Wrong Cure for Ill Market?

By Heinemann, H. Erich | Insight on the News, September 13, 1993 | Go to article overview

Wrong Cure for Ill Market?


Heinemann, H. Erich, Insight on the News


The U.S. economy stands at a great divide. For 20 years, roughly 1970 to 1990, America enjoyed job growth at rates well above the trend of the last century. In the nineties, the great American job machine has slowed. What, if anything, ought government to do?

Should Washington seek a return to rapid job creation? Alternately, should it foster opportunities for a more stable (possibly a smaller) work force to create more wealth? These aims are not mutually exclusive, but policy choices will be different depending on which goal you prefer.

On average, more than 62 percent of civilian adults in the United States were at work during George Bush's four years in the White House. Even with the recession, that was a record for any president in the 20th century, and probably in the 19th century as well. An average of 1.8 million people found employment each year from 1960 through 1989, a total gain of about 52 million.

By contrast, total employment went up less than 1 million from 1990 through mid-1993, an annual increase of 270,000. Obviously, most of that slump in growth was due to the recession. Even so, some folks are worried that forces leading to a long-term slowdown in jobs may be at work.

Bill Clinton came to Washington to create "good jobs at good wages." Sadly, he seems to have lost whatever sense of strategy he brought to the White House. His budget squeaked through Congress, but the final bill was a patchwork of political accommodation, not a program of incentives to invest and create wealth. The reverse seems more likely

A national debate on employment policy has just begun. Voters need the facts. More workers will not necessarily mean an increase in national wealth, which should be the objective. Employment was very high in the Soviet Union under communism, but former Soviet citizens are poor today because their productivity was low. Here are four important points to keep in mind:

* Since the early 1970s, rapid gains in employment in the United States have been accompanied by sluggish improvement in productivity, well below earlier trends. As a result, real income per worker has stalled. Average real incomes are far below what they would have been had the gains in the first 25 years after World War II continued.

Employment growth has been led by private companies that provide services. The list is long: Such fields as communications, entertainment, education, finance, health, insurance, real estate, trade, transportation and utilities are among the larger employers. Such fields account for more than 70 percent of the job growth since World War II and 100 percent since the early 1980s. Add government to a "service industry"), and services account for more than 90 percent of the jobs added since 1946.

* Roughly two of every three net new workers in the United States since the late 1960s have been women. Almost 46 percent of the U.S. work force is female, compared with 37.7 percent 23 years ago. Put differently, 54 percent of women over age 16 were working outside their homes in the second quarter of 1993, against 41 percent in 1970s. The male employment rate, by contrast, fell from 83.6 percent to 69.9 percent.

* The feminization of the work force is most pronounced in the displacement of older men by younger women. Females between age 25 and 44 made up 14 percent of the work force in 1970, compared with 24.

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