new jobs.
There is little we can do with some of these headwinds, but our governments at all levels have turned out to be the main impediments to the expansion of our economy that is needed to employ the new millions entering the job markets every year. The alternative solution seems to be to make most of them compliant wards of the state that become putty in the hands of self-serving and corrupt politicians.
My name is Rebane, and I expand on this and related themes in my Union columns and on georgerebane.com where the transcript of this commentary with related links is posted, and where these topics are debated extensively. However these views are not necessarily shared by KVMR. Thank you for listening.
rebanesruminations.com 
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