Jobs are getting scarcer, and bad public policies are making matters worse.
The Labor Department reported Friday that the economy added 287,000 in June, but that was a bounce from only 11,000 the prior month. Over the last three months, new jobs have averaged only 147,000—about two-thirds the pace from 2013 to 2015.
Unemployment increased to 4.9 percent from 4.7 percent in May, and wages were up only 2 cents per hour or less than one-tenth of a percent.
The U.S. economy is growing again—about 2.5 percent annually in the second quarter and going forward—but good jobs remain scarce and wage gains lackluster. New technologies are reducing the demand for workers but poor government policies are making matters worse.
Too many Americans simply don’t qualify for the jobs that pay high wages in a globalized, technologically advanced economy.
The robotics and artificial intelligence revolution is all around us—even if we don’t yet have an android doing our housework.
Uber brings patrons cars without the dispatchers that once took calls at the local car services. At Amazon Prime, customers point and click without the aid of sales clerks and packages are increasingly assembled by robots at fulfillment centers.
Tasks requiring complex manual dexterity have proven tougher to replace but automated checkouts are spreading, and robots are at the cusp of not just taking orders at McDonald’s but also grasping and handing you hamburgers, fries and soft drinks.
Globalization accelerates these trends by forcing more aggressive substitution of machines for high-wage Americans in factories.
The next generation of Boeing jetliners will be assembled with more robots—moving and fixing components into place. The few people who are left will be greatly assisted, for example, by Google Glass and software that aids in assembling the complex wiring and programming of cockpits.
Sweeping labor-saving innovations have confronted us since the spear and the wheel but in the past we moved redundant workers, who often did repetitive manual tasks, into emerging industries. As agriculture mechanized, workers moved to repetitive tasks in manufacturing and as factories automated, workers moved into services—for example, at convenience restaurants, shopping malls and dry cleaners.
Major institutional failures make these challenges more wrenching.
Bad trade agreements permit other nations to boost exports into U.S. markets without accepting comparable amounts of American made goods and services. Subsidies, currency manipulation and non-tariff barriers to U.S. exports accentuate pressures on companies like Boeing and Ford to automate or outsource more.
The Obama administration promised thousands of new jobs from the 2012 Korean-U.S. Free Trade Agreement, but it actually boosted the trade deficit by $16 billion and helped push unemployment up by 130,000.
The Affordable Care Act, mandatory overtime and higher minimum wages imposed by many states and cities have helped to raise the cost of employing Americans. This, in turn, has compelled businesses to purchase labor saving devices more quickly or close.
Our high schools and colleges are better at preaching social justice than producing enough graduates who can do the complex cognitive work that machines still leave to human beings. On the flip side, skilled technicians with a year or two of training and graduate engineers and systems analysts remain too scarce.
Too many Americans simply don’t qualify for the jobs that pay high wages in a globalized, technologically advanced economy. Consequently, average family incomes continue to cycle down, even as the upper middle class—the top 20 percent or so—gets richer.
Passing laws—taxing the upper middle class to subsidize child care or forcing them to pay more for hamburgers to support a higher minimum wage—does not address those fundamental policy failures and leaves America vulnerable to more aggressive societies in Asia.
Policymakers must more effectively manage globalization by negotiating better trade deals. They must also stop pandering to voters with giveaway programs and force schools and universities to shift from proselytizing about the evils of American capitalism to equipping young people with the skills they need to compete in the wider world.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.