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Many jobs are gone forever: What now?

By Jason Thomas, Special to CNN
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STORY HIGHLIGHTS
  • Jason Thomas: Jobless issue has heroes and villains, but many jobs gone forever
  • Thomas: Outsourced, replaced by technology or made obsolete by models such as ZipCar
  • He says people need help getting employable; crossing fingers doesn't work
  • We can benefit from innovation of productive workers, support training of others, he says

Editor's note: Jason Thomas is chief investment officer of Aspiriant. He earned a doctorate in economics from the University of Southern California and an MBA from the Stanford University Graduate School of Business.

(CNN) -- My introduction to economics consisted of two high school courses, one taught by an economist and the other by a political scientist.

The economist claimed that every political question was really an economic question -- the allocation of scarce resources is a fundamental purpose of political activity. The political scientist claimed that every economic question was fundamentally a political question -- the framework and incentives provided by the political system define the potential of an economy.

Since then, I have learned through policy and business experience that the perspectives and tools of economics and political science are individually insufficient to respond to the complex issues facing the United States.

Discussion about the lack of employment growth in the U.S., for example, is driven by truly economic circumstances, but it has been conducted in the prevalent political mode of identifying heroes and villains. The resulting "fingers-crossed" approach to watching the employment figures suggests a dangerous misunderstanding of the challenge facing American workers.

The underacknowledged truth is that many of the jobs that were lost over the past three years are gone forever. Americans who held them will not be rehired to do the same jobs, no matter how much the economy grows.

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Some of those lost jobs will go to someone in another country for less pay. U.S. workers are competing with an increasingly global work force in a "flat" world, and we are only beginning to understand the implications of the huge labor pools in China and India being plugged into the global economy.

This process of outsourcing to other countries has attracted significant attention from politicians because it offers some seemingly obvious heroes, American companies that hire in the United States, and villains, those that outsource to other countries.

Most of these "gone forever" jobs have been replaced by greater productivity -- fewer workers using better technology -- or made obsolete by a new business process. My favorite example of job obsolescence is the rise of car-sharing companies such as ZipCar, which allow members to reserve a car online for as little as one hour.

The car is picked up from, and returned to, a nearby parking lot -- the key stays in the car and the doors are unlocked using a special key card. Gas is included in the rental price, and members are asked to refill the tank when necessary, using a gas credit card that stays with the car. There is no direct human contact during the transaction and, unless the car needs maintenance, no need for a human being at the parking lot.

For the user, this process is more convenient and less expensive than renting from a big rental company such as Hertz. But think of all the jobs that are no longer needed to conduct the transaction, including the telephone representative who makes the reservation, the parking lot attendant who checks your driver's license and the person who fills the gas tank when you return.

Who are the heroes and villains in the ZipCar example?

Neither economists nor politicians can address the issue on their own.

Concerned primarily with aggregate welfare, economists point to the greater efficiency of the ZipCar model and assume that the economic losers, such as the phone representative, will be redeployed to more productive jobs. Politicians focus on other aspects of the problem with more obvious villains and which are therefore more likely to generate quotable sound bites.

A successful analysis of, and response to, the lack of employment growth require economists and politicians to:

Understand the evolution of the demand for workers. Since the information technology revolution of the 1980s, we've seen ever-falling employment growth associated with economic expansions; only 0.9 percent annually from November 2001 to December 2007, for a population growing even faster. More and more U.S. companies can grow without hiring workers, at least American workers. Don't assume that economic growth will generate employment growth.

Make people more employable. Rather than relying on economic growth to drive employment, we should support employment more directly by increasing the productivity and profitability of workers. We will need to work through the recent problems of for-profit companies in the worker education field -- including fraudulent reporting of attendance, improprieties regarding student loans, and simply promising too much in terms of skill development and job opportunities -- probably by encouraging employers to get more involved.

Rethink unemployment insurance. The unemployment insurance program was designed for people who are temporarily out of work and need a financial bridge to the next job. It does not work well for a worker whose job is obsolete.

States and local agencies have a grab bag of retraining initiatives, but they are not up to the challenge. There are some who point to studies that a dollar spent on unemployment insurance generates two dollars in economic activity. There is no discussion, however, of the opportunity cost of spending a dollar in that way -- a dollar which might otherwise generate three or four dollars in economic activity if spent retraining workers.

Acknowledge the difference in productivity of different types of jobs. The productivity growth of certain workers, even those who are highly skilled, has fallen dramatically. A brain surgeon can only operate on one person at a time. A computer programmer, on the other hand, can write code for millions of PCs and, increasingly, mobile phones and tablets. This reality can partially explain the growing income disparity in the United States, which is unavoidable to some extent. Instead of punishing highly productive and high-earning workers through increased taxation, encourage people to invest in the development of their own skills.

The issue is complicated, to be sure. Millions of Americans are exhausting their 99 weeks of unemployment insurance while, in the fight for talent in Silicon Valley, Google has decided to raise salaries by 10 percent across the board. But if the economists and politicians can work together, we can benefit from the effort and innovation of highly productive workers while supporting the adjustment of the rest.

The opinions expressed in this commentary are solely those of Jason Thomas.