Tough Times Ahead for American Workers

Practical Economics

Tough Times Ahead for American Workers

Even many of those lucky enough to have jobs will find stagnant wages, shrinking benefits and less clout.

Today’s workforce is facing the bleakest outlook for any economic recovery since 1948.

It’s not just the latest lull in job growth. Even if employment gains step up from June’s dismal levels, prospects are that job creation will remain slow well into 2012 and beyond. Big companies say they plan to increase their payrolls later this year, but smaller businesses expect only a modest increase in hiring — mostly because of the current economic uncertainty.

Moreover, the Brookings Institution’s Hamilton Project, which studies job trends, predicts that the United States will need to create some 12.3 million jobs to return to prerecession employment levels plus provide work for the estimated 125,000 persons entering the labor force each month. That could take five to 10 years, even under the best-case scenario.

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Even those who have jobs will face some formidable pressures. Wages, which have remained stagnant for the better part of a decade, aren’t expected to rise significantly in the current market. Employers are doing whatever they can to hold down the cost of fringe benefits. Many are asking workers to pay more of their medical bills.


Corporations also are beginning to push back at union demands. Verizon Communications is making its biggest effort in years to slash union work rules and cut benefits. General Motors has won an agreement to pay lower wages to entry-level workers at its Sonic plant in Lake Orion, Michigan.

Continued congressional bickering over how to cut the budget deficit is threatening to end the payroll tax holiday that President Obama pushed through for 2011; it expires on December 31. For those without jobs for long periods, extended unemployment benefits, which provide up to 20 more weeks of support, already are expiring in many states.

Nationwide, union leverage and public support for worker demands are waning. Wisconsin, Michigan, New York, Connecticut and New Jersey have moved to trim benefits or collective bargaining rights for government workers. State employees in these jurisdictions have roused little public backing.

Union membership has continued to decline during the recession. The percentage of American wage-and-salary workers who were members of a labor union fell to 11.9% in 2010, down from 12.3% the previous year and 20.1% in 1983. The number of union members fell to 14.7 million last year. In 1983, it was 17.7 million.


Democrats still recognize labor unions’ ability to turn out the vote. The Obama administration has proposed speeding up the process by which workers can unionize. It also is moving to block Boeing from opening a new plant in South Carolina to avoid having to pay higher wages in Washington state.

But there’s not much support for either move in Congress, which could well reverse such decisions if Republicans win the Senate next year. GOP lawmakers already are seeking to block a Democrat-sponsored provision to continue a controversial program aiding workers ostensibly left jobless because of trade pacts.

Even more daunting for younger workers are the latest demographic trends, which threaten to make it more difficult to get jobs. Improved medical care, a shift away from manual labor jobs, and the shrinkage of retirement portfolios since the financial collapse are prompting seniors to stay on the job longer, squeezing opportunities down the line.

U.S. workers also are losing some of their mobility — a factor that used to be one of the big pluses of the American workforce. Workers who once might have moved across the country to take a new job are finding themselves hampered by an inability to sell their houses and obtain credit. Two-earner families must consider the spouse’s job as well.


Finally, there’s a growing mismatch between the kinds of jobs that employers are offering these days and the skills that applicants bring to the table. At the same time, today’s immigrants are more highly skilled than the day laborers and farm workers who arrived in previous years, and therefore more competitive with American job seekers.

As a result, an increasing number of economists argue that the lowest level to which the jobless rate can fall without increasing inflation pressures — in effect, the minimum for a long-term unemployment rate — is close to 6.5%, rather than 5%, where it had been for the past 10 years or so.

Of course, that still leaves a lot of room for improvement from the 9.2% jobless rate recorded for June. But it’s a bleak outlook for the labor force for the next several years.