The Harvard Business Review’s Eric Janszen questions, “Are These the Economy’s Good Old Days?” He writes this following the release of the latest unemployment statistics, which show that over 4% of the total US Labor Force has been unemployed for 6 months or more. Further, the unemployment rate increased to 9.6% and for the third straight month more people were laid off than hired.
Gallop measures underemployment as those unemployed plus those working part-time that desire full time work. Their August numbers indicate that 18.6% of the US Labor Force is underemployed.
I’m not underemployed by this definition. I was a full time professional, managing a staff of two and responsible for a $1M annual operating budget and earning over $70,000. I was then laid off and spent one year on unemployment. My unemployment was at the maximum amount allowed, which was $584 a week plus a $25 stimulus check. The big benefit was Cobra, because stimulus funds meant I only paid 33% of Cobra or roughly $440 a month.
When I was approaching one year on unemployment, a friend asked me to talk to a manager of a local dealership that was struggling with their online marketing. I took a position because I thought it was better to work than not to work, and I was not certain unemployment would be extended (it was). Now I earn a base plus commission. The base is $26,000 per year and based on being in my position for four months, my commission will be an additional $12,975 putting my salary under $40,000 for the year. I won’t even compare benefits.
How many of me are out there? How many people are looking for a new position, while working for pay that is 33% or more less than what they had been earning? How many people are out of work and not on unemployment, but want to work?
It’s not scientific, but let’s simply assume that if 9.6% are unemployed and another 9% have part-time work and are seeking full-time work, there could easily be another 9% like me with a full time job that pays 1/3 less or more than they previously earned and they took work because it was believed to be better than the unemployment or underemployment. This would put roughly 27% of the US Labor Force earning significantly less than they had been previously.
Back to Janszen’s article. He opens with this haunting statement, “Five years from now, will we look back on the dismal unemployment that we’re suffering on Labor Day 2010 and see this year as the good old days?”
Janszen contends that at the rate we are adding jobs, we will enter the next recession with unemployment rates at the level of previous recessions. Can you imagine how high the rates will climb under that scenario?
He also predicts that the next recession will hit within three years and be triggered by a spike in oil prices.
At the end Janszen notes that since the 80’s the US economy has been dominated by Finance, Insurance and Real Estate (FIRE) and they have burst causing recession and massive government intervention. He ends with this, “Government subsidies of FIRE industries must be rolled back and precious resources redirected to support productive industries while there is still time.”
So what are productive industries? How can we create jobs in these industries to revive the economy and base it on a more material and tangible industry?