Looking at the official unemployment rate, American workers should be pretty happy. Almost everyone who wants a job has one.
Yet many aren’t happy at all. We see it in consumer sentiment, retail sales, and other indicators. We all hear it anecdotally from friends and family.
Some employers are unhappy too. They complain they can’t find qualified people to fill open positions, no matter how much they raise wages. This prevents them from expanding and may explain why economic growth lags previous recovery cycles.
How do these seemingly conflicting conditions things coexist at the same time? To answer that, we have to go deeper than macro analysis and look at the “micro picture.”
Growth Can’t Solve This
Christopher Cabaldon is the mayor of West Sacramento, California—a small but fast-growing city within a large metro area. So its problems reflect those of many other places, and Cabaldon is the one who has to handle them.
I saw him speak this month at the South by Southwest conference, on a panel called In the Red: How Americans Experience the Economy. With him were experts from the American Enterprise Institute, Aspen Institute, and Pew Charitable Trust who study this. I thought Cabaldon was the most interesting, though. His experience is practical as well as observational.
Cabaldon said lack of jobs isn’t the main challenge. Instead, he listed four other problems that help explain the stubborn discontent.
- There’s a mismatch between the unfilled jobs and the skills of those who need jobs. Many don’t have the education or knowledge employers need. That’s not easily or quickly solved, even if taxpayers are willing to solve it.
- Many of the unemployed are parents of small children. They want to work—and would, if they could get affordable childcare. It often costs more than they would earn from the low-wage jobs available to them.
- People lack transportation from the areas where they can afford to live to the areas where jobs are available. Owning, fueling, and insuring a car is expensive. Mass transit