I have been thinking a lot about America's economy and American jobs lately, and have an essay on the subject in this week’s TIME Magazine and a long post on the Global Public Square. I also spoke with Eliot Spitzer about jobs on In the Arena. Here's the transcript of our conversation:
Eliot Spitzer: All this week, CNN has been focusing in-depth on the crisis of jobs in America. And that includes an amazingly insightful article in this week's TIME Magazine by our own Fareed Zakaria. Fareed, as always, thank you so much for being here. Frame the issue for us.
Fareed Zakaria: The simplest way to think about it is we don't realize what the unemployment rate is. We think we have about seven million people unemployed. Actually, if you take into account the people who have stopped looking for work and you take into account the people who have part-time jobs (and these part-time jobs pay on average $19,000, which is half the median wage) - if you put all that together, you have 24 million people unemployed. This is almost close to great depression levels of unemployment.
What unemployment does is outside of the fact that it means you have fewer taxes and all your budgets get screwed up at the state level. The personal tragedy of unemployment is that you lose these people. This becomes a lost generation because they lose skills and they lose work habits. They kind of get lost to society.
Spitzer: Let me summarize it this way: There is a corrosive effect to our society. The social fabric of our nation is ripped apart, and we have 20-plus million unemployed. And then as you point out, all the presumptions about the federal budget are completely thrown out the window because they presume revenue from jobs that simply don't exist.
Zakaria: If you look at President Obama's budget and this is true of all the budgets been put out there, but take President Obama's budget. It assumes that over the next 10 years we will create 20 million new jobs. Over the last 10 years, we created 1.7 million jobs.
Spitzer: Why is this happening? You highlight two fundamental causes.
Zakaria: There are two things going on. One is technology. If you look at the American economy right now, we are back to pre-crisis level of GDP, which is about $13.5 trillion. We're producing the same number of goods and services as we did in 2007 with seven million fewer workers. So at some level, that's a productivity increase, right, which is admirable. But what it tells you is we are achieving productivity where you can get GDP growth without hiring more people - in fact, by firing people. Look at every industry: Technology is replacing people.
Spitzer: Now, traditional economics would say additional productivity is good because it produces greater wealth and the people who are displaced by that technology then get new jobs in new sectors. But what's happening, it seems to me, and tell me if I'm right here, is those people who've been displaced are sitting on the sidelines, and the new jobs, such as they are, are overseas.
Zakaria: Exactly. And part of what's happening is, I think, this technological change is happening at warp speed. So maybe that's part of it. But the other part of it is there's a pincer movement.
You the technological change but you also have globalization and global markets and global labor so there are cheaper workers doing the same kinds of jobs overseas. The two things together, technology plus globalization, mean the average American workers feeling the pressure like I don't think he's ever felt before.
Spitzer: Now, it used to be that our sense was manufacturing jobs were being displaced and being sent overseas. But now you point out it's happening in white-collar areas as well. Lawyers. Now nobody maybe will cry for lawyers, but nonetheless, lawyering jobs are being displaced as well.
Zakaria: Right. Discovery, which used to be one of the classic things that young lawyers did, is now something that is increasingly being done by computer programs. If you were running a law firm and you could replace a lawyer you're paying $150,000 with a computer program, you'd do it in a heartbeat, because it's huge cost savings for you. But it tells you that even in professions like law, computers and technology are replacing people.
Spitzer: Here's a number to give people a sense of scale. Back in 1979, General Motors had 618,000 jobs in the United States. 2011, down to 77,000.
Zakaria: Right, Facebook employs 2,000 people. It's a $50 billion company.
Spitzer: Now, look, there's something much more important about your article. You diagnosed the problem. You do it brilliantly. And to "The Post-American World" which is the book that catapulted you to global fame did that as well, people should read it. But you also say here are some answers. So you give us what you think is the single most important of the five.
Zakaria: Probably the single most important of the five is small business. Because if you look back over the last two decades, almost all job creation came not out of these big companies that we think about, but out of small businesses.
And we've got to sit and focus on the question of what does it take to grow small business in this country. That means rationalizing the patent system and creating a regulatory environment that allows it to happen. I would argue that mmigration reform that allows skilled immigrants to –
Spitzer: Because that's where so much of the small business comes from.
