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Jubak's Journal
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Readers answer the disappearing-jobs riddle
This is a recovery? More than 900 offer their ideas on fixing an economy where the jobs are vanishing and the paychecks aren't what they used to be.
By Jim Jubak
I opened a can of worms when I asked readers for solutions to what I called The job-is-worth-less recovery in my Oct. 24 column.
More than 900 e-mails later, Im still hearing from readers about the pain of being without a job even as the official numbers show the economy growing, about the anger of seeing a paycheck eroded by rising health-care costs and falling company benefits, and, to be sure, about how to fix what ails us.
Theres no doubt that the economy is in the upward stage of the business cycle. But this 23-month-old recovery is weaker than average. Consider:
- The economy has gained 330,000 jobs since August, lagging about 7 million jobs behind the normal hiring cycle after a recession, says Stephen Roach, Morgan Stanleys chief economist.
- The jobs picture is even bleaker if you remember that the economy has lost 2.8 million relatively high-paying manufacturing jobs since the start of the down cycle. According to the Economic Policy Institute, the average manufacturing worker who is laid off takes a 13% to 14% wage cut in his or her new job.
- Many of this recoverys new jobs come with fewer benefits. But even those companies that continue to provide solid benefits are passing on more of that cost. According to Hewitt Associates, employees can expect to pay 23% of the cost of their own health-care benefits in 2004, up from 21% in 2003.
As I said in my Oct. 24 column, I think its relatively easy to identify the long-term trends that are making this tide less likely to lift all boats. One trend, the continuing decline of manufacturing, has been going on for decades. The second trend, the increasing globalization of manufacturing and, now, service industries, has made the manufacturing dislocations worse and added its own relentless pressure on costs and wages.
It was my challenge to readers to find a way around this dual squeeze that buried me in e-mail.
Suggestions fell into five broad categories.
Nothing can be done
A substantial minority, about 10%, feel that nothing can be done and that a decline in the U.S. standard of living is not only inevitable but just about what we deserve.The USA is a very young country that has had one hell of a run. We've convinced the world that capitalism and free markets is the way to go and we are paying the piper.
-- Mike from Vermont
We all need to do a reality check and realize that the market just doesn't bear our high wages and appetite for good benefits anymore. . . . The economic boom of the 1990s is being paid for by market adjustments in the 2000s. We might as well come to grips with the fact that the happy days we afforded ourselves in the 1990s are being paid for in the 2000s in this way.
-- Michael Pennington
Build a wall around the country
Many readers suggested stopping all or at least all illegal immigration as a way to relieve the pressure on U.S. paychecks. Since companies increasingly are sending the work overseas to employees who remain in their home countries, I dont think this suggestion, however you react to it morally, really addresses the issue. But some readers proposed a different kind of barrier, targeted tariffs that would be used to level the playing field and subsidize the painful transitions of U.S. workers:Place a tariff tax on goods produced by U.S.-based companies who decide to go abroad for almost slave wages. This would make the move to China, India, etc., less attractive. It is very unfair to produce goods in China for dirt then bring the goods back to the U.S. and sell them for the same price as when they were made in the U.S.
-- Don Crosby
No transfer of technology to the global community without a clear understanding as to the impact on our future workforce. Set that policy with the greedy corporate titans. Tax the hell out of them if they violate a policy of protecting our present day technical advantage.
-- J.B. Crowley
Our government could finally enter the health-care arena by offering subsidies, garnered from the taxes levied on companies who move jobs off-shore, to cover a portion of employee health benefit costs for those companies who retain and create jobs for American workers; thus, lowering these companies total cost of keeping jobs here, and easing the burden on U.S. job-is-worth-less workers.
-- Judy Fonseca
Boycott the bums
The logic is compelling. Why buy products from companies that are putting U.S. workers on the street by sending jobs overseas? Setting up the system, which would require some kind of rating or a seal of approval, would require work and a budget, but the successful efforts to certify foods as organic or lumber as sustainable show its certainly possible:
I think we should label products similarly to how we label food to give the consumer the necessary information when buying the product. Remember, that cheap overseas labor also means more affordable products for the American consumer, which helps to offset the impact. These are complex problems. For example, when I buy a computer I would want to see (1) percentage of employees from 3rd world countries involved in the manufacture of this product, (2) percentage of employees from 3rd world countries involved in the post-manufacture servicing of this product; (3) average hourly pay of these employees (and benefits provided them); (4) average hourly pay of non-3rd world employees (and benefits provided them).
-- Brian
Compete through education
Our workforce never will be cheaper than that available overseas, but it can be more productive. The challenge isnt as huge as it seems, either. According to a recent New York Times article, Ohio Arts, the company that makes Etch A Sketch, used to pay its U.S. workers $9 an hour. The Chinese company that now manufactures the toy pays its workers 23 cents an hour. But despite that huge differential, Ohio Arts told the Times that the Chinese product was only 20% to 30% cheaper by the time it reached the companys Ohio warehouse:More training for workers whose jobs are gone. We must face facts -- the jobs that have gone overseas or been eliminated because of increased productivity aren't coming back when the economy improves. Once an employer switches to automation and/or overseas outsourcing, he's not going to switch back just because the domestic economy improves. U.S. workers need to take responsibility for their ongoing retraining. Too many workers need to be dragged kicking and screaming into training. They wait until they have lost their jobs and exhausted their savings before they consider upgrading their skills. More skills equals higher productivity equals higher wages -- at least for those people with average/above-average abilities."
