It’s now two years since the official end of the Great Recession. Yet the US unemployment rate in May was 9.1 percent, and even college grads are having trouble finding jobs. The US economy is mired in its third, and worst, “jobless recovery” since the early 1990s.
Things look pretty bleak for the foreseeable future. So how did it come to this?
Let’s take a look. The scarcity of good jobs, even in an economic recovery, reflects the cumulative impact of three structural changes in the employment practices of US industrial corporations, going back three decades to the early 1980s. These changes are the result of a triple-layered process of 1) rationalization, 2) marketization, and 3) globalization. Together, these trends have taken a permanent bite out of the quantity of well-paid and stable middle-class jobs in the US economy.
From the beginning of the 1980s, the trend of rationalization, which is characterized by plant closings, tended to jettison the jobs of unionized blue-collar workers. And from the beginning of the 1990s, marketization, which brought the end of the one-company-career norm, has placed the job security of middle-aged and older white-collar workers in jeopardy. Finally, from the 2000s, globalization, which drove the offshoring of jobs, left all types of members of the US labor force — even those with advanced educational credentials and substantial work experience — vulnerable to displacement.
In each case, the structural change in employment took root in a cyclical downturn: rationalization in the double-dip “blue-collar” recession of 1980-1982; marketization in the “white-collar” recession of 1900-1991; and globalization in the “Internet” recession of 2001. Looking back, we now know that the recoveries that followed the recessions of 1990-1991 and 2001 were “jobless” as marketization and globalization, along with ongoing rationalization, continued after the recoveries. Indeed, in terms of blue-collar employment, the recovery from the recessionary conditions of 1980-1982 was also jobless because of the continuation of plant closings in 1983 and beyond. In 1985, for example, the number of machine operators, inspectors, and assemblers in the US economy was down 22 percent from 1980. For the economy as a whole, however, these blue-collar job losses in the first half of the 1980s were offset by new employment opportunities for white-collar workers created by the microelectronics boom and the rise of what would come to be known as the New Economy.
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Initially, you could justify these structural changes in employment in terms of changes in industrial conditions related to technologies, markets, and competition. The plant closings that came with rationalization were a response to the superior productive capabilities of Japanese competitors in consumer durable and related capital goods industries that employed significant numbers of unionized blue-collar workers. The erosion of the one-company-career norm among white-collar workers that characterized marketization was a response to the dramatic technological shift from proprietary technology systems to open technology systems that was integral to the microelectronics revolution. The offshoring of the jobs of well-educated and highly experienced US members of the labor force that went along with globalization was a response to the emergence of large supplies of highly capable workers in nations such as China and India, many of them with graduate degrees and work experience in the United States.
But once these structural changes in employment had gained legitimacy as responses to new industrial conditions, US corporate executives often pursued them purely for financial gain. Some companies closed manufacturing plants, terminated experienced workers, and offshored production to low-wage areas of the world simply to increase profits, often at the expense of not only the jobs of long-time US employees who had helped to make a company successful but also, going forward, investment in the company’s long-term competitive capabilities. As these changes became embedded in the structure of US employment, business corporations declined to invest in new, higher value-added job creation on a scale that could at least offset the job losses.
At first sight, the Great Recession of 2008-2009 appears to be detached from these changes in employment practices, given its origin in the casino-like activities on financial firms in the subprime mortgage market. Yet the very existence of a large body of subprime borrowers derived in large part from the failure of US industrial corporations since the 1980s to invest in innovation and high-quality job creation while middle-class jobs were permanently lost through rationalization, marketization, and globalization. Through subprime lending, Wall Street sought to exploit the vulnerability of a working-class population to whom industrial corporations no longer delivered middle-class employment opportunities. And, as I will explain in a later post, the current dismal employment situation and outlook reflects the ongoing investment and employment practices of US industrial corporations that, over the past three decades, have become thoroughly financialized.