In traditional societies everyone works - they have to, just to provide essentials for survival. As society becomes more complex, fewer people are needed to produce essentials, so the society can support luxury items and services, including cultural services that enrich everyone's lives. But this reached an extreme and untenable proportion in the United States
Agriculture now occupies only about 1% of the population; manufacturing and construction some 10%. This is the underpinning of the entire economy, and supports the now much larger service sector. But there is no neat division into essential and nonessential. Even with agriculture and manufacturing, there is a spectrum from essentials (basic foods and household goods) to luxuries (designer gowns and yachts). In between there is a range of goods that are more expensive, but higher quality, goods that are more functional and last longer. Even the concept of necessary is flexible - a typical house today is much larger than a traditional house; two bathrooms at a minimum are "necessary," as are larger kitchens, more spacious rooms, perhaps a den or an office area.
It is clear that a relatively small percent of workers can produce all the necessary essentials. This production sector supports the service sector, which itself also encompasses a spectrum from essential to nonessential:
- Business services include management and office operations. The downsizing by many large corporations vividly demonstrated how flexible the concept of essential management is.
- Financial services ranged from essential mortgage and business loans through stock markets and pension funds to hedge funds and financial derivatives. Some of these services are clearly essential for the functioning of the economy. Others helped undermine the economy. Many jobs lost here were not only nonessential but counterproductive.
- Computer and information services are the essential skeleton of the modern economy, they control manufacturing lines, manage projects, and greatly increase the efficiency of office operations while reducing job requirements. These services also trail off into nonessential and even trivial, from teen-age text messaging to massive computer gaming.
- Municipal services includes basic education and utilities, as well as the buildings that support these activities and local roads - infrastructure critical for business. Upkeep and maintenance is also necessary, but can easily be deferred for significant current savings but increased future expenses.
- Legal services range from support of basic court and justice functions to specialized government and corporate services, including support of the complex financial transactions which eventually collapsed much of the economy.
- Hospitality services support business travel, essential to a complex and widespread economy, as well as personal travel, vacations, and such simple pleasures as dining out. The recession has also starkly demonstrated how nonessential much of these services are.
- Health services are an expending portion of the economy, but also extend from clearly essential basic services to a range of questionable (and often expensive) tests and diagnostic procedures as well as expanding cosmetic and dietary services.
- Government services not only provide essential coordination and justice activities, but also oversight and regulation of increasingly complex economic and social relations.
- Cultural and religious services enrich our lives, but also include items that are clearly nonessential or even frivolous.
- Military services protect the nation and its interests overseas. Much of this is open ended and the importance of specific elements is widely questioned. What is clear is that military elements, including the military-industrial complex behind them, are nonproductive and use assets that could certainly be applied elsewhere.
Even this cursory review of the economy shows that there is a productive core which supports the rest of the economy. However, it is not easy to specify exactly what this productive core is. Many service areas include services which are critical for production. There is also an international dimension: the US economy imports a wide range of essential products, and pays for many of them with services. From a global point of view, these services may be nonproductive, but from a US point of view, they provide essential products. And of course, "essential" is also a relative term.
But even allowing for all the ambiguities, there are now clearly millions of extra workers, qualified people who can not find jobs. There is a general expectation that jobs will eventually come back, but there is ample reason for skepticism:
- Many jobs have been lost to globalization. Foreign workers can now compete directly with US workers in many fields, offering comparable work at significantly lower costs. Many of these jobs may never come back.
- The move of manufacturing jobs overseas is more complicated. Some of this production supported exports to other areas, including areas where the production plants are now located. It is unlikely that much of this production will ever come back. Other production shifts overseas, based on lower labor and raw material costs, may be challenged by gradually rising wages and material costs overseas, as well as increasingly higher transportation costs. Nevertheless, the shift of any significant number of manufacturing jobs back to the United States in the near term seems unlikely.
- Many financial service jobs were very well paid, but had no real grounding. They existed by supporting the bubbles in real estate and financial instruments and were essentially responsible for the following recession. Stricter regulation means that many of these jobs will also not come back.
- The recession is forcing both corporations and households to reevaluate just what is essential. Many companies have apparently concluded that they can operate just fine with a lot less management. Economic recovery along with considerations of long term efficiency and continuity of operations may encourage some modest re-hiring of supervisory personnel, likely at lower salary levels.
The underlying reality is that essential production and services occupy only a fraction of available workers. Non-essential goods and services -- luxury items, cultural services, entertainment, vacations, military -- enrich our lives but can exist only on the basis of assets provided by the productive sector of the economy. The service economy is largely nonproductive and inherently dependent on outside resources. The services offered have to be sufficiently attractive to induce the productive sector to pay for them. A small productive sector simply cannot support an outsized service sector. So there have been voices, for example Alan Tonelson, arguing for a resurgence of manufacturing as the only credible exit route from recession. This will certainly not provide any short-term impact but easily raises controversy. Now, for example, when the nation desperately needs jobs, unions are opposing free trade agreements which would increase manufacturing at some locations, but stress it at others. The challenge is exacerbated by demographic projections which show an expanding retired population depending on a shrinking work force.
Low-end jobs have been significantly impacted by the recession:
- Nonessential and low priority jobs -- landscaping, maids, janitors -- have been scaled back.
- Workers forced to down scale into low-end jobs find they do not offer a living wage. Although they are unsuited for long term employment, many workers find they have no alternative.
- Immigrants, many illegal, are bearing the brunt of the impacts. The Land of Opportunity with a ladder up into the middle class has disappeared with the shriveling of the middle class job pool. The result is the emergence of a permanent underclass alienated from the mainstream of American society.
Where new jobs will come from remains problematical. Government jobs can ease the situation temporarily, but ultimately depend on taxing (and undermining) the productive sector or increasing the already swollen national debt. Joblessness is here to stay and a return to a steadily expanding economy seems well beyond reach. One current assessment rates the chances that a laid-off worker will ever regain his or her income level as only one in four; another recent report found that 71% of American workers hold jobs for which there is decreasing demand, increasing supply, or both. At the same time, China, fueled partly by US debt money, is now leading the global race to design and make clean energy equipment. This is competition based not on cheap labor and shoddy goods, but on sharp minds and long-term perspective.
In the long run, only developing a globally competitive workforce will provide high employment and support continuing US prosperity, and this depends critically on the US education system with its numerous shortcomings. So while the nation faces a wide range of external challenges, the most critical challenge is to fix American first. Without some very basic realignments, the United States faces the prospect of becoming a second rate economic power unable to compete in the new global market.