What’s Behind the Jobless Recovery?

In case you hadn't heard, things are looking up. After a brief recession, corporate profits are again rising, and productivity is increasing. The economic recovery is in full swing.

But unemployment is still high. The growth of new jobs (most of which are in the low-paying service sector) lags far behind the loss of existing jobs, especially the relatively well-paying jobs in manufacturing.

What accounts for this “jobless recovery”? Why isn’t economic growth lifting all boats?

Over the past two decades, employers have radically increased labor productivity—they can produce much, much more with fewer workers. Lean production—the reorganization of work through speed-up, new technology, and job combination and “redesign”—allows corporations to increase output, lower costs, and raise profits without hiring additional workers.

Productivity is the problem? According to union leaders and many politicians, the culprit is corporate “outsourcing” to other countries.

The media is filled with stories of work previously done by relatively well-paid workers in the United States—including very-well paid scientific and technical employees—being shipped to Asia, Africa, and Latin America.

In these locations, workers perform the same tasks at a fraction of the pay. These “Benedict Arnold corporations,” as Democratic presidential nominee John Kerry calls them, have abandoned U.S. workers for cheaper labor abroad.

Kerry has a point. For years now, major corporations have spun off labor-intensive work to non-union companies. The mere threat of outsourcing work has sharpened competition among workers and allowed employers to lower wages across the board.

Lies, Damned Lies, and Statistics

 The Bush Administration’s trumpeting of a Labor Department report 
that stated 308,000 jobs were created in March may 
overstate the case that strong growth is around the corner. According to the King Report, a daily investment newsletter, 
an estimated 296,000 of the new March jobs were either 
temporary or part-time. “We have never seen such a grossly misinterpreted employment report in our 30 years in this biz,” 
the newsletter commented.



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More than 47,000 workers returning to work after the southern California grocery strike and lockout were also added into the job creation numbers.

But outsourcing abroad is not the main cause of the jobless recovery. Most outsourcing by corporations involves sending work to non-union employers within the United States. Outsourcing of work abroad has, according to Business Week, accounted for the loss of only 300,000 jobs in the past three years—only 10 percent of the over 2.5 million jobs lost since March 2001.


Business Week also estimates that every one percent of annual productivity growth allows corporations to eliminate about 1.3 million jobs. Productivity has grown almost two percent since 2001; that accounts for almost all of the 2.5 million jobs lost in the past three years.

So if the real cause of the jobless recovery is speed-up and new technology, why do union leaders and Democratic politicians harp on outsourcing? Outsourcing is an easy target—it makes a great sound bite.

It would be much harder to go after the larger cause of job loss, because so many union leaders have been complicit in the spread of lean production.

Think of the unions that pursued a strategy of labor-management cooperation all through the 1980s and 1990s, often forcing such programs on skeptical workers on the shop floor. Their cooperation allowed employers to reorganize the workplace by gutting work rules and introducing two-tier.

As management introduced new work methods and new technology that turned workers’ work lives upside down, most unions failed to react, forfeiting even their right to bargain over the effects.

Focused on elections and on organizing new members, most union leaders are far removed from the realities of the workplace, and how hard their members have to work. If that’s true of union officials, it’s doubly true of politicians.

It is so much easier to blame foreign workers and corporate greed than to organize a fight against employers here at home.