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Greenspan's Blinders on Job Quality
By Alan Tonelson
Sunday, August 01, 2004
Despite Fed Chairman Alan Greenspan’s praise for the New Information Economy, his recent comments on job-quality trends in America made it painfully clear that he needs a lesson in elementary internet use.
Responding at Congressional hearings last week to worries that the United States recently has been replacing high-paying jobs with low-paying jobs, Greenspan stated, “We have not been able to find a significant, meaningful change in the quality of jobs being produced relative to the quality of jobs being lost for the nation as a whole over the last year.”
Actually, Greenspan himself provided some evidence in his own remarks to the Senate and House. For example, he acknowledged that, despite the technical end of the last recession, businesses continue to hire an outsized percentage of temporary workers, who enjoy less job security and receive fewer benefits than permanent employees. Greenspan also admitted that Americans are having difficulty findings new jobs that pay as much as the ones they’ve lost.
More important, however, evidence of declining U.S. job quality is everywhere in the government statistics easily accessible on the internet – and for much more than the last year. Moreover, the data reveal that America’s recent successes in job creation have come largely in spite of globalization and its effects, not because of it.
Inflation-adjusted hourly wages are the best measure of a worker’s worth in the new world economy Greenspan and others so uncritically laud. Unlike weekly wages, they can’t be affected by the number of hours a worker stays on the job (although, shockingly, this figure has declined throughout the current economic bounce-back). Unlike benefits, hourly wages don’t reflect employer decisions driven by tax considerations, and they are easier to quantify. Unlike income, moreover, wages don’t reflect all-too-transient changes in asset values (like home
valuations and investment earnings) or government transfer payments that have nothing to do with free markets at all, much less globalization, or the recent move to two income-earner families.
These real hourly wage figures unmistakably show a sea change that coincides remarkably with the decision in the 1970s to open America’s market almost indiscriminately to world trade. For example, real hourly wages for the entire private sector (which are not set by legislative fiat as they are for government jobs), peaked in 1972. The latest figures show them to be 9.5 percent lower. Since December, 2002, with the economy’s technical recovery well underway, they’ve fallen 2.5 percent.
Real manufacturing wages, which are earned by the workers most exposed to imports and outsourcing, peaked in 1978, and have fallen 5.8 percent since. Their decline since December, 2002, has been 1.5 percent. How can job quality remain the same nationally if wages throughout the private sector are falling behind living costs? Further, the persistence of this wage decline and stagnation over three decades is completely unprecedented in American history.
Slicing and dicing the data another way, the Economic Policy Institute shows in a July 27 report that between June, 2003 and June, 2004, the weekly earnings in industries with expanding and fast-growing employment rolls have been 7.2 percent lower than comparable earnings in industries where employment has been shrinking or growing most slowly. Over the last three years, the gap was even wider – 9.4 percent.
And the recent differences between the growing and shrinking job categories are revealing. As is well known, manufacturing employment has cratered in recent years, down nearly 20 percent from its 1990s peak of 17.7 million (in June, 1998). Where have most of the new jobs been created? Overwhelmingly in occupations having nothing to do with the global economy. Employment in construction, repair and maintenance, personal and laundry services, and membership organizations and associations are all at their all-time highs or close to them.
The same holds for jobs in government – where the employment levels are not only unrelated to the global economy but depend purely on politics – and for jobs in education and health care services – which are heavily subsidized by government.
Greenspan is informed and politically savvy enough to know that something important is wrong with U.S. labor markets lately. Although job creation has picked up markedly in recent months (thanks largely to unsustainable tax, budget, currency, and monetary stimulus), its pace still lags that of previous recoveries. Wages are remarkably soft for a recovery as well.
The Chairman’s explanation? The nation has “not been able to keep up the average skill level in our workforce to match the required increases of increasing technology.” His answer? Improve our educational system – somehow.
Obviously, American public grade and high schools could be a lot better. But we Americans have been wracking our brains for 30 years searching for remedies, with almost nothing to show for it. So if those who stress education as the problem are serious about helping economically struggling Americans anytime soon, they need to look elsewhere.
Just as important, Greenspan missed an emerging trend that seems equally noteworthy: The education premium – the pay increases generated by better education and skill levels – may be about to shrink. According to the Economic Policy Institute, from the early 1970s and the great opening of the U.S. economy to foreign competition until 2001, wage growth for college-educated American workers did indeed outpace that for other Americans (15.85 percent for college grads, 1.46 percent for Americans with some college, and a whopping 18.5 percent decline for workers lacking a high school degree).
But for highly educated Americans, the times may be a-changin’ – for the worse. Although the exodus of many high-paying information technology and professional services jobs to India has not adequately been captured by official data, evidence is now streaming in that the allegedly best and brightest are facing the same kinds of economic pressures already familiar to blue-collar workers.
According to a July 26 press release from the Institute of Electrical and Electronics Engineers, between the first and second quarters of this year, employment among computer software engineers fell by 131,000, among computer scientists and systems analysts by 51,000, among computer hardware engineers by 3,000, and among computer programmers by 16,000. And these jobs losses are occurring during a supposed tech industry recovery!
The longer term trends are even worse. Since their various late-1990s or turn-of-the-century peaks to the present, employment for workers in computer systems design and related services, custom computer programming, and other computer-related services has dropped by 17.38 percent, 16.03 percent, and 27.53 percent, respectively. Yet the total private sector workforce has shrunk by only 1.22 percent since its peak in October, 2000. Put differently, the odds of losing a computer services job in the last few years were only slightly better than the odds of losing a job in the devastated manufacturing sector.
It’s hard to believe that Greenspan’s unwillingness to acknowledge the most important job-quality data is unrelated to his determination to defend current globalization policies at all costs. But let’s give him the benefit of the doubt and offer him his first lesson in browsing government and other relevant data on the web. “This, Mr. Chairman, is a mouse....”
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
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