It's the most anemic jobs recovery on record. Productivity is soaring, but that's mainly because fewer workers are doing more. At least 150,000 new jobs have to be created each month just to keep up with population growth. We haven't come close. In December, the private sector produced a paltry 1,000.
Not to be ghoulish about it, but this could be good news for Democrats seeking to regain the White House and stem the Republican tide in Congress. There can't be a genuine recovery until jobs come back, they aren't likely to roar back within the next nine months and George W. Bush will have a hard time convincing voters that he's a good steward of the economy unless Americans feel that the recovery is on solid footing.
But to be credible, Democrats have to come up with their own plan for how to spur job growth. And that plan has to respond directly to the structural changes in the economy that account for this unprecedented dearth of new jobs. Before I get to the plan, you need to understand those changes.
"Jobless" recoveries aren't supposed to go on this long. It used to be that businesses started hiring again when demand picked up. No longer. Technology and globalization have given companies two easy ways of temporizing. They can substitute off-the-shelf software (automated scanners at the supermarket, for example, or e-ticket kiosks at the airport). Or they can outsource to low-wage workers abroad (back-office service workers in India or manufacturing workers in China).
Eventually demand will pick up enough to restore job growth. There's still a limit to what software can do and how much work can efficiently be outsourced. But in the meantime, millions remain unemployed, are too discouraged to look for work, have to settle for jobs paying far less than the ones they lost or are forced to become self-employed "consultants" (glorified temps, essentially). Worse yet, the "meantime" could drag on for years. With so many people facing such uncertainties, consumer demand may well stall.
Bush's two major job initiatives are to gut the overtime laws and seek to allow more guest workers into the country. Both will only make the bad situation worse. The requirement to pay time and a half for overtime gives employers an incentive to hire more workers; eliminate overtime pay and that incentive is lost. Meanwhile, opening America's borders and otherwise legalizing guest workers will reduce the demand for Americans to fill those jobs. The administration's claim that the program would be limited to jobs that "no Americans can be found to fill" is ludicrous on its face. The only reason a job remains unfilled is that it pays too little. An employer who has to fill it with an American will have to raise the wage.
Here's what Democrats should propose instead:
First, level the playing field between technology and labor. As it is now, businesses get an investment tax credit for buying technology that substitutes for labor. One option is to repeal the tax credit, but that would be politically difficult. Another is to give businesses a "new jobs tax credit" (say, 10 percent of the costs) for all net additions to payrolls. Make it for two years, or until the proportion of employed adults returns to its pre-recession level.
Second, recognize the high social costs of outsourcing. Businesses should still be allowed to outsource -- even a temporary ban on the practice would be a nightmare to enforce, would probably violate international trade rules and would drive up consumer prices. But there's no reason businesses should be able to deduct from their taxable incomes the full costs of outsourcing. Limit the deduction to, say, 50 percent. However, if businesses hire American workers, allow them temporarily to deduct the full costs of their payrolls until jobs are restored.
Third, buffer workers against income losses. With so many having a hard time finding work, unemployment insurance should be extended. In addition, many workers have to settle for jobs that pay less than their former wages. They need wage insurance -- paying, say, half the difference between the old and new wages, for up to two years.
Democrats need not be neo-Luddites or protectionists to respond to the worst jobs recovery in American history. They can offer these three constructive steps to get jobs back faster and to alleviate the pain in the meantime.
The Bushies have it all wrong. It's time for the Democrats to say so, to say why and to offer what's needed.