April 9, 1993
"The Best Job Creation Program is a Healthy Economy"
San Jose Mercury News
By Timothy Taylor
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THE LAST few years have made it obvious, in case there was ever any doubt,
that working hard is no guarantee of keeping your job in a capitalist economy.
Workers who had plied their trades within the defense industry are being laid
off as military spending is scaled back. Management mistakes and new competition
have led to enormous layoffs at emblematic American companies like General Motors,
IBM and Sears -- but most of the workers at those companies were putting in an
honest day's work and had no control over the fortunes of the company.
Other American workers are threatened by foreign competition; for example,
signing the North American Free Trade Agreement with Mexico will displace perhaps
150,000 people from their jobs, again through no fault of their own.
A total of 15.3 million jobs were lost between 1987 and 1992 -- roughly one
of every eight jobs in the U.S. economy -- for reasons given in the table above.
Government statisticians define 12.3 million of those workers as "displaced,"
which just means that they lost their job for one of the first three reasons in
Nearly half of the workers displaced between 1987 and 1992 had worked with
their employer for more than three years, according to the Bureau of Labor Statistics.
Focusing on this particular group, where the dislocation and disruption are presumably
greatest, the bureau found that about two-thirds of these workers had new jobs
by January 1992. Just over half were earning as much or more than in their previous
job; about one-sixth were earning only slightly less; but one-third of the re-employed
workers had seen their earnings sink by more than 20 percent.
Of course, the Bush administration didn't invent job losses, although it sometimes
sounded that way during Bill Clinton's presidential campaign. The story of displaced
workers is only a portion of what is happening in the labor market. Often, the
reason one worker loses a job is because another worker is getting one.
Workers lost jobs at IBM, for example, partly because of success and growth
at competitors like Intel and Microsoft. Even as free trade with Mexico displaces
some workers, every economic study not done by a labor union estimates that the
new opportunities for trade will create even more jobs. As money shifts away from
defense spending, it will create new jobs and opportunities in other parts of
An average of 2 million workers lost their jobs every year during the 1980s,
according to a recent study by the Congressional Budget Office. But taken as a
whole, the labor market during the 1980s created not only enough jobs to offset
those losses, but also 18 million additional jobs. The economist Joseph Schumpeter
described capitalism as a process of "creative destruction." If that
phrase sounds a bit contradictory, it's because capitalism often feels that way,
Too often, when policy makers talk about displaced workers, the focus is on
why people lost their jobs. For example, the government has a special program
for some of those who lose jobs because of foreign competition, and the Clinton
administration is mulling over a program for those who lose jobs because of defense
When it comes to extending personal sympathy, the reason someone loses a job
makes a difference. But when government policy is at stake, a worker who loses
a job because of foolish corporate management deserves the same support as one
who becomes unemployed because of foreign competition. A displaced worker who
lives in a region hard hit by defense cutbacks deserves the same help whether
that worker was directly employed by a defense contractor, or by a company that
sold to the contractor directly, or by a company that sold to the subcontractors
of the defense company, or whatever.
Unemployed workers are a social disaster not because of the reason they lost
their jobs, but because their skills aren't being used.
Between unemployment insurance, severance pay and welfare programs, America
does a reasonable job of providing short-term income assistance to displaced workers.
However, the U.S. economy does less well at helping unemployed workers hook up
with new employers, or at providing retraining.
While I am generally supportive of programs to retrain workers, I also find
myself wondering whether a government that has grave difficulties educating its
children in public schools is likely to be very successful in retraining its adults.
My guess is that any successful job training will require considerable initiative
and support from private business.
Public policy tends to worry more about those who are being displaced from
jobs than it does about creating economic conditions that favor the creation of
new jobs. But the most powerful job creation program, and the greatest assurance
for displaced workers that they can find another job, is a healthy and growing
|THE REASONS FOR JOB LOSSES
|More than 15 million workers lost their jobs between 1987 and
||Number of jobs lost
|Plant closed down/company relocated
|Position or shift abolished
|Seasonal job completed
|Self-operated business failed
Source: Bureau of Labor Statistics, unpublished tabulations from January 1992
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