Heal Job Market By Cultural Renewal, Not Fed Intervention

No.: 
85

Americans have been reminded of at least two things of late: In the end, deflation is significantly about jobs. Secondly, and also according to Ben Bernanke, while we wait for the jobs we must realize that “central bankers alone cannot solve the world’s economic problems.” These may be the most important words Bernanke has uttered during his tenure as Fed chief.

Economic growth only matters when jobs appear, too. But where are the jobs going to come from? Should the Federal government hire many of the unemployed as temporary government project workers, stringently withholding the benefits of full federal employment? The answer is a guarded and qualified “yes:” Something must be done to help salvage the self-respect of the unemployed. If the U.S. Congress doesn’t do enough we face the proverbial risk that “idle hands are the devil’s workshop.” If the U.S. Congress does too much, government employment and spending growth will overwhelm the system and destroy liberty’s dream.

Government Remedy Is A Very Bitter Pill

If public employment comes to rival private industry in its political clout, this nation will lose a good part of its distinctive heritage as well as its raison d’etre. Plus, our unique and long-abiding constitutional system would no longer work, checks and balances undermined. The middle way — government jobs without traditional government security or pay — is the lesser evil.

The United States is going to continue to bleed jobs, such bleeding being a structural imperative of world trade until equilibrium in the U.S. is reached at a much lower standard of living for the middle class. Private enterprise in America cannot solve the nation’s unemployment problem because the cost of labor in developing countries limits job opportunities in developed nations that keep product costs down through international trade. Thus, the national legislature has little choice but to create an expanded federal work force following the 2010 midterm elections. This approach to the nation’s unemployment problem is anything but desirable. Yet, the tearing of the nation’s fabric by unemployment is so bad that a mending action is essential. But what price mending! The monetary cost of the repairs will resemble the price of war.

Will the Fed Print Money To Pay For Jobs?

Where will the U.S. get the money to put over 10 million Americans back to work? The Federal Reserve is tasked by the laws of Congress to pursue a full employment environment. Consequently, the Fed will find justification in buying Treasury bills that the government issues as new debt to cover the salaries of new federal workers. This will be nothing more than an expression of quantitative easing — a monetary policy that the Fed employs in hard times.

The Fed is a public/private entity that serves the interests of elites in the banking community while beholden to whatever goals and operational standards the U.S. Congress sets for it. Oftentimes the Fed has little choice but to service the fiscal insanity of the U.S. Congress if it wishes to keep the banking industry fit. Taxpayers should not be sanguine about Fed interventions, especially the creation of money to pay for government mistakes, since this so-called “quantitative easing” amounts to stealth taxation, the tax levied against wage increases that could (and should) accompany national gains in productivity and business efficiency. This taxation increases damage to the dollar, widens the U.S. trade deficit, produces consumer inflation, and hastens any pending sovereign debt crisis.

Harsh Realities Of The Job Landscape

There are certain attractions to the idea of taking unemployed persons who are receiving governmental assistance and increasing their payments if they do infrastructure work for the government. Some observers think many of the unemployed are good prospects for such work due to experience in the construction trades, manufacturing, and support service occupations. However, a healthy dose of realism is needed. Allowing for the hundreds of thousands of individuals that don’t fit the stereotype, the aggregate quality of the unemployed in terms of motivation, competency, reliability and productivity does not equal the aggregate profile of the gainfully employed. A government led initiative to employ persons that private enterprise has deemed ‘less desirable’ will come at no small price.

Granted, hiring in the private as well as public sector has not been fair for along time — not fair to employers in some regards and unfair to employees in others. Informed practitioners know that the federal merit system is one of the most skewed in the developed world, countless expressions of preference muddying the meaning of merit. But it’s not just government employment where things are mucked up. Equal employment opportunity laws in the private sector along with the over-extension of individual rights prevent employers from hiring motivated job hunters to replace relatively unmotivated employees. The problems include excessive “job-as-property” rights, employee litigation rights, seniority rights, union rights and norms that impact aggregate employee morale if employers tackle slacking head-on. That said, workplace demands are very uneven in America, with millions of workers enduring unreasonable demands by employers who prey upon the job insecurity many workers feel in today’s economy.

Arguably, the top third of the American unemployed are suffering workplace injustices. They have bountiful qualifications and skills, yet cannot find opportunities that provide reasonable compensation, let alone the pay to which they are accustomed. These motivated people would outperform the majority of employed persons in their job categories if given the chance. But other folks with hyper-job security block their way.

During the business boom years of the Clinton and Bush administrations many businesses hired on the basis of aggressive growth plans. When consumers became over-leveraged with debt and the real estate bubble begin deflating, business had to play defense. Corporations dumped both excess and marginal employees, making the competent and the incompetent the wards of American taxpayers.

Globalization’s Toll On U.S. Job Market

The Federal Reserve and the U.S. Congress are equally responsible for the calamity. The Congress globalized the U.S. economy for the sake of Wall Street and the multinational business lobby. The globalization was wrongheaded as it lacked achievable plans for re-deploying American workers into sustainable jobs where the nation could defend technological advantages, and hence, the pay of its workers. Obviously, a prudent adjustment of this scope was not possible without carefully designed laws and incentives to induce American consumers and businesses to buy the new goods and services. Instead, the stimulus went to the black holes of Wall Street finance. Nevertheless, a prudent adjustment had little hope as Americans substituted self-gratification over a vision of being the world’s most morally sound and technically competent society. We were not willing to pay the price of holding our own in the world!

Instead of a strategic repositioning of free market demands (through re-visioning, incentives and law) and a smooth re-tooling of the interests and skills of American workers, we are confronted with a crisis where millions are unemployed and unprepared to do economically sustainable work. This outcome is testimony to a “tragedy of the commons” — the tragedy reflecting inadequate presidential leadership, deficient religious norms, and a conflict between the interests of elites and the best interests of the general public. We could be a nation of reputable business leaders, honorable entrepreneurs and highly employable people, this being our natural interest. But we’ve not attended to our shared interests, individualism skewing our ethos.

Objectivity demands sympathy not only for the responsible among America’s unemployed but for employers and businesses that end up with employees who impede business viability. One need only consider the endless landscape of unmotivated workers in blue and white collar jobs to realize that the work ethic in America is badly damaged in many quarters. The theft of materials and supplies by American workers is now dwarfed by the theft of time, energy, focus and real regard for productive contribution. This is not so much the case in assembly line work or occupations where norms created earlier by an emphasis upon the scientific management of labor still hold sway. It is, however, quite dismaying to consider the lethargy of street repair crews, administrative workers, infrastructure maintenance employees and countless workers in shielded enterprises. Plus, there is widespread dishonesty in the operations of small businesses.

Cultural Decline At The Core Of Unemployment Problem

The American work ethic is in serious trouble in many quarters and people in foreign countries will continue winning our jobs. Every motivated, clear-thinking and hard-working American is harmed by an aggregate mentality that undermines our international competitiveness. Our aggregated inefficiencies increase the costs of American goods, thus enticing us to buy cheaper foreign goods. Since our export businesses must absorb the costs of goods and services at home, our ability to price our exports advantageously is impeded as well.

Viewed from this perspective cultural decay in America is costing us many millions of jobs! Our world is now a place where globalism causes financial stimulus in developed nations to produce jobs and inflation in under-developed countries, for money flows to where profits can be made in trade. While job losses in developed countries are inevitable in this environment, healthy culture trims the losses by keeping people at their moral, innovative and competitive best.

Winning jobs in the midst of global competition is about much more than mere business savvy. Success involves cost controls: micro controls at the business level and macro (visionary) controls at the national level. While many American enterprises have been good at controlling their direct costs, the nation has been very ineffective in dealing with national overhead costs as expressed in the cost of housing, transportation, healthcare, higher education and such. Equally salient is the fact that the American culture has created lifestyle norms that do not allow employers to attract many workers at wages that facilitate business success for enterprises caught in global competition.

For example, many Americans expect wages sufficiently high to allow them to eat out frequently. They also expect their healthcare benefits to keep paying at a full rate even if they become unfit or obese. They expect wage increases with seniority without regard to productivity. The cultural norming of wage and lifestyle expectations toward rights and away from responsibilities has elevated remuneration demands. Inflated wages thus contribute to a cost feedback loop that increases the aggregate overhead for productive enterprise in the U.S., thus reducing the prospect for balancing the current account (i.e., trade deficit) and retaining jobs in the states.

Cultural Reform Is The Key

Cultural reform in the right areas could effectively reduce national overhead costs as well as increase worker productivity and business efficiency. Over time this could help win back for America a portion of the jobs lost to developing countries. Everyone knows we must create good jobs to revive the American economy. What is not widely understood is that an easy money policy by the Federal Reserve is no solution at all. It is rather a lucrative subsidy to the banking industry. What America really needs is a pathway to economic health that starts with the soul. The morally tone-deaf Federal Reserve knows little about this pathway, for its focus on money has dulled its senses to a wider range of policy tools. Employment redemption, if it is to come for America, must be rooted in enlightened thinking and spiritual renewal.