-- C. Paul Mendez, President, National Association of Workforce Development Professionals
Level the playing field
A number of readers suggested reversing the perspective. Rather than focusing on what the United States could do to preserve its edge, they argued, the best way to preserve the U.S. standard of living is to help overseas workers win the same kinds of rights to unionize, to receive a minimum wage, to work in safe conditions, and to breathe clean air and drink clean water that U.S. workers have. Making overseas companies, often just the overseas arm of a U.S. company, follow U.S. standards in these areas would help level the global playing field:Global minimum wage.
-- Gerald Schultz
My suggestion would be to end free trade agreements, such as NAFTA and the proposed FTAA. The U.S. should engage in bilateral fair trade agreements with other countries that protect workers, human rights and sound environmental policies.
-- Bonnie Redding
I own a small manufacturing company in Maine. . . . I think if you asked most manufacturers if they were for . . . free trade, most would say Yes, but it has to be fair trade. We can't compete against countries and manufacturers in other countries who don't have the same or similar requirements as we do. For example, do we need to have both worker's comp and health insurance? I am all for environmental regulations and abide by our local and state rules, but does my competitor in the Eastern Bloc (old Czech Rep.) have to abide by similar ones? Do they have the same OSHA regulations as we do? If not, then there has to be some way to level the playing field.
-- Carolyn H. Brodsky, President, Sterling Rope Co., Scarborough, Maine
Here are my solutions
Last and least, since I asked readers for solutions, I feel its only fair to post my own two cents. I think the first part of any solution to this job-is-worth-less recovery is to admit the problem, especially in Washington. Politicians of both parties should take a break from seeing who deserves credit/blame for the economy and admit that this recovery is leaving some workers behind and that our government needs to do its bit to help.
That help needs to be both short-term and long-term.
Short-term, the word is education. We need to fund education and retraining to help workers whose jobs have disappeared and wont be coming back. We need to provide limited subsidies to help workers with families get by until theyve retrained. And we need to recognize that some workers, through no fault of their own but simply because theyre too old or too unlucky, are simply not going to be able to make the transition successfully. We need to do our best to provide such minimum support as decent health care for them and their families.
Long-term, level the playing field. We need to tackle how best to level the global playing field. We face a choice of allowing global competition to reduce the conditions in our workplaces to those of factories in China and to reduce the quality of our air and water to those in the developing world or of doing everything in our power to use our consumer-market muscle to raise the standards in those countries.
Let me close with a quote from another reader, Gautam Kavi:
By and large Americans have never had the need to learn about anybody else. We are a self-absorbed and self-centered society. For this reason, in spite of our destiny and our tremendous wealth and power, we are not able to efficiently adapt to change as well as take care of our strategic interests. Are we up to the challenge?
New developments on past columns
Bull market in metals is just beginning
Every little bit helps when it comes to improving corporate governance. Freeport-McMoRan Copper & Gold (FCX, news, msgs) announced Dec. 10 that it would separate the offices of chairman and CEO. Separation of the two offices has been a top recommendation of corporate governance reformers since with different people acting as chairman of the board of directors and chief executive officer of the company, the companys board would be more likely, they argue, to exercise independent oversight of company management. Long-time Chairman and CEO James Jim Bob Moffett will serve as executive chairman, the company said, and Richard Adkerson will be CEO. Adkerson also will continue as the companys president. (Full disclosure: I own shares of Freeport-McMoRan.)
4 stocks that Peter Lynch would like
Shares of GameStop (GME, news, msgs) have been under pressure ever since Dec. 4, when electronics retailer Best Buy (BBY, news, msgs) reported a decline in comparable store sales of video game hardware and software. The price decline has come even though software executives at a Credit Suisse First Boston conference were optimistic about holiday sales just the day before.
Frankly, I dont put much faith in retail sales numbers this early in the Christmas season, especially for electronic games. There are about 25,000 stores in the United States selling games, according to Wedbush Morgan Securities in Los Angeles. That means, the firm calculates, that even a best-selling game released in November is likely to sell no more than three to eight copies per store. With that small a sample, random error is likely to overwhelm any useful data. On the basis of what investors do know and GameStops recent reaffirmation of its holiday sales projections, the sell-off is, so far at least, an overreaction. (Full disclosure: I own shares of GameStop.)
Editor's Note: A new Jubaks Journal is posted every Tuesday and Friday.
E-mail Jim Jubak at jjmail@microsoft.com.
At the time of publication, Jim Jubak owned or controlled shares in the following equities mentioned in this column: Freeport-McMoRan Copper & Gold, and GameStop. He does not own short positions in any stock mentioned in this column.
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