Besides theoretically restoring the economy to a grow track exceeding 3%, something the Bush economic policies succeeded in doing, President Obama’s policies purportedly will create over 5 million new jobs.
Good luck for those who are holding out for these high paying jobs concentrated in the ‘green sector’, but the odds are that they won’t materialize because of what I’ll term ‘logistical issues’ and a misbalance between available labor skills and what performing these 5 million fabulous jobs will require.
For the most part, as the economy fluxes and flows there is a rough balance between jobs and people with the skills necessary to fill them. Sometimes the supply of such labor exceeds demand and other times the opposite prevails. Over the long haul as the economy evolves, demand for certain skill sets change, but this is an evolutionary process as certain sectors expand and others contract as technology progresses.
Whenever this evolutionary process accelerates into a revolutionary process, dramatic shortages in demanded skills do show up that are soon followed by an explosion in compensation for those possessing these skills are suddenly able to ‘extort’ ever greater pay packages until the inevitable arrival of newly trained employees appear to end the shortage. We need only to look at the ‘high tech’ bubble of the 1990s to see how this works. Once enough new computer engineers, et al, had graduated from college, supply shortages in this segment of the labor market quickly dissipated and the ability of experienced Silicon Valley hands to move from job to job in order to receive ever greater compensation packages came to a screeching halt by the early 2000s.
The reverse was true in the 1980s when most segments of American industry restructured thanks to the computer revolution and a changed nature to the demand structure for American manufactured goods and the material inputs used to make them. This led to a sudden collapse in demand for certain managerial skills as middle management layers were thinned out and a sharp shrinkage in the demand for industrial labor as manufacturers converted to robotics in order to stay competitive in the emerging global economy. That decade also saw the kybosh put on the demand for oil field workers as the amount of drilling in the lower 48 imploded with the collapse in oil prices after 1980. Collectively this resulted in massive dislocations within the American labor market and it took time for those adversely affected to be reabsorbed back into productive jobs – a processes that was greatly facilitated by a continuum of strong economic growth fostered by President Reagan’s economic policies.
The key then to job creation is to structure economic policies that produce economic growth and lead to the invention of new products that rejuvenate consumer demand and increase labor productivity, without which real per capita income cannot grow. Unfortunately this is not what America is getting with the Obama stimulus plan and the quantum increase in federal spending in his proposed budgets – spending that will likely become even more excessive once Congress finishes with it.
Outside of a significant increase in bureaucratic jobs, which makes it surprising that Washington DC’s city government expects unemployment rates for the district to jump from 5.8% to well over 11%, there is little in the way of real job creation because all this spending that’s coupled with future tax increases and probable double digit inflation rates is not structured to promote real economic growth. Additionally, the labor skill sets for the economic sectors slated to receive this federal largess do not match the supply of skill sets prevalent throughout the economy – mainly because under some degree of normalcy, Americans do not spend money on the same things governments do and no where is more than a very modest foundation been laid in the ‘green technologies’ scheduled to receive a giant chunk of this money.
Just look at those most affected by the current economic debacle. The related lost jobs are heavily concentrated in labor intensive home construction, all segments of the real estate industry where everyone works on commission, and of course the humongous layoffs seen throughout the financial services industry.
Now there probably are a large number of transferable skills set lose in the construction trades that can be swung over to building roads and bridges. However, from my experience as a commander of a USMC combat engineer company, I know that ‘nail-benders’ are not equipment operators and that the officers commanding the latter couldn’t level a hillside if God came down and bit them in the butt. So there’s going to be a major skill shortage when various governments crank up infrastructure re-construction a couple of years down the road when this part of Obama’s stimulus is supposed to be spent. Meanwhile carpenters stay unemployed until they’re retrained, assuming that they actually are.
Now how about the thousands no longer employed in the financial services industry. As a Chartered Financial Analyst and retired investment professional, I know that few of them have the capability to suddenly become engineers working to advance the supply of ‘green energy’ that Obama’s plans call for. There is a reason that people like me majored in finance and economics, besides greed, and for most of us courses in calculus were a necessary evil at best. There isn’t a solar or wind energy firm that wants to hire me unless I go through another six years of college to get a masters in engineering or physics – a subject I flunked my freshman year.
Where the average high school dropout, some 20% of our younger population unless they’re products of Detroit’s dropout factories where only 25% of incoming freshmen actually get a diploma, fit into the Obama scheme, God only knows – maybe they’ll get jobs provided by the $8.2 billion ACORN is scheduled to receive. Even the average college graduate is technologically illiterate after finally graduating in six years.
So who’s available to do the grand panoply of ‘green energy jobs’ or the mass of biotechnology tasks envisioned by the White House? These are all high skill sports, or at least jobs requiring considerable technical training like industrial electricians, and the vast array of those currently unemployed are ill-equipped to fill them. Ergo, these great high paying green jobs aren’t going to be there in the near future and unemployment levels will remain high until labor market participants are able to adjust – thus we’re replacing a disequilibrium with another disequilibrium fueled by federal spending.