Much of the conversation about jobs in our country is driven by the election cycle. If you're looking for a long-term, large-scale take on American unemployment, a great resource is an article in the August issue of Foreign Affairs by the Nobel prize-winning economist Michael Spence. "Globalization and Unemployment: The Downside of Integrating Markets" is behind the paywall, but you can buy a reprint for $1. Essentially, Spence argues that America's unemployment problem is deeply connected to globalization. To solve it, we're going to have to get beyond today's highly politicized stimulus vs. austerity debate, and think non-ideologically about how to improve the American workforce.
Michael Spence. Photo by Robert Scoble.
The most important thing to grasp about American jobs, Spence argues, is globalization; more specifically, you have to grasp how globalization is changing and progressing. A few decades ago, Americans benefited from a global surplus of cheap, unskilled labor; everything from cars to seafood got better and cheaper. Today, however, we're suffering, because those same workers are climbing out of poverty and becoming more skilled; now they can do the same work we used to do, cheaper. "This climb," Spence writes, "is a permanent, irreversible change." Ultimately, it's true that, many decades from now, as living standards rise, global labor will become expensive again. But a generation or two is too long time to wait.
That's the global picture; here at home, "the evolving structure of the global economy," Spence explains, "has diverse effects on different groups of people in the United States." Essentially, it's divided Americans into two groups. The first group of Americans are actually part of the global economy: They are highly educated managers and technicians, and they work for companies that employ, or in other ways benefit from, global labor and open markets. Their wages have been rising, because their firms have gotten more profitable and productive. The second group of Americans aren't globalized. They work in purely domestic industries, like construction, health care, education, retail, and government. Globally connected workers, who are in the minority, are part of fast-growing, innovative industries. Purely domestic workers are the majority, and they tend to work in slower-growing, sometimes stagnant ones.
Unfortunately, the American workforce has been shifting, slowly but steadily, into this second category. From 1990 to 2008, Spence writes, 98% of the new jobs in America have been in slow-growing, domestic industries which are disconnected from the global economy. That shift was masked by a number of factors, like declining family sizes, increased borrowing, and gender equality. The financial crisis put reality into stark relief.
This is a long term crisis -- but it's a comprehensible one. The bottom line is that, today, "opportunities are expanding for the highly educated throughout the economy.... But opportunities are shrinking for the less well educated." So we need to drastically improve our educational system. But more than that, Spence argues, we need to rebuild the economic context which makes education worthwhile. Extensive research funding can help to create the jobs which make education worth pursuing: government policies can make it easier for advanced manufacturers to keep their factories open. But the time horizon for these changes will be measured in years, if not decades, rather than months. It will take sustained bipartisan effort to move America's economy up the value chain. "Instead of benign neglect," Spence concludes, what is needed is "an agreement that restoring rewarding employment opportunities for a full spectrum of Americans should be a fundamental goal. With that objective as a starting point, it will then be necessary to develop ways to increase both the competitiveness and the inclusiveness of the U.S. economy."
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