Zakaria: The statistic is that half of all the Internet start-ups in Silicon Valley had a founder who was a foreigner, who was an immigrant. So if you think about that and ask yourself, what would it take to get these small companies going? These are companies that often employ less than 100 people or even 25 people. But there are lots of them.
Spitzer: You also talk about retraining. We need to retain the existing workforce where people had been on an assembly line but simply don't have the capacity to step into the shoes of the jobs that are needed. So how do we do that?
Zakaria: Well, honestly, we haven't had great luck with this, so I think this is one of those areas where you want to try a bunch of different things. But I think part of the problem is we have never thought about this as ambitiously as we need to.
You're talking about a whole generation of workers in their 40s and 50s who need to be retrained. I think this is a place where you need the government, academia, the educational institutions and industry and private sector to work together. The government probably pays the bills. The educational institutions train people. And industry tells you what training they need. You need something on the order of the G.I. bill, you know, that kind of magnitude where you really change people's lives.
You can read my TIME article here, and explore my Global Public Square post on the topic here.
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Brilliant man giving a perfectly rational explanation to the problems of unemployment in the US.
I watched the interview and it should be a must watch to understand the reasons given for the possible lost generation and how to fix it.
I don't agree with the comprehension of a "lost generation". Each generation has its ups and downs and every single one of us is different. There's a German proverb saying "Every man forges his own destiny". Children growing up during World War II were seen as a "lost generation", yet numerous of them did well in life. They didn't end up in the gutter and lived in comfort till they died. Circimstance have an impact on a generation, yet it is up to each of us to get more out of life.
I agree with Fareed on strategies to gwt the US moving quickly. Unfortunately, politics always gets in the way of common sense thinking.
Fareed is way off the mark. We currently have half a million H1B visa holders in the country taking high paying tech jobs. The excuse for this is we do not have qualified domestic individuals. How do you get qualified if you can't get a job. Fareed sounds like he changes gears mid stream in this essay. The solution for jobless americans is importing more job taking people from overseas? While I am on my rant! I am tired of people saying that undocumented aliens are taking jobs that no one wants. They are taking jobs for a salary no one wants. Jobs like every other commodity are supply and demand. If the undocs were not here, menial jobs would have less supply hence wages and benefits would have to go up to attract workers. Similarly, if the H1b program was cancelled companies would have positions for graduates. Companies would have to invest in training graduates, but that would help the country and the economy. Please stop being corporate tools.
You make great points about the H1B visa holders & other issues. Zakaria has good points – see my post with my take.
"How do you get qualified if you can't get a job."
You get the appropriate education. The kinds of jobs to which he's referring are not the kind of jobs where you get all or even most of your skill from on-the-job training.
I agree with your comment about illegals taking jobs for *wages* no one wants. If a product or service is viable people will pay enough for it to produce it using legal labor.
The biggest problem in the United States is that the average American has been accustomed to high salaries and other benefits in the past, whereas the undocumented immigrants have always worked on less salaries, just to maintain their families. The average American unemployed today prefers to remain unemployed rather than work on less salary, by now everyone knows that the undocumented immigrant cuts down on unnecessary expenses, sometimes even making sacrifices on personal expenses.
Zakaria's right about technology and globalization killing the middle class. It seems the GOP & RW position on no gov't participation in REAL job creation and funding retraining are dooming much of the US – for political support from their base. Much of their base is in the undereducated southern states who are failiures in ed from K -12 and beyond. There's a reason GOP et al focus on these states for votes: ignorant folk are easy to manipulate.
Andrew, I agree with your comment about the southern states. They pay in less federal tax money than other states, and receive more back in entitlements. They would be very surprised if they got their own way and realized how reduced their federal funding would be.
And the left hasn't used under-educated minorities in our inner cities for their ideology? Look at the literacy rates, graduation rates and drop-out rates in our largest cities. Get real. Neither party gives two-shites about you or anyone else. They only create fear and separation for their own political gain.
Retraing is a big one. There are a lot of good workers out there who can't find jobs because they don't have the "right" skills and no company wants to foot the bill to retrain people.
I'd love to see some serious government investment in creating jobs or training people, especially young people. Something like an updated version of the CCC that would provide jobs, training, and at the same time give something back to the country.
You are so right, Michelle. I am one of those in her 50's whose lifetime career as Executive Assistant has been replaced by computer programs. Without a retraining program, we become a liability. Most of us *want* to be employed with a living wage.
Republicans tell us it is important to maintain a tax structure that hasn't create a significant number of jobs in seven years because we need it to create jobs. And people believe it. Of course, a lot of people believed Republicans would address job creation if they were elected in large enough numbers to take control of the House and they've expended more energy trying to limit abortion than they have trying to increase unemployment.
I agree JimH.
Btw, the end goal fareed is a global perfect market, but the other very important goal is space travel...I will not discuss it in detail, but there is reason to believe we may not have much time on this planet.
Read my other posts on your other article; the one suggesting ways to solve the unemployment problem....I slightly disagree, offer you a different perspective.
We are also not the first intelligent beings to have inhabited, or the only ones currently inhabiting....this planet. I just thought you would find that interesting. There is more to history than you know, especially the history of earth. In any case, we will likely have to leave eventually...it's always good to get a head start.
No, the aliens are not hostile..apparently it's something else, it does have to do with the weather...but I won't go into detail .anyway, good job, keep up the good work my dear fellow. Finnally someone is beginning to see the angles in the public arena...glenn beck saw much, then he took a sharp apeshit turn....what a long time lad...long long time. But not so long ago.
We already have a 'lost generation', maybe two. Look at our inner cities. This problem isn't new....it's growing.
Re-training is an essential. Please look at THE GREAT COURSES and THE KHAN ACADEMY. With the help of the internet and the input of industry telling us what they want employees to know we can retrain our people at a very low cost.
Fareed Zakaria is a foreigner trying to make excuses for exporting jobs to 3rd world slave Nations while importing cheaper foreigners like himself who steal jobs that could go to American citizens because he doesn't want to live in the dirt whole he came from.Most small business go bankrupt.They are a scam bankers love they get people to invest their savings into a dream that usually doesn't pay off.Then the Banks get to collect interest from businesses no longer around.Small businesses that usually thrive are sub-contract.The truth is the Big 3 still employ at lot of people as many or more than when they first started however what hasn't been sent abroad is done in Sub-Contract Companies where they get around Unions.Same thing goes for Comcast,At&t,all the rest of Corporations.Everything is sub-contract for legal reasons or wage/benefit reason.Corporations are getting away with robbery.Truth is banks own stocks,they then pressure companies for more profits for returns on investments with money from your banks accounts.The companies then lay you off and outsource some of your jobs.You never get a raise but the banks offer you credit(again money from your savings/checking accounts) to buy what you can't afford from your small pay check.Banks get more profits,Company pays no taxes than get tax right offs dividends paid to Banks but the government does get military to protect your goods from foreign nations and Companies get to use trains,Planes,and navy to get it here all paid by taxpayers,which they aren't.Uh Oh the company has no more money or customers,Your 401 just bought stocks from this Company,what a surprise.Company goes bankrupts Government pays for retirement benefits for remaining workers,you lose part of your investments,Banks made money, because your retirement fund bought those stocks from them just when about to go bad.You take left over money from saving invest in Ice cream shop.You employ 2 people.you mortgaged your house.Made some money but this recession is just starting and you put a mortgage on your house for the loan too.Your small business is bankrupt your employees are now Unemployed,Government will now pay them a salary for you.Your house is worth less than when bought but you still owe.You have know just lost your house.Banks have your house and all the money you paid them for interest Credit with the money form your and others banks accounts.Banks have made money off you every step of the way from credit card to investing your Savings.You have no more saving,banks have no more money to use for investments so the people working for them can forward to their accounts.The Government has just gave them money.Government has no more money because you have no job and they are paying for you and everyone else the banks has sucked dry,nobody is paying taxes.Government has just borrowed money from foreign Nations.Foreign Nations want their money back.Government has lower the dollar.So you if you have a job are now making less per hour but paying more for basics goods and resources.Story short use credit Unions where you are a member,When young try to save 3 years worth of salary,pay off house in full before starting family.Save money for your retirement in Savings.Government always works for bankers and media always works for Government.