With the economy as screwed up as it is, and President Obama and Congress seemingly incapable of fashioning constructive efforts to minimize pain to U.S. citizens, it’s downright cheering to see some young people out in the streets, raising a little hell over the mess.
The Occupy Wall Street manifesto seems a bit bombastic – workers should seize their workplaces, students should seize classrooms, everyone should seize abandoned property – but its heart is in the right place: something needs to be done for the millions of people put out of work by the financial collapse and resulting recession. And what the Occupy Wall Street people have rightly concluded is that government hasn’t a clue how to make that happen.
Our very high jobless rate isn’t declining as rapidly as in past recoveries, as seen in this unemployment chart. That’s not so much the fault of government, as it is due to the changing nature of business. Through each recent recession, managers have learned to produce more with fewer workers. It is the fault of government, however, for failing to recognize and react to this trend.
As many economists have pointed out, at this point in a weak recovery the government ought to be stimulating, as in spending to boost employment, and should save the belt-tightening, which indeed is badly needed, for when the conditions are less dire. The poor follow-through in managing the last stimulus package, of course, hardly inspires confidence in a new round of such spending. So, skeptics can be forgiven. The stimulus package was huge. The recovery is weak. One could conclude, albeit wrongly, that government stimulus doesn’t work. (It worked but not nearly well enough.) Further holding back any second round of federal largesse is the fact that most sane people are freaking out about the overall level of government debt in the U.S., and the structural deficit that keeps pushing the debt up.
Given all that, Obama and Congress at most seem willing to throw corporations some targeted tax relief in the belief that companies will hire someone. But that hope shows a failure to appreciate the mindset of an increasing number of CEOs and others atop companies large and small: they’re in the business of ridding themselves of workers, not hiring more of them, regardless of economic conditions.
CEOs see it as productivity, and rightly so, given that they work for shareholders. So, when the most recent president Bush signed a tax holiday on foreign cash reserves, telling himself and others it would spur investment and employment, it should have been no surprise that companies instead used the cash for stock buybacks, dividends and takeovers, which typically result in mass layoffs. Oops.
The sad truth is that many corporate managements loathe their workers: for belonging to unions; for needing health care coverage; for wanting to make more than a Chinese worker. And boosting profit margins in a slow-growing economy means lifting productivity. Thus Becton Dickinson (BDX) more than doubled revenue (and tripled profits) during the past decade, but employment at the medical products company edged up all of 16%.
Caterpillar’s (CAT) workforce in the past five years went from 52% domestic to 45% U.S.-based, and given the global nature of Cat’s business and labor costs, one can expect the domestic percentage to keep dropping.
Outsourcing work abroad helps tech companies stay lean and efficient. Apple (AAPL) employed 11,434 in 2001, with sales of about $6 billion. A year ago, with sales of $65 billion, Apple’s employment hadn’t even doubled, growing to just 20,186. That’s amazing efficiency and great for shareholders. Not so great for the employment picture.
But it’s doubtful a tax break is going to cause Apple, or any of these companies, to run out and hire U.S. workers. Long-term, the solution is a better-educated workforce: higher graduation rates from high schools in the U.S.; more college and grad school graduates; and more education attuned to supplying skills in short supply. Accomplishing that, even if Obama and Congress were on the same page, could take 20 years, hardly the quick fix out short-term-minded elected leaders tend to focus on.
The Anti-Regulators Are The “Job Killers” by William K. Black
Trade with China: Who is the Protectionist? by Dirk Ehnst
Health and Income Inequality (GEI News)
And the Rich Get Richer (GEI News)
Occupy Wall Street Video Collection (GEI News)