Following are some portions of the article. First, Tankersley defines the issue:
The Great Recession wiped out what amounts to every U.S. job created in the 21st century. But even if the recession had never happened, if the economy had simply treaded water, the United States would have entered 2010 with 15 million fewer jobs than economists say it should have
Somehow, rapid advancements in technology and the opening of new international markets paid dividends for American companies but not for American workers. An economy that long thrived on its dynamism, shedding jobs in outdated and less competitive industries and adding them in innovative new fields, fell stagnant in the swirls of the most globalized decade of commerce in human history.
Even now, no one really knows why.
This we do know: The U.S. economy created fewer and fewer jobs as the 2000s wore on. Turnover in the job market slowed as workers clung to the positions they held. Job destruction spiked in each of the decade's two recessions. In contrast to the pattern of past recessions, when many employers recalled laid-off workers after growth picked up again, this time very few of those jobs came back.
These are the first clues--incomplete, disconcerting, and largely overlooked--to a critical mystery bedeviling a nation struggling to crawl out of near-double-digit unemployment. We know what should have transpired over the past 10 years: the completion of a circle of losses and gains from globalization. Emerging technology helped firms send jobs abroad or replace workers with machines; it should have also spawned domestic investment in innovative industries, companies, and jobs. That investment never happened--not nearly enough of it, in any case.And then he provides some factors that contributed to low employment:
If we can't figure out why, we may be doomed to a future that feels like a long jobless recovery, no matter how fast our economy grows. "It's the trillion-dollar question," says David E. Altig, senior vice president and research director for the Federal Reserve Bank of Atlanta, where economists are beginning to explore the shifts that have clubbed American workers like a blackjack. "Something big has happened. I really don't think we have a complete story yet."
"Most of the jobs added during the recovery have been new positions in different firms and industries, not rehires," they wrote. "In our view, this shift to new jobs largely explains why the payroll numbers have been so slow to rise: Creating jobs takes longer than recalling workers to their old positions and is riskier" when recovery still appears fragile.I know some will say that it is better for the US to have the high tech engineering jobs, and letting emerging economies actually produce the product has minimal impact to an economy, but this fact in the article may prove otherwise:
In other words, American companies had adopted a more cold-blooded attitude toward recessions, one that fit the new model of globalization and automation. Technology made it easier to lay off your 100 least-effective workers and ship their jobs to India, or to replace them with a software program that made your remaining workforce dramatically more productive.
...The simple truth is that American firms are either returning the spoils of globalization and technology to their shareholders, spending them on new projects abroad, or both. "Globalization isn't the problem," says Howard F. Rosen, a labor economist and visiting fellow at the Peterson Institute. "U.S. companies are investing in plants and equipment, just not in our borders.... They are privatizing the gains of globalization. That's really it. They're our gains!"
A recent paper by researchers at the Asian Development Bank Institute concluded that the iPhone, one of the United States’ top innovations of the past decade, actually contributes nearly $2 billion to our trade deficit because it is almost entirely produced and assembled in Asia. The paper also raises a conundrum for lawmakers and business leaders alike: If Apple moved its assembly line to the United States and created domestic jobs but didn’t raise the cost of the iPhone, the company would still turn a 50 percent profit on every one it sold.To most, that sounds like Apple is being greedy. But companies need to chase margin wherever, whenever they can. They never know when the next product will prove to be a turkey that consumes a large amount of R&D for little or no gain. And that's when companies rely on every bit of gain they can capture from past successful products. So yes, I'll defend Apple here. The article continues:
Some free-market economists say that we could encourage more domestic investment by cutting corporate tax rates, although it's fair to note that the jobs breakdown of the 2000s coincided with hefty tax cuts under President Bush. Still, liberal and free-market analysts alike have argued for a sweeping reform of America's corporate tax code--one that would reduce rates while eliminating many deductions and provisions that give companies incentives to spend their global profits outside the United States. More narrowly, groups such as the Association for Financial Professionals have urged Congress to lower America's tax rates on repatriated income, to levels closer to international competitors.I don't think corporate tax rates could ever compete with labor costs - at least not for the foreseeable future. Labor costs are the largest costs, and no tax policy in my mind can level the differences in wages between a Chinese worker and an American worker.
Yet others say that the globalization process takes a long time to balance out, and maybe they are right:
Autor, the MIT economist, says that there’s no guarantee the gains from globalization and automation will appear as immediately as the costs—or that everyone in America will benefit equally from them. “What people tend to not appreciate is how large the adjustment costs are and how long adjustments take,” he said in an interview, adding later: “There are things we can do to help people adjust. But we’re not very good at this.”The entire article can be found HERE.
So where does this leave us? I agree with many of the points above, and some to an extent. I think we are entering a post industrial era that just can not produce the jobs at a rate other economies at a prior, different stage can. Technological improvements too, play an enormous role. For example, during the Great Depression, roughly 25% of the US popualtion lived on a farm. Today, only 2-3% are farmers, and they produce more food than ever before. And that is just one industry.
So what does this mean to our economy, and to a monetary system that is reliant on debt that needs to be serviced at a certain rate of interest. A rate of interest, that also needs a corresponding rate of employment growth to function? I am being rhetorical here, because honestly, I don't know the answer. I can only speculate that our monetary system can not keep up with such low employment growth. Hence the need for budget busting deficits.
And we can't overlook the wage differences between East and West either. And those differences do not end there either. There are also debt differences. Which reminds me of an old interview I saw on CNBC back in November 2009 where Damon Vickers, CIO of Nine Points Capital Partners addresses these issues of imbalances and concludes that a global currency and a global banking governance structure of sorts is inevitable. In that I disagree, because I just don't see that kind of global cooperation. Not even Europe itself can get its act together, let alone the US, along with China, Russia, Brazil, etc...
One way or another, the imbalances will correct, the question is will it be a smooth process?