Where Did All the Jobs Go?
NEW YORK ( MainStreet) We have a jobs problem.
As we have reported , December delivered some pretty grim job numbers. According to the Bureau of Labor Statistics the economy added just 74,000 jobs over the month, far fewer than economists had predicted and less than half of November's job growth. Unemployment dropped slightly to 6.7% without much growth in employment, and nearly a third of the unemployed have been out of work for 27 weeks or more.
According to the Economic Policy Institute "for more than three out of five job seekers, there simply are no jobs."
In other words, we have a very serious jobs problem.
Where did they all go? After all, not so long ago, America enjoyed high employment and general prosperity. We build more, mine more, grow more and invent more for more people now than we did back then. Innovation hasn't fallen off; in fact most of the smart phone and the entire tablet revolutions have taken place since 2007. So if we're all still here making, buying and consuming things, why can't we put people back to work? Where have all the jobs gone?
There are many answers to that question, and though the issues are nuanced, a few broad factors come into play:
The economy today can't create as many jobs as it did before, an issue called structural unemployment. The jobs haven't moved or changed; we just need far fewer workers than we did before. Two major theories compete to explain why this is so: supply and demand side economics.
"Why [unemployment] has remained stubbornly high is I'd say the million dollar question," said University of Chicago economist Allen Sanderson. "And the answers to that question tend to change from the extreme right to the extreme left... You go back to the right wing, and they say that the answer is taxes and regulations that the Obama administration has heaped on the economy. You go back to the left wing, and they say it's that there's not enough aggregate demand out there, so there just aren't enough jobs."
Supply side economics, Sanderson explained, says that businesses struggle with tight regulations, high taxation and an atmosphere of uncertainty, all of which work aggressively discourage hiring. This line of thinking argues, therefore, that to encourage hiring we need to reduce government demands so employers have the freedom and money to hire additional workers.
"Generally households and firms don't like a great deal of uncertainty," Sanderson said. "There've been a lot of changes, whether it's the Affordable Care Act...We're producing a lot of uncertainty here, and I think that's hard for firms and I think that that's hard for households to adjust."
The less confidence a business or consumer has in tomorrow, the less likely he is to spend today. As taxes take away money with which to hire and regulations limit new business models, it becomes increasingly difficult for firms to hire new people.