MidasMoments: Rob Slee’s Comments on the Nation
April 15, 2013
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Let’s Talk About Jobs
Several years ago I wrote that the U.S. would not generate a sufficient number of high-paying jobs this decade. It was an easy call to make. Most such jobs are created by private companies, and most private companies are destroying market value in a big way. They just can’t afford to create high paying jobs. Let’s see how my prognostication is working out.
First, let’s get real about where we currently stand on jobs. As with most of our economic issues, the government is trying to paper the problem over. But even all the money the government has created is not working as they’d hoped when it comes to job creation. Unemployment remains high, at seven or eight percent officially, but more than twice as high if you look at the shadow stats. It would be even higher if you counted the so-called discouraged workers who are no longer looking for jobs. And it’s even higher if you break it down and look at segments of the population like young, black males. Their unemployment rate is over 40%.
True un(der)employment is probably around 20%. Congratulations, say us, at least we have Europe beat. Comparing ourselves to Europe on any economic metric reminds me of my kids coming home during grade school proclaiming that everyone did poorly on a test, so a “C” was a really good grade. I wasn’t buying then, and I’m not buying now. I prefer to use a higher standard.
The truth is that America’s most common jobs come with lousy pay. Workers in seven of the 10 largest occupations typically earn less than $30,000 a year, according to new data published Friday by the Bureau of Labor Statistics. That’s a far cry from the nation’s average annual pay of $45,790. Food prep workers are the third most-common job in the U.S., but have the lowest pay, at a mere $18,720 a year for 2012. Cashiers and waiters are also popular professions, but the average pay at these jobs tallies up to less than $21,000 annually. There are 4.3 million retail sales workers out there, making them the most common job, but the position pays only $25,310 for the year. Among the 10 most popular professions, only the nation’s 2.6 million registered nurses earn a good living, bringing home nearly $68,000 a year on average. Another two of the most common jobs — secretaries and customer service representatives — have an average annual wage of about $33,000.
Now let’s consider what kinds of jobs we are creating. Middle-class Americans have been losing ground, as median household income dropped by more than $4,000 since 2000. Part of this decline stems from a disappearance of middle-class jobs and an explosion of lower-paying ones. Some 58% of the jobs created during the recovery have been low-wage positions, according to a 2012 report by the National Employment Law Project. These low-wage jobs had a median hourly wage of $13.83 or less, with limited/no fringe benefits. I don’t even consider these full-time jobs.
Aside from private companies not being in position to hire, we also face the “problem” of dramatically increasing productivity. Solving this productivity riddle leads us to the biggest reason for the good jobs deficiency. We might call this the Midas Dilemma. Historically companies needed to generate $200,000-$300,000 in sales per employee to break-even. By using Midas models and strategies, many companies now generate more than $2-3 million in sales per employee. Another way of looking at these numbers is to consider that avant-garde companies need only 10-20% of the employees than what was required in the past. Uh-oh.
As more companies move to Midas models, and they will, highly-skilled people (the top 2% or so) will make tons of money, but the bottom 75% of the populace will be stuck. In reverse.
Does this mean that the U.S. is destined to have the majority of its population living outside of the global economy, at least in terms of increasing living standards?
Have I met a single person who has a viable solution to this jobs dilemma?
Maybe we’ll figure it out next decade.
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