San Jose Mercury News, January 18, 2004
``Jobless'' recoveries aren't supposed to go on this long.
If the current economic recovery were like most previous ones, businesseswould have started hiring again when demand for their products picked up.That hasn't happened, and more than two years after the economy startedturning out more goods and services, Americans find themselves wallowing inthe most anemic jobs recovery on record.
Productivity is soaring, but that's mainly because fewer workers are doingmore. At least 150,000 new jobs have to be created each month just to keepup with the growing population of potential workers. We haven't come close.As we learned earlier this month, the private sector produced a paltry 1,000new jobs in December.
Not to be ghoulish about it, but this could be good news for Democratsseeking to regain the White House and stem the Republican tide in Congress.There can't be a genuine recovery until jobs come back; jobs aren't likelyto roar back within the next nine months; and President Bush could have ahard time convincing voters that he's a good steward of the economy unlessAmericans feel that the recovery is on solid footing.
But to be credible, Democrats would have to come up with their own plan forhow to spur job growth. And that plan has to respond directly to thestructural changes in the economy that account for this unprecedented dearthof new jobs -- technology and globalization.
The increased reliance on technology and on global operations has givencompanies two easy ways to delay hiring. They can substitute off-the-shelfsoftware (automated scanners at the supermarket, for example, or e-ticketkiosks at the airport). Or they can outsource to low-wage workers abroad(such as back-office service workers in India, or manufacturing workers inChina).
Eventually, demand will pick up enough to restore job growth. There's stilla limit to what software can do and how much work can efficiently beoutsourced. But in the meantime, millions of our workers remain unemployedor too discouraged to look for work. Or they have to settle for jobs payingfar less than the jobs they lost, or be self-employed ``consultants'' --essentially, glorified temps. Worse yet, the ``meantime'' could drag on foryears. With so many people facing such uncertainties, consumer demand forgoods and services may well stall.
Two of Bush's major job initiatives are to gut the overtime laws and toallow more ``guest workers.'' Both will only make the bad situation worse.The requirement to pay time-and-a-half for overtime actually gives employersan incentive to hire more workers. If overtime pay is eliminated, they losethat incentive.
Meanwhile, opening America's borders and otherwise legalizing ``guestworkers'' will reduce the demand for Americans to fill those jobs. (Theadministration's claim that the program will be limited to jobs that ``noAmerican worker is available and willing to take'' is ludicrous on its face.The only reason a job remains unfilled is that it pays too little. Anemployer who has to fill it with an American will have to raise the wage.)
Here's what I think Democrats should propose instead:
First, level the playing field between technology and labor. In other words,give businesses incentives to employ people, not just technology. As it isnow, businesses get an investment tax credit for buying technology thatsubstitutes for labor. One option is to repeal the tax credit, but thatwould be politically difficult. Another is to give businesses a ``new-jobstax credit'' (say, 10 percent of the costs) for all net additions topayrolls in the United States. Make it for two years, or until theproportion of employed adults returns to its pre-recession level.
Second, recognize the high social costs of outsourcing during this prolongedjobless recovery. Businesses should still be allowed to outsource; even atemporary ban on the practice would be a nightmare to enforce, wouldprobably violate international trade rules and would drive up consumerprices. But there's no reason businesses should be able to deduct from theirtaxable incomes the full costs of outsourcing. Limit the deduction to, say,50 percent of costs.
If they hire American workers, on the other hand, they can continue todeduct the full costs of their payrolls. Here again, make the incentivetemporary, until jobs are restored.
Third, buffer workers against income losses. Given that so many workers arehaving a hard time finding new work, it's only fair that unemploymentinsurance be extended. In addition, many workers have to settle for jobsthat 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.
The White House has it all wrong. Yet Democrats need not be neo-Luddites orprotectionists to respond to the most anemic jobs recovery in Americanhistory. They can offer these three constructive steps to get jobs backfaster and, in the interim, lessen the pain.
