As middle-income jobs go, so goes the economy
This article first appeared in the St. Louis Beacon, May 4, 2011 - For three out of four unemployed American workers, there were no jobs to be had in February, according to research from the Economic Policy Institute.
It was simply a case of supply and demand, according to the nonprofit Washington think tank that focuses on the interests of low- and middle-income workers.
The institute's analysisof U.S. Department of Labor statistics came down to this:
- 13.7 million -- number of jobless workers (supply).
- 3.1 million -- total number of job openings (demand).
- 4.4-to-1 -- the ratio of unemployed workers to job openings.
As dismal as that ratio sounds, it was, in fact, slightly improved. In January, there were 5.1 unemployed workers for every job opening.
It's not that the nation's economy hasn't been showing signs of improving, it's that recovery has been uneven, said Robert Cropf, who chairs the department of public policy studies at Saint Louis University. And, in general, the recovery has been more positive for workers at the high-wage end of the spectrum and for workers at the low end than for those in the middle.
"It's always a tragedy when people are out of work," Cropf said, "but it's hard for people in certain industries to find work again because of the restructuring of the economy."
Economists and public analysts agree that the Great Recession, officially over since June 2009, turned up the heat on a long-simmering stew of factors -- advances in technology, automation, stagnant wages, outsourcing -- that had been chipping away at U.S. jobs, and income, for decades.
Examples of middle-income positions lost to such restructuring in the St. Louis region since 2008 include: 6,000 jobs at the Chrysler plant in Fenton, which is now being demolished; several thousand engineering, information technology and corporate jobs at Anheuser Busch after its purchase by InBev; 600 scientific research jobs at Pfizer in a reorganization of the pharmaceutical giant following its purchase of Wyeth.
Cropf said that for years the nation's policymakers, as well as leaders of private industry, did little to mitigate job and wage shrinkage that was then accelerated by the recession.
"At the macro level, we talk about coming up with policies -- both Republicans and Democrats are working toward solving these issues -- but no matter which solution gets enacted it's not going to change the underlying problems overnight," Cropf said. "And that is not a comfort to unemployed Americans who are struggling to get by on unemployment benefits, or who have exhausted them. These are real families who have dreams, who want a secure financial future, who want to live in their houses and send their kids to college."
Even if the economy were to begin immediately generating 350,000 jobs a month -- the pace of the late 1990s -- it would take four years for the current 8.8 percent unemployment rate to return to its mid-2000s level of 5 percent, according to an article by St. Louis Federal Reserve economist Natalia Kolesnikova and researcher Yang Liu, published in the April issue of the Regional Economist. At a rate of 210,000 jobs a month -- the March 2011 growth rate -- it would take 11 years to reach 5 percent.
Gene Cheatham, 55, of Belleville, who has been struggling with the changing employment world for a decade, said his wife explained it best.
"She said, 'People want a $30-an-hour job, but they want to pay the equivalent of 25 cents an hour for labor to make and buy their goods,' " he said. "So this is the mess that we're in."
Cheatham's resume reflects what he calls periods of "broken employment" -- several years at various companies -- since 2000, when the scientific instruments company that had employed him for nine years was bought and reorganized. Schooled as an electronics technician, he boasts a range of job experience, including project management, electronics and engineering research and development.
"My entire career has revolved around manufacturing," he said. "If you look at manufacturing as a bull's-eye in the middle of a concentric circle, all the concentric circles, including those that feed manufacturing, have moved offshore to China," he said.
Part of the problem, Cheatham believes, is that American corporations focus too heavily on short-term profits and cost cutting rather than on future growth and research and development.
Cheatham has medical insurance through his wife's employer, he said, but their finances have been hard hit by his broken employment. He doubts that he will ever be able to retire.
Tamara Keith has produced a year-long occasional series on unemployment, entitled "The Road Back to Work" tracking six St. Louis residents.
To find that series, click here.
"Over the course of these 10 years, we've ratcheted down our spending," he said. "We have ourselves on a short leash. I'm a pretty handy and diverse guy. I can keep a lot of stuff going at home."
Cheatham said they have considered selling their home and relocating, but the depressed housing market would mean practically giving their property away. In the meantime, he works when and where he can, and he doggedly pursues his job search. He believes in hanging tough.
"I have my ups and downs. It's OK to have a pity party for yourself for a half hour, but if it keeps going on, you better find somebody to knock you straight and get yourself shaken off," he said.
Chipping Away at the Middle Class
In March, the average length of unemployment for U.S. workers was 37 weeks. And even when they do find jobs, many are underemployed -- with pay and benefits less than what they had previously earned, analysts say.
In addition, wages are not rising, no matter the price of groceries or gasoline. In 2010, the average wage earned by workers in the St. Louis area dropped 20 cents an hour -- to $21.13 per hour -- according to the national compensation survey compiled by the U.S. Bureau of Labor Statistics.
Economists say that declining income has long been at the heart of the nation's economic troubles, though it was masked before the recession by easy credit and debt load. As long as Americans kept spending -- even money they didn't have -- the economy kept humming along.
"We've had stagnant wages in the middle class for a long time, but they kept spending more as a group by borrowing a lot. And that was the engine of a lot of demand growth," explained Steve Fazzari, an economics professor at Washington University.
The question now is how to repair an economy that is so dependent on its struggling middle class, he said.
Fazzari participated in a recent panel at Washington University that included Christina Romer, the former chair of President Barack Obama's Council of Economic Advisers. She acknowledged that job growth is too slow for the 13.5 million Americans who are unemployed.
Fazzari said the economy has lost two big sources of demand growth fueled by middle-income Americans: new residential construction and consumption.
"If we're not going to get the growth from increased borrowing by the middle class, and their incomes are not going to rise faster, how is a robust recovery going to happen? What are we going to replace that with?" Fazzari said. "And I don't think anybody as an answer for that."
"I've been somewhat in favor of a large middle-class tax cut, which I would see as at least helping to support middle-class spending and economic security. The obvious counter argument to that is, what about the deficit?" he said.
Fazzari doubts that middle-class tax cuts would be considered in Washington in light of the current political environment.
Fazzari and Cropf agree that the nation's overall economic recovery is hampered by globalization. It is difficult for single governments to control economic changes occurring within their boundaries.
Even protectionist trade policies can be subverted, Fazzari said. For example, imposing a tariff on China wouldn't prevent that country from building assembly plants in Mexico -- so do you cut off trade to Mexico, also?
"It's a real conundrum," Fazzari said. "I wish I could say that here's a magic bullet."
Instead, he said, political leaders can consider various policies that might over time help the middle class, such as effective health-care reform.
But Fazzari believes the intense debate about taxing the wealthy misses an important point.
"The best thing you could do for the wealthy classes is to have a strong, robust economy," he said. "If you go back to the '50s and '60s to periods where there was strong consumer spending, strong demand for the output of business, the economy was rolling, wages were rising. Those are environments in which business thrives. Some of the best times for the stock market and capital gains were the late '90s. Having a strong middle-class demand can be supportive of high profits as well as high wages."
Fazzari believes the middle class is challenged -- but surviving.
"But my concern is -- at least for the next few years -- that stagnation is going to continue to chip away. We're going to find way too many individuals in a rich society whose standard of living is seriously threatened," he said. "It's not a happy time."