Unemployment, Inc.: Six reasons why America can't create jobs
UPDATE: No net growth in new jobs in August kept the US unemployment rate at 9.1 percent. Six reasons the country is struggling to put people to work – and why it may not last.
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One example of the growing income divide: If you sort US workers into four groups based on educational attainment, only one has seen its inflation-adjusted median wage rise since 1979. The gains went to people with college degrees or more education, while other groups have experienced declines in real wages. College isn't an automatic ticket to prosperity, but this trend reflects how sophisticated skills and judgment command a wage premium.Skip to next paragraph
4 The China Syndrome
Amid the fecund rows of corn and soybeans in south-central Iowa, Interpower Corporation turns out power cords, transformers, circuit breakers, and other components for electrical and electronics equipment around the world. The only trouble is, so do some companies in China.
Even before the recession, Bob Wersen, the founder and president of the Oskaloosa firm, was feeling global pressure, with Chinese competitors underpricing his products by as much as two-thirds. To survive, Mr. Wersen instituted "lean manufacturing" techniques. Adopting a concept pioneered in Japan, he organized workers in production cells rather than along an assembly line, boosting efficiency. He also cut down on his delivery time of products to customers.
The result is that the company has survived both the recession and the bargain-basement pricing of the Chinese. Yet the transition hasn't been without its difficulties. The company went from record sales in 2008 to a 25 percent drop the next year, and it now employs 82 people, down from a peak of 117 in 2002.
The experience of Interpower is a reminder that globalization has an impact on the employment rolls of American companies, too. While it can make them more efficient, it can also siphon off workers from assembly lines and cubicles.
Like the shift to more flexible workplaces, globalization has been on the march for years. And to some degree, the two trends are related, with some jobs being "offshored" and companies like Boeing learning to make products through global partnerships.
But global competition, in its own right, is another factor behind the weak jobs recovery. "The major emerging economies are becoming more competitive in areas in which the US economy has historically been dominant," warns economist Michael Spence in a recent article for the journal Foreign Affairs.
It's not that trade is a bad thing. Most economists say the gains far outweigh the negative side effects, including job losses in industries that are exposed to tougher competition. But many note that current high US trade deficits symbolize an unsustainable pattern, in which the US keeps going a little deeper into debt each year to finance its import consumption, and emerging nations keep expanding their export edge.
The global economy also represents a major opportunity if US companies like Interpower can make progress. By producing goods for export – or for domestic markets now served by foreign firms – they promise to add jobs.
Several forces may already be shifting to give US firms a better shot. A falling dollar helps make US exports more competitive. Rising oil prices make companies consider locating production closer to customers, and labor costs are rising in nations like China.
5 Somebody start a company!