America Creates Many New Jobs However, most of them are low-paying or part time. Wages are still low. Is there a way out of this?

WASHINGTON – In 2014 the US added 2.95 million new jobs, the best year since 1999 when America added 3 million. More people working is good news all around. Good for the people who earn wages, good for their families, and for the overall economy that gets a lift from growing demand created by people with money to spend.

Doing well, but not great

That said, while America is doing very well, especially if compared with the rest of the stagnating developed world, these are not extraordinary numbers. Unemployment at 5.6% is down a bit; but it is higher than the historic norm. And the decline we have registered is in part the result of many long-term unemployed who simply dropped out. Besides, most of the new jobs created are low-paying service jobs in the retail and hospitality sectors, while millions of Americans who would like to have full-time jobs are stuck with part-time employment. And, finally, real wages are not growing.

So, good news in terms of growing numbers of Americans who have a job. But no great news. The question is why is it so difficult to move the US economy into really high gear? There are two sets of reasons.

Needed: pro-business economic policies

The first one has to do with economic policies. Without indulging in easy partisan criticism, the tendency of the US Federal Government to over regulate everything created artificial hurdles for business owners. Running a business is becoming too onerous and too complicated. Permits, compliance with this and that, and too many inspections at some point yield diminishing returns. While it is the job of the Government to ensure safety and health standards for all, beyond a certain point environmental restrictions and other rules and mandates discourage business formation.

Reform the tax code

And then we have the unsolved tax monstrosity. Almost all level-headed economists recognize that America needs a new, streamlined, easy to navigate, simplified tax code. But unfortunately, because of the persistent political gridlock, it is impossible to have agreement in Washington on serious tax reform.

Add to this mix the uncertainties stemming from Obamacare and the additional financial burdens that this health law created for at least some employers.

All this conspires to depress the number of start-ups, while many small businesses may be reluctant to hire more people, even when business is good.

But this is only part, and probably not the biggest one, of the problem.

The negative impact of globalization

The real issue is the negative impact of globalization on a society that has not yet found ways to adjust to it. Globalization has meant first of all the globalization of the labor markets at a time in which hundreds of millions of Asians gained marketable skills and entered the labor force. The ability to easily move production almost anywhere, coupled with the availability of hundreds of millions of workers willing to do the same job at a fraction of the wages that would normally be paid in America, caused the massive migration of manufacturing jobs from the US to Asia, especially China.

This has been a tremendous blow for millions of US factory workers, and for many others employed in economic activities that have been outsourced.

The net result is that the wages of those who are lucky to have a factory job have declined or are stagnant. Workers know that demands for higher wages may very well be the incentive that will push the corporation to close down and move its operations overseas.

New technology kills old jobs

And then we have technology. Technology is great, except that very often it means automation. And automation means that machines replace humans. And this means that the modern factory is run by fewer and fewer super qualified technical supervisors who oversee the work of computerized machines and robots.

In this new work environment there is no room for yesterday’s blue-collar worker. And, in fact, less and less room for yesterday’s white-collar workers who used to perform routine, repetitive tasks. New software and ever more powerful computers are taking over their functions.

And so, now we understand why the economy adds mostly low-paying jobs for people working as waiters, nurse assistants, store clerks or janitors. There are of course high paying jobs for managers, super qualified engineers, and IT specialists. But not that many.  And the vast number of reasonably good jobs that used to be “in the middle” have essentially vanished.

Indeed, even with manufacturing growing as a sector, the need for factory workers is not growing, on account of automation.

The importance of education

Is there a way out this? Hard to say. For sure, a very well-educated young person who has technical skills and/or superior managerial qualifications can have a shot at a career path leading to high paying jobs. Therefore, a good education is an essential prerequisite to succeed. But education may not be enough. There is a limit to how many new high-tech or managerial positions will be created. There isn’t room for everybody at the top.

Who knows, may be some new technologies will open up new economic sectors that may be able to absorb the millions who are otherwise likely to be left out. We simply do not know.

However, even in this uncertainty, one thing is clear. More education is far better than less. A good education is no guarantee of a great career. But no education for sure means dead-end, low-paying jobs and likely marginalization.

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