Van­ished jobs aren’t com­ing back

Austin American-Statesman - - OPINION -

Ain’t no hir­ing. And ain’t likely to be any for a good long time. The prob­lem isn’t merely the great­est down­turn since the Great De­pres­sion. It’s also that big busi­ness has found a way to make big money with­out restor­ing the jobs it cut the past two years, or in­creas­ing its in­vest­ments or even its sales, at least do­mes­ti­cally.

In the mildly hal­cyon days be­fore the 2008 crash, the one eco­nomic out­lier was wages. Profit, rev­enue and GDP all in­creased; only or­di­nary Amer­i­cans’ in­comes lagged. Wages are still down, em­ploy­ment re­mains low and sales rev­enue isn’t up much. But prof­its are the out­lier. They’re soar­ing.

Among the 175 com­pa­nies in the Stan­dard & Poor’s 500stock in­dex that have re­leased their sec­ond-quar­ter re­ports, The New York Times re­ported, rev­enue rose by a tidy 6.9 per­cent, but prof­its soared by a stun­ning 42.3 per­cent. Prof­its, that is, are in­creas­ing seven times faster than rev­enue. The mind, as it should, bog­gles.

How can Amer­ica’s cor­po­ra­tions so defy grav­ity? They have evolved a busi­ness model that en­ables them to make money even while the strapped Amer­i­can con­sumer has cut back on pur­chas­ing. For one thing, they are in­creas­ingly sell­ing and pro­duc­ing over­seas. Gen­eral Mo­tors is go­ing like gang­busters in China, where it now sells more cars than it does in the United States. In China, GM em­ploys 32,000 assem­bly-line work­ers; that’s just 20,000 fewer than the num­ber of such work­ers it has in the States. And those Amer­i­can work­ers aren’t mak­ing what they used to; new hires get $14 an hour, roughly half of what vet­er­ans pull down.

The GM model typ­i­fies that of post-crash Amer­i­can busi­ness: mas­sive lay­offs, pro­duc­tiv­ity in­creases, wage re­duc­tions and re­duced sales at home; in­creased hir­ing and boom­ing sales abroad. An­other part of that model is cash re­ten­tion. A Fed­eral Re­serve re­port last month es­ti­mated that Amer­i­can cor­po­ra­tions are sit­ting on a record $1.8 tril­lion in re­serves. As a share of cor­po­rate as­sets, that’s the high­est level since 1964.

Why in­vest in new plants, of­fices and work­ers, par­tic­u­larly here at home? Spooked by the 2008 crash, cor­po­ra­tions want to keep more money un­der the mat­tress.

Is this model sus­tain­able? It’s hard to say — a dou­ble-dip re­ces­sion could plunge their prof­its yet again. But from the Amer­i­can worker’s per­spec­tive, the model is an un­qual­i­fied dis­as­ter. It por­tends the kind of long-term un­em­ploy­ment that we haven’t seen since the 1930s. It locks into place a gen­er­a­tion of re­duced in­comes. This dystopian Amer­ica al­ready stares us in the face. Fully 46 per­cent of the un­em­ployed have been with­out work for six months or more. Two years ago, just 18 per­cent of the un­em­ployed were job­less for more than six months.

The restora­tion of Amer­i­can pros­per­ity, then, isn’t likely to be driven by our cor­po­rate sec­tor. Across-the­board busi­ness tax cuts make no sense when busi­ness is al­ready sit­ting on oceans of cash. Tar­geted tax cuts and cred­its for strate­gic in­vest­ment and hir­ing within the United States, on the other hand, make ex­cel­lent sense.

The Obama ad­min­is­tra­tion has pro­posed ex­pand­ing the tax credit for the man­u­fac­ture of green technology here at home, and con­gres­sional Democrats will soon un­veil leg­is­la­tion cre­at­ing fur­ther in­cen­tives for do­mes­tic man­u­fac­tur­ing.

What won’t work as an eco­nomic so­lu­tion is blam­ing the un­em­ployed for their fail­ure to find jobs. There are now roughly five un­em­ployed Amer­i­cans for ev­ery open job, ac­cord­ing to the Eco­nomic Pol­icy In­sti­tute’s most re­cent cal­cu­la­tions, and that ra­tio isn’t likely to de­cline much if we leave it to the cor­po­rate sec­tor to re­sume hir­ing. Cor­po­ra­tions have fig­ured out a way to make money with­out re­sum­ing hir­ing. Their model is premised on not re­sum­ing hir­ing. If the pub­lic sec­tor doesn’t fill the gap, the era of Amer­i­can pros­per­ity is his­tory.

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