President Barack Obama eavesdrops as Aidan Lamothe, the 2014 March of Dimes Ambassador, whispers to his mother that he had wished to see both the President and Bo, the Obama family dog, during his visit in the Oval Office, May 01, 2014. |
Dr Peter Morici: Friday, the US Labor Department
is expected to report the economy added 215,000 jobs in April. A moderate
improvement over February and March when the pace averaged 195,000, indicating
growth will improve this spring over its tepid winter performance.
Still good jobs will remain scarce and wages
depressed, because policies put in place over last the quarter century have
permanently slowed growth.
The unemployment rate is expected to fall a notch to 6.6%-well below the 10%
recession peak-however, that largely reflects fewer adults participating in the
labor force. Were the same percentage of adults working or looking for work
today as when the recession began, the unemployment rate would be 9.3%.
Baby boomer retirements are not driving down adult participation-the percentage
of working Americans ages 65 to 69 has risen from 22 to 30% over the last 15
years. Given rising life expectancies and the secular decline in stock market
returns and interest rates, this is likely to continue.
Rather, decent employment opportunities for prime working age adults have not
kept pace with population growth. The percentage of Americans ages 25 to 54 that
has a job is down to 77% from 81% 15 years ago, despite a larger share of women
Shrinking opportunities, especially in manufacturing and the building trades,
have hit men particularly hard. One out of six between the ages of 25 and 54 is
without a job, and many have few prospects of finding one.
Twenty million Americans over 25 are working part-time, owing much to poor
economic conditions and government incentives not to work full time. ObamaCare
and the Earned Income Tax Credit (EITC) encourage low wage employees to work
part-time to avoid losing benefits, and employers are limiting workers to less
than 30 hours per week to avoid health insurance mandates.
All this pins down wages-especially for high school graduates with little
additional training and college graduates from non-elite institutions-and
worsens income inequality.
Through the recent recession and recovery, low wage businesses-those paying in
the bottom third of all industries-added about 1,851,000 employees, while high
wage employers-those paying in the top third-shed 976,000 workers.
No surprise, average family income, adjusted for inflation fell from $55,627 in
2007 to $51,017 in 2012.
The root cause of poor jobs creation and falling incomes is slow economic growth
that has bedeviled Presidents Bush and Obama. During the Reagan-Clinton era, GDP
growth averaged 3.4%; however, since 2000 the pace has halved to 1.7%, thanks to
well meaning but ill conceived government policies,
Trade agreements have further exposed US manufacturers to foreign competition,
but have not similarly improved their market access abroad. Principal
competitors China, Japan and Germany all systematically undervalue their
currencies to make their exports artificially cheaper than US products both in
domestic and rapidly growing Asian markets.
Similarly, unlike Canada, which shares many of the same demographics shaping US
labor markets, the United States has chosen to outsource-not
reduce-environmental risks associated with petroleum development by shutting
down or curtailing production on the Atlantic and Pacific Coasts, the Gulf and
Those policies are responsible for a $485bn trade deficit, which easily suppress
growth from 3.4 to 1.7%. Just the lost R&D, so prevalent in manufacturing and
energy but now captured by foreign competitors, could boost US economic growth
by 2 percentage points a year.
Also, dysfunctions in banking, higher education and health care imposed by
misguided regulations and government subsidies permit professionals to earn
inflated incomes but harm the availability of credit, workers with the skills
employers need and affordable health care and insurance. Along with the
inefficiencies imposed by the excessively complex corporate and personal income
tax systems, those lower productivity, investment and growth dramatically.
Emerging from a long recession, the economy should grow at 4 or 5% and create
the needed jobs, but misguided and abusive government policies do not permit the
economy to accomplish takeoff speed and raise wages.
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone