Tuesday, July 21, 2009

A Pessimistic View of the U.S. Job Market

Observers such as Harvard's Tammy Erickson argue that, at least long-term, U.S. job seekers especially the educated, will find it easier to find employment.

I strongly disagree. While the Obama stimulus plan may short-term create some government and government-mandated jobs, I predict that the U.S. unemployment rate will, over the coming decade at least, continue to increase.

The following factors will dramatically reduce the need for U.S. employees:

Ever-accelerating automation fueled by dramatic increases in the cost of employing people. Most of these costs will come as the result of the already large but likely to grow still larger government-imposed mandates on employers. Here's just one example. The Family And Marriage Leave Act, because of its heavy fraudulent use by employees wreaks havoc on workplace. That burden will become even more onerous if it becomes paid family leave, which the Obama administration advocates. In addition, wrongful termination, sexual harassment, and racial discrimination grievances and suits grow as do demands for "accommodations" for everything from depression to hyperactivity (to conform to the Americans with Disabilities Act.) Health care costs will continue to grow and be cost-shifted to employers under Obama's plan--those costs will include paying for the 45 million uninsured, who are low-income or unemployed and thus would pay little or nothing into the system, leaving the employer and taxpayer to foot their health care costs.

Globalization. Ever more work product can be transmitted over the Internet, which increases the possibility of offshoring. And while offshoring 1.0 was only modestly successful, it is being re-pursued with a vengeance because companies are now armed with the knowledge it takes to do it successfully. A net saving of 35% is now standard and Accenture, for example, has a large and growing business in helping companies to offshore employees. The public is unaware of the extent of offshoring because companies saw the anger it engendered among the public even when unemployment was low. So, now offshoring is done with as little publicity as possible.

In addition, other countries, notably China, India, Russia, and Brazil, are producing ever more and better products and services, at a much lower cost that U.S. products and services.

The continued elimination of the 52-week-a-year/lifetime employee.
Workers are becoming fungible work units, used only as needed. That will mean a dramatic reduction in the number of U.S. full-time-equivalent employees.

The greening of America.
Environmental restrictions and voluntary de-emphasis on materialism will result in a contracting economy and, in turn, fewer jobs.

The tax increases on companies. The Democrats, which all signs suggest will be in power for a long time, want to fund their expansion of government by printing money and increasing taxes on companies, which will reduce the amount of real dollars companies have to hire people and to develop new products, which in turn, would have created more jobs.

All signs point to these being long-term and potent factors, so I cannot envision a realistic scenario under which the unemployment rate will decline except perhaps temporarily in late 2009 or early 2010.

1 comment:

Anonymous said...

I'm in complete agreement of the factors you describe (although I don't know how long the high unemployment numbers will last).

Also the influx of illegal immigrants (and legal H1B) displaces US employees. Furthermore, early baby boomers without savings are holding on to jobs where they can and the largest number of boomers still want employment before retirement.

I wonder how high unemployment will have to go before something changes.


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