Despite an improvement in employment in November, unemployment and underemployment seem likely fixtures of the future economy.
While 18 million new jobs were created in the United States during the 1980s, structural unemployment - the seeming base level - was redefined upward from 4.5 percent to 5.5 percent of the work force.Worse, job creation fell off in the early '90s, and recovery even now is concentrated generally in the low-wage service sector. Discouraged workers, those who have ceased looking for work and are no longer counted as unemployed, multiply exponentially.
The root cause is, arguably, a rapidly growing population: more people, more workers. Some contend this bodes well in the long run. But certain characteristics of labor leave room for doubt.
Labor is a factor of production; labor productivity limits the wage that can be paid without igniting inflation. Wages also vary with the supply and demand for labor.
The years immediately after World War II struck a balance, featuring economic growth, tight labor supply, stronger consumer markets, rising wages. Inflation stayed low because expensive labor spurred automation, and the substitution of technology for labor increased productivity. Most prospered. Good times seemed here to stay.
Too soon, the worm turned. The baby boom and the entry of more women into the workplace caused real wages to stagnate after 1970. Although these temporary bulges in the labor supply were absorbed, real wages did not rise because immigration emerged as a new source of labor.
History shows that a tightening of the labor pool stimulates general prosperity, whereas an expanding pool dampens wages. In 19th-century England, for example, a 10 percent rise in the labor supply led to a 22 percent increase in rents, but a 19 percent decline in wages. The society polarized into rich and poor, largely because of a greater supply of workers.
Trends in the United States' labor supply may foretell our own future. In 1987 the Hudson Institute's influential "Workforce 2000" study predicted a shortage of skilled labor. The report, however, was flawed: It stated that white males would account for only 15 percent of new entrants into the labor force between 1987 and 2000, whereas actually 15 percent more are entering than leaving it.
Job creation, not labor shortage, is the issue.
Forty percent of young black men are unemployed, college graduates worry that a bachelor's degree is devalued in today's job market and about 13 percent of Ph.D. mathematicians are unemployed.
At every skill level, labor is impacted by immigration. The 1990 Immigration Reform Act tripled the number of visas for engineers and scientists. The rationale - a skilled labor shortage - is derided as "lies and fraud" by the American Engineering Association; companies prefer to hire foreign engineers, it states, because they work for lower wages. Similarly, some thousands of mathematics jobs go to Chinese students claiming asylum and to professionally established Russian refugees.
Americans with less education face declining compensation and job displacement in the computer software, hotel, construction and meat-packing industries.
In all of 1992, the economy created under 2 million new jobs while the potential labor force grew by nearly 1 million native-born Americans, 1.3 million recipients of work authorizations and an estimated one-half million illegal foreign workers.
The rapidly expanding labor force, driven by the highest levels of immigration this country has ever seen, is ending prospects that the majority of the young will enjoy the American dream.