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Tags: jobs | wage | unemployment | growth

Washington's Bad Policies Stunt Jobs Growth

Peter Morici By Wednesday, 02 July 2014 09:39 AM EDT Current | Bio | Archive

Thursday, the Labor Department is expected to report the economy added 211,000 jobs in May. In line with the pace so far this year, that is far short of what is needed to keep up with population growth and genuinely reduce unemployment.

The jobless rate is down to 6.3 percent from the recession peak of 10 percent, but most of the reduction has been accomplished by adults quitting the labor market — neither working nor looking for work. If the same percentage of adults were in the labor force today as when Presidents Obama and George W. Bush took office, the jobless rate would be 10.4 percent and 12.4 percent, respectively.

Three problems have limited jobs creation during both the Bush and Obama years — slow economic growth overall; a disinclination to control the border with Latin America or disappoint businesses' appetite for cheaper skilled labor from Asia; and the work disincentives imposed by social programs intended to redress income inequality and help the disadvantaged.

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In this century, GDP growth has averaged 1.7 percent per year, whereas during the Reagan-Clinton period it was 3.4 percent. The reluctance of both Bush and Obama to confront Chinese protectionism and currency manipulation and open up offshore oil for development has created a huge trade deficit, which sends consumer demand and jobs abroad.

Efforts to bring jobs back to America are often frustrated by government regulations that are more burdensome than necessary to accomplish their legitimate objectives, and skilled labor shortages. Paradoxically in an economy with 9.8 million unemployed and actively looking for work individuals, too many lack skills appropriate to the 21st century economy and seem to lack adequate incentives to acquire those skills.

The combination of free and subsidized healthcare, the earned income tax credit and other government programs whose benefits phase out as incomes rise imposes high effective marginal tax rates on lower-income working families. These often encourage prime-working-age adults to forgo full-time employment or not work at all.

Many have simply made little effort or lacked the opportunity to acquire skills in demand. Efforts at improving primary and secondary education and access to college have focused too much on basic skills and granting degrees without much concern for the course of study selected. Those efforts have simply not adequately emphasized creating skill-ready graduates for a rapidly changing economy.

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Immigrants — legal and illegal combined — are all too eager to fill the void and have captured all 5.6 million jobs created since 2000.

Meanwhile, the share of the working-age, native-born population holding a job has fallen from 74 percent to 68 percent, and many have not made the effort to acquire the skills necessary to land a good-paying job in a quickly changing economy and labor market.

Baby boomer retirements are not appreciably driving down the adult employment rate — Americans between the ages 65 to 69 who are working has risen from 23 percent to 32 percent since 2000. It's prime-working-age Americans who are not showing up. For example, one in six males between the age of 25 and 64 is not working.

Twenty-six million Americans are working part time, many owing much to poor economic conditions and government disincentives to work full time. Adding in the adults working part time who want full time work but can't find it and adults not currently in the workforce but who say they would return were conditions better, and the unemployment rate rises from 6.3 percent to more than 12 percent.

These forces combine to cap wages for workers making goods and services that primarily serve U.S. markets and compete with imports, while wages rise for workers with skills needed in industries selling products in global markets, such as in advanced manufacturing, international finance and a broad range of technology services.

It should come as no surprise then that the average family's real buying power continues to drop even as the gap between the rich and the average working family continues to widen.

© 2023 Newsmax Finance. All rights reserved.

Thursday, the Labor Department is expected to report the economy added 211,000 jobs in May. In line with the pace so far this year, that is far short of what is needed to keep up with population growth and genuinely reduce unemployment.
jobs, wage, unemployment, growth
Wednesday, 02 July 2014 09:39 AM
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