America's False-Front, Movie-Set Economy
America’s economy resembles the propped-up false fronts of an old Western movie set; it seems unlikely to support a middle class anymore. The existential issue is simple, though insufficiently discussed: technology, demographics, and government policy are collaborating to impose economic decline. The evaporating middle class is taking the erstwhile American worker and his employer with it as it fades. Folk whose worry ends with the deficits hollowing out Social Security and health care are worried about poor passenger service in a falling airplane.
First, consider the U.S. workforce. Contrary to some folk, the government isn’t going to support everybody; the government has only the money it takes from citizens. Unemployed and minimum-wage Americans offer little to take, and the Labor Force Participation Rate is declining. Those growing numbers of non-working people have to be housed, fed, and watered by those still working. Government SNAP (food stamps), disability, and/or other benefits are presently paid to 49% of Americans. That is a wobbly crutch resting upon deficits from a government burdened with debt. Most of the money is taken from workers whose incomes have just halted a six-year decline. Our grandparents spoke of “trying to get blood from a turnip.”
That should illuminate the hollowness of the “recovery” claims, and there is more. While the work participation is going down, the population is going up. And those newbies need support, too. A significant number of them need support until they are 25 years old, per the unemployment tables. However, the young are becoming fewer; the U.S. fertility rate is declining for whites, blacks, and Hispanics, with the latter two declining less. When these babies reach 25 and more of them find work, they represent a long decline in high school graduation rates, though there was an uptick recently. Unfortunately, the uptick may reflect declining standards. It is noteworthy that the lowest graduation rates reflect the blacks and Hispanics, who retain the highest birth rates.
In world rankings, U.S. education has declined among advanced countries from first rank to the middle of the pile in math and science. So we have a proportionately smaller workforce with more people to support that is not keeping up with world education standards.
The size of that growing dependent population is significant. With the U.S. Population By Age, it seems that the unemployed kids under 25 plus the presumed mostly retired folk over 65 are almost as many as the labor force that supports them. With the rapidly retiring baby boomers meeting the declining birth rates of new workers, this is discouraging enough, but the seniors are now living longer. A declining workforce must face an increasing burden.
How will workers do that? The difficulties are manifest: much of U.S. manufacturing has moved offshore, much work has been assumed by machines, and government provides both educated and less qualified foreigners to compete with citizens. The H-1B visa program provides educated foreigners to work in America, particularly in high-tech positions. Currently, over 500,000 jobs are listed for these applicants. So. Calif. Edison has laid off its IT department, replacing it with H-1B foreigners.
The government combines foreign-born workers legally and illegally present in reports. Foreign-born U.S. workers of all types amount to 15.3% of the labor force, a percentage that has risen. One of every six jobs, then, is held by someone born in another country. One of every thirteen is held by a Hispanic. Is it the “jobs that Americans won’t do,” or the low wages? Some say that economics is simply equalizing world wage levels…with a little help from the politicians.
All the workers face both the emigration of work and the replacement of human labor. Labor costs have been sending manufacturers to China, India, and other places for decades, as most know by now; G.M. sells more cars in China than in the U.S. By 2010, U.S. factory work had fallen to 1941 levels. Such employment has risen a bit since, but nothing that justifies hopes for a recovery; the situation is largely stagnant. U.S. productivity is declining, and labor costs are rising.
Less attention has been paid to the increasing emigration from the U.S. tax structure; that seems myopic. Too many of such emigrants are wealthy investors taking needed capital with them, in numbers never seen before. U.S. corporations face a similar situation: corporate tax rates top the international list. Economic prosperity requires capital as much as labor.
Manufacturing is the past, we’re told now; services are the future. But what sort of future, when a burger joint may buy a machine that takes your order and makes custom hamburgers faster than three McDonald’s burger-flippers? True, that’s only one sort of service; software consulting, say, is another. Ordinary personal computers come with audible screen readers for the blind, and Windows 8.1 incorporates voice recognition. You can ask Siri, Google Plus, and Cortana to do things for you on your mobiles. Will software continue to be written exclusively by people? Some, no doubt, but how much?
The machine impact of the moment is 3D printing. With an increasingly inexpensive and simply operated machine, one can make all sorts of things on short notice. Things that used to need factories. Your dentist may now 3D print new crowns and such in his office by himself, if he wishes, while you wait; dental labs seem set to follow buggy whip manufacturers. Educated people were needed to design the machines, but a lot of workers are no longer needed on account of them. Mid-last century, when computers were added to machine tooling, low-paid machine operators replaced a lot of highly skilled, expensive machinists. Then those machine operators became Indian and Chinese. Now, we’re seeing the next step.
Let’s add this up. Fewer, less prepared workers with more people to support face foreigners and machines competing for proportionately fewer jobs. North America and Europe remain high-cost producers in an increasingly competitive world; we’re told that Google’s next smartphone may, for the first time, be made by a Chinese tech company. Basic economics predicts the future, though no American or European politician dares say it.
Government policy is the capstone: government regulation of labor, business, and markets has driven costs well above natural market levels and opened the door to foreign competition. Government holds the borders open, encouraging illegal and H-1B immigrants. A 2014 study by the Center for Immigration Studies said that all the new jobs since 2000 have gone to immigrants.
In addition, government discourages work: some New Jersey teens planning to shovel snow were stopped by the cops because they weren’t a registered business. Some states’ laws and pending federal regulation put babysitters, caretakers for the elderly, and similar activities under minimum wage, overtime, and vacation mandates, pricing such work out of much of its market.
Such an economy seems unlikely to support a middle class. America and Europe, too, are replacing their middles with new proletarians in reversion to the historic economic pattern. This should not be unexpected; we watched the Soviets, and we can see Venezuela, Greece, and others now. Politicians can’t keep their hands from an economy, but political decisions are economic poison.
The world’s once most productive economies have hollowed to old Western movie sets, propped up by welfare, cheap money, media, and politicians hoping that few citizens will enter the swinging doors of the fake saloon for a real drink…or a real job.
America and Europe are pursuing one fork in the economic road; another, though unlikely, exists. President Warren Harding’s deep 1921 depression moved his secretary of commerce to urge strong government intervention. Harding refused; he let the economy readjust on its own. Recovery required two years. Later, that secretary of commerce was president during his own depression and, contrary to much we are told, intervened heavily. He was Herbert Hoover; we know how that turned out. Now we’re seeing the sequel.
The Gallup CEO recently pointed out that as a percentage of the population, America’s full-time jobs stand at a historic low. A cruise ship is testing robot bartenders. American Millennials lag behind foreigners’ work skills. Behind distracting technical goodies, the U.S. living standard has been fading since the housewives had to go to work in the 1970s. And the trend continues.