Let’s Talk About Jobs
By William Bailey (09/14/03)
Over the past few weeks, much has been written and spoken about two subjects: the unemployment rate and the loss of manufacturing jobs in the U.S. So, lets’ take a look at those two subjects. However, let’s take “our” look from a standpoint of reality . . . not from one based on computer models or economic forecasts.
Let’s deal first with the issue of unemployment. Regardless of what percentage unemployment is being quote, it must be understood that there is NO way to identify an accurate rate of unemployment. First (unless the methodology has been changed), the unemployment rate in this country is based on the number of persons who are receiving unemployment compensation. It does not include those who tried to find jobs . . . and gave up. It does not include those who were “downsized” and forced into early retirement and were precluded from filing for and/or receiving unemployment compensation. And, (again, unless the methodology has been changed), it does not include those who were receiving unemployment compensation, but whose benefits expired and are still unemployed. Just those three factors alone would, materially, affect the overall unemployment percentage. So, when people start going “bonkers” about an unemployment rate of 6% or 7% or whatever it is, just remember what that percentage rate really represents. Also, remember that the rate being quoted can run as much as sixty (60) days behind the period it represents. Again, I recognize that it would be, virtually, impossible to have an unemployment rate that was current and completely accurate.
On to the issue of the loss of manufacturing jobs . . . based on what is being written and spoken, it would appear that this phenomenon didn’t start until January, 2001. At least, that’s the impression one gets. Well, that’s just not the case.
According to David Wyss, Chief Economist for Standard & Poors, “In the 1950’s, 1/3 of the nation’s workforce was employed in factories. It is now down to 11%”.
Nationally known and respected columnist David Broder has this to say, “From July, of 2000 until last month, industrial jobs fell from 17.3 million to 14.6 million, a loss of almost one job in six. And these were, for the most part, good jobs, averaging $54,000 a year.” (article appeared in the Topeka Capital-Journal, August 31,2003).
Mr. Broder concludes, “The United States and its economy have a large stake in international trade----one that could be lost if policy took a turn toward the sort of short-term protectionism embodied in the steel tariffs. But, the wasting of the manufacturing sector is a large fact of life, far too important to be ignored in pursuit of some economic theory. It is a problem crying out for a solution.”
I am confident that many have heard the expression, “lies, da**ed lies, and statistics”. But, to give an accurate picture of the situation, one must look at statistics to understand that this didn’t just start.
According to the Statistical Abstract of the U.S. (a publication of the U.S. Bureau of the Census), manufacturing employment totals in the U.S. were as follows (please note the year): in 1970, 20,746,000; in 1980, 20,285,000; in 1990, 19,076,000; and in 1994, 18,063,000. Based on the “numbers”, it is obvious that the decline didn’t just get underway in 2001. It becomes pretty obvious (at least to this individual) that the blame must be laid where it belongs . . . with both political parties and all presidents since the decline commenced.
Those who are (or have been) in the field of economic development work daily with something called the “multiplier effect”. Simply stated this means that for each manufacturing job created by a new plant/industry, there will be an additional number of “support” jobs created in the community. The National Association of Manufacturers (NAM) puts it this way, “Every $1 million in final sales of manufactured products supports 10 jobs in the manufacturing sector and six jobs in other sectors such as services, construction and agriculture.” This is the “multiplier effect” in action. And, as best my math calculates it . . . that means that the “multiplier effect” is a factor of 60%. Obviously, that factor can be affected by the geography and the demographics of the area in which the new manufacturing facility is being located. It may be higher in some areas and lower in others. But, the underlying fact is . . . there is a “multiplier effect” when new manufacturing jobs are created.
The unfortunate part of the seriousness of the loss of manufacturing jobs is that, as best I can determine, nobody is applying the “multiplier effect” in a “reverse” manner. If you gain manufacturing jobs, along with the “support” jobs, for a new plant, doesn’t it stand to reason that if/when you lose manufacturing jobs due to closing or reduction in size of the workforce, you’re going to see a similar effect on those same “support” jobs . . . only in reverse ?
Is there a solution to both of these issues ? Certainly. It would appear to me to be two-fold: 1) we’ve got to quit making it so difficult to “manufacture” in the United States . . . we’ve got to stop this endless flow of jobs outside our boundaries; and 2) we’ve got to tighten up this (senseless) visa program that allows foreigners to come into this country for work assignments, thereby taking jobs away from U.S. citizens.
That these are two very, very serious issues goes without saying. But, as we talk about them, I suggest that we should do so in a very open and forthright manner. Let’s deal with both from the standpoint of reality and the resultant effects on both the citizens and the “corporate” citizens of the United States. Until we do so, there will continue to be a lot of discussion and not much substance. We will “moan and groan” and we will do a lot of “finger-pointing”, but we won’t be coming up with solutions. Therein lies the answer.
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