While local and national economic trends are slowly moving in the right direction, market forces are creating new economic realities that will impact American workers, families and communities for the foreseeable future. One of these new realities is a phenomenon called the “jobless recovery.” Economists are predicting that unemployment rates may linger around eight percent for several years, as the economy slowly recovers. They also theorize that there are key factors that will contribute to this reality, including productivity gains driven by the increasing use of technology and the forces of globalization.
During recessions, industries typically lay off workers to survive until business picks up again. Yet this time, economists theorize that the necessity of cutting jobs combined with an increased use of technology has resulted in productivity gains which translate to increased economic output with fewer workers. This increasing use of new technology has impacted a diverse range of industries, from manufacturing to the legal profession. The net result is a gradual economic recovery with fewer workers being recalled than after past recessions.
The other big factor affecting employment has been globalization. This has two major impacts on the American workforce. The first is that, over the last two decades, about 400 million people have entered the global talent pool, primarily from Asia. Manufacturing has seen the greatest impact from this phenomenon, with millions of new workers producing goods at a fraction of previous costs. The increased global talent pool has also impacted top professions in engineering, research and medicine. As emerging economies become more affluent, market demands also shift to these global markets. The result is more capital investment in these markets with the use of indigenous talent to make up the workforce.
The implications for our workforce, families and communities will be profound and protracted. While the unemployment rate averages between eight and nine percent, the impact on segments of our workforce is disproportionate. Dislocated workers in declining industries, workers with low educational attainment, minorities and youth all experience higher levels of unemployment.
Due to the unique nature of this “jobless recovery,” displaced workers from declining industries are experiencing unemployment for longer periods of time than before. The longer the term of unemployment, the less marketable a worker’s skills become. In addition, workers in declining industries may have to retrain or update their skill sets and consider opportunities in new or growth industries. Additional challenges for dislocated workers include the financial pressures due to income loss and the need to take on part-time employment to make ends meet or work jobs for which they may be overqualified until better opportunities emerge.
Another group of workers with higher-than-average unemployment rates are those individuals without high school diplomas. They typically have unemployment rates at nearly twice the national average. Those individuals with high school diplomas fare a little better, but still suffer unemployment higher than the average. Long-term success in the new economy will require education and training beyond high school, ideally with an associate’s degree or better.
Other groups hit hard by the current downturn have been minorities and youth seeking to enter the workforce. The unemployment rate for minorities is twice the national average; and for youth, it is three times the average.
As these segments of the workforce struggle against the market forces of the new economy, our families and communities will also be adversely impacted, resulting in lower tax revenues, increased deficits and reduced public services. As we map our road to recovery, we will have to take these new realities into account. iBi