Trade Off

by Kevin Fahy

 

The unemployment rate in the United States is now below five percent, the lowest it has been since the financial crisis of 2008, and about half of what it was at the peak of the “Great Recession.” The historical average is 5.82 percent.

Given those numbers, you would think that Americans might be pretty happy about the economy, but that doesn’t seem to be the case. Critics sometimes point to the “participation rate,” which is the percentage of working-age people who have jobs. That number stands at about 63 percent, which is the lowest it has been in almost 40 years.

The labor department compiles these statistics, but it doesn’t explain them. Perhaps people drop out of the workforce because they get tired of looking, or they aren’t willing to accept the sort of positions that are available. Perhaps they actually do work at something, but don’t report it. Some of them may simply choose not to work, for whatever reason.

At any rate, in spite of a relatively low unemployment rate, most people don’t feel good about the job market. They see factories closing, or moving to Mexico, young people struggling with college debt, older people working part-time at low skilled jobs, and millions of workers making less money than they used to.

When asked what the most important issue is in terms of the race for president, voters invariably choose jobs and the economy over such things as terrorism, government spending, education, immigration and health care. That’s why politicians keep telling us that their policies are all about creating more jobs, or saving the ones we have. A couple of them go so far as to promise that they will bring manufacturing jobs back to the U.S. from abroad, and voters eat it up.

Let’s step back for a minute. When I was growing up in the 1950s, unionized factory jobs were the golden fleece that the average American prized. They paid considerably better than other blue-collar work, provided great benefits, job security to retirement, and a guaranteed pension.

It wasn’t quite “cradle to the grave,” but it was close, and in many cases you had to know somebody to get in. If you didn’t have a father or an uncle in the union, it was going to be a long wait.

Amid the prosperity of the “Happy Days” era, it was easy to miss the fact that manufacturing in the United States had already peaked. World War II had required a maximum effort, swelling our production capacity to an almost unbelievable level and finally putting an end to the Great Depression, but the percentage of the workforce engaged in manufacturing would never again be as high as it was in 1944.

Although factory employment would not start to drop off until 1979, by the time I graduated from high school in 1971 the handwriting was on the wall. A few of my classmates did take factory jobs, and they made a lot more money than those of who worked at menial jobs to help pay for college, but we all knew that their future employment picture was cloudy. Too many products were already being made abroad, even our beloved automobiles, and too many northeastern factories were already being deserted.

What we didn’t see coming was the revolution in technology. Who would have thought that a job like mine, in the publication business, or a job like yours, in the retail business, would be threatened with extinction? Somebody in Beijing couldn’t very well publish your local newspaper, and no one was going to go shop for toys at a store in the Philippines.

I guess we can be forgiven for not imagining the Internet, let alone the effect it would have on our jobs, since virtually nobody else did either. I don’t remember seeing George Jetson or Captain Kirk ordering anything online, or checking his Facebook page.

The unemployment numbers in the specialty retail segment, and the publishing business, held up very well through the end of the 20th century, but the first dozen years of the 21st were brutal. According to the Bureau of Labor Statistics, for example, music stores shed 70 percent of their employees, camera shops lost 55 percent, and bookstores were down by 42 percent. Newspapers laid off more than 40 percent of their workforce.

Monster.com predicts that the bleeding will continue for the next few years, resulting in a further drop of 10 percent at department stores and 25 percent at newspapers. Yikes.

Fortunately for you and me, toy stores have done better than most specialty retailers, and magazines have done better than newspapers. I like to think that it has something to do with the experience we provide to our clientele, as opposed to the electronic alternatives, which are available in abundance. It’s no longer a matter of whether or not there’s an online version, but simply of which mode better suits the nature of the consumer.

At least we’re still here, which is more than can be said for much of our manufacturing base. From that 1979 high of 19,553,000 jobs, we have lost 7,231,000, or 37 percent. As a proportion of our working-age population it is even more dramatic, dropping from more than 12 percent in the 1970s to less than 5 percent today.

One of Donald Trump’s major tenets throughout his presidential campaign has been the premise that trade agreements, such as the North American Free Trade Agreement and the new Trans-Pacific Partnership, have caused much of the loss in manufacturing jobs. As president, he claims that he would reverse the process by imposing high tariffs and pressuring American companies to stay put.

Supposing that a president even has such powers, is Trump right in his assertion that trade pacts hurt American workers? That’s a difficult question to answer, because our economy is an extremely complex organism, affected constantly by a myriad of events, influences and trends. It is not a laboratory, where we can isolate and test a single hypothesis, and after a trade agreement takes effect, we don’t have a control group that would show us what would have happened without the agreement.

Having said all that, the majority of economists, as well the majority of politicians on both sides of the aisle, agree that the movement toward free trade and globalization is generally a good thing for the U.S. economy. That doesn’t mean that some people don’t get hurt.

There is no question that lower trade barriers have resulted in a loss of manufacturing jobs in the toy industry in this country. On the other hand, less-expensive imported products, everything from underwear to cell phones, have left consumers with more
disposable income to spend on things like toys. The net effect is positive, or at least that’s the theory.

I graduated from college during a severe recession, and it took me nearly two years to find a decent job in publishing. I’ve been very fortunate ever since, but I have never forgotten how difficult and demoralizing that experience was.

Like technology, I think globalization will continue to move forward whether we like it or not, but we cannot afford to leave millions of people behind. If we don’t find a way to improve the job prospects of the dispossessed, all the flat-screen TVs in the world won’t help us.

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