I explained the economic downturn to my son, who is 9, in terms he could understand. “It’s like we’ve done something bad, so the whole economy has to go to its room and think about what it did and what it can do differently. We’re in our room, alone and sad right now.” He bought it, and unlike some of the things I explain to him I eventually bought it, too. The problem, of course, is what we tell the great economic parent when we come out.
The press has spent a lot of time on what we did wrong but not as much time on what we do different in the future. That’s the Restructuring that comes out of a Depression, or the re-allocating of money and talent towards things that are going to be more productive in the future. In other words, people are going to have to do things differently. But how? Where will the new jobs be for people? Unfortunately, there are key barriers to getting people into new productive careers that reflect the new times. It’s always the “What you’ll do differently?” that is the hard part.
A flexible labor market is one of the most important things we can have to get us out of this situation. Right now, however, we have a very inflexible labor force for the following reasons:
Hidden Job Market Any recruiter will tell you that there’s a hidden job market that they have access to. Not all jobs are posted, and many companies rely on trusted professionals to staff them. If you want to know about these jobs, you either have to network until you find them or hit the right agency; in either case, it’s a matter of who you know. Since we don’t all know everyone, that’s a problem. It’s especially a problem for talented people of an outside race or social class. Who is the best person for the job? Well, the only ones who know about it are my people. That’s not good.
Certifications If you need someone to weld a bridge, you need to know that they can weld properly; proof that they can do the job is essential. A financial planner has to show that there’s at least a good reason to believe they can do the job in the form of an appropriate college degree. New jobs, or at least jobs that are new to the people out looking, have certain requirements that may take time and money to get. If an entirely new field opened up tomorrow that needed a lot of people, it would still take a lot of energy to get it off the ground as people acquired the skills and proof that show they can do it. An economy that is based on a high degree of specialization is inherently less flexible than one that is based on general skills and a keen intellect.
Overhead The cost of an employee is far more than their salary. There are taxes and benefits to consider, too. GM uses a figure of about 2X the salary to figure the actual cost of an employee, and there’s evidence that this is fairly typical for a large industrial company. I covered this earlier in more detail.
Life Parents with young children are notorious in any workplace for having to leave early or arrive late, asking those without kids to cover for them. This becomes a lot more difficult in a highly stressed workplace running “lean and mean” (or, more accurately, “skinny and pissed”). Working parents have to have more flexible jobs, which is to say that a lot of the jobs out there aren’t suited to them and force a choice between kids and work that isn’t healthy. Similarly, if you buy a home near your job and then change jobs, you may be looking to either move or face a long commute. Perhaps the best job for you is in another state, meaning you have to rip up your family and ask your spouse to look for work in the new location. No matter how you look at it, there are many reasons why the art of living makes the workforce reasonably choosy in what jobs they can take – especially families.
As a group, these are a major barrier to the Restructuring that is about to take place in our economy. Some of them are things government can help with, such as lowering payroll taxes, socializing health care, and subsidizing training. Some of them are things that employers will have to figure out on their own, especially the hidden job market. Others can’t really be solved without major social upheaval.
Changing this is probably the most important thing we can do, because Restructuring is not only inevitable but healthy. The sooner we get it done, the better. If President Obama wants to do one thing to help ease the burden on workers in America, it would be to focus on what can be done to make a more flexible job market – without trashing wages.
We all know we’ve done something terribly wrong and we won’t be let out of our room until we can say just what we’re going to do differently, after all; that won’t come until we open ourselves up to what the options are.
It looks like the restructuring is beginning after the G 20 summit. More needed regulation of banks, financial non banks, and tax havens. It will be interesting to see how the alert minority reacts.
Now for restructuring the work force thats a whole different matter.
Sorry I’ve been away from the comments – too busy trying to make a living. Pretty tough these days, too.
One of the things I left off of this piece, because I thought it was obvious, is that the economy has to restructure itself – there’s no great Politburo that will tell us just what we’ll all be doing. We’re gonna have a Free Market, more or less, no matter what happens.
A Free Market takes time to adjust, generally, and the more “friction” or resistance it has to adjusting the longer it takes. What will be the jobs of tomorrow? I have only a few clues, and I while I thought about a piece on that it seemed so sketchy and pointless I dropped the idea.
What’s more interesting is how our economy moves in a way that takes advantage of the talent which now seems like a big excess. How will it do that? I dunno, but I know it’ll be different. About all I think we can do it to allow it to move as rapidly as we reasonably can, and that’s flexibility. I’m afraid we just don’t have it.
Would it be nice if some central Politburo could tell us just what things are gonna look like in a few years? Um, no, actually. I’m good with how things are – with some minor tweaking to make it a bit more open, and bit more fluid, and ideally even more of a Free Market than it is now in certain ways.
Thats kinda was what I was getting at. It could be a generational thing and some teens through 40 year olds are facing some big unknown future challenges. I am trying not to be cynical here but many if not most teens to 30 somethings are focused on their love life. And then comes babie(s). I can provide academic evidence if you need it. Most of us are followers not leaders. Capital whether used in politics or finance means “the head”. Good luck to you and to everyone. Sincerely.
I like this post but I can’t figure out what I did wrong. You are right about the hidden job market. I dropped out of corporate America 7 years ago because I don’t believe in it. I know what I am good at and what I am not good at and I use my skills the best that I can to earn a living. None of my previous employers gave me that opportunity.
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