Why the jobless recovery is so stubborn
Someone has called the current period in the economic cycle the “mother of all jobless recoveries.” A jobless recovery happens when the economy repairs itself following an economic but without a corresponding reduction in the unemployment rate.
Jobless recoveries are a relatively new phenomenon, but since we’re currently experiencing the second consecutive one in less than ten years, could this be what future recoveries will look like?
In the 21st century, there are two kinds of unemployment: economic and structural. The first is as old as the marketplace and the easier one to fix; it presumes unemployment will go down as the economy improves. Structural causes are more stubborn because they’re associated with fundamental changes in the marketplace that create shifts in how companies use human beings. The previous jobless recovery – from 2001-3 – is a good example of structural unemployment for two reasons:
1. At the advent of the 21st century knowledge economy, many 20th century jobs disappeared. And unlike after the Great Depression, when farmers could easily be converted to factory work, it takes longer for a factory worker to make the jump to a cubicle.
2. New technology significantly increased the automation of tasks that once required a human.
Here are three examples of how structural unemployment manifests:
1. In a conversation I had with the manager of a paper mill built in the last decade, I ask two questions: a) How many of your plant employees use technology in the direct performance of their jobs? Answer: “100%”; b) How many employees work in your plant? Answer: “400, which is half as many as the new plant I built in the 1990s.”
2. If you think the U.S. owns the franchise on structural unemployment, studies have shown that the country that lost the most manufacturing jobs in the past decade was China. Not because of globalization or a recession, but because of automation made possible by new technology.
3. In a recent poll on my website, we asked small business owners if their first move to meet growth opportunities would be to hire new people or employ automation alternatives. Seventy percent of respondents said they would automate first.
As the economy recovers, small businesses will produce most of the new jobs but not before we automate. It’s not our responsibility to hire for the sake of reducing unemployment.
Write this on a rock … Jobless recoveries will be with us until all workers are trained for 21st century jobs.
Jim Blasingame is creator and host of the Small Business Advocate Show.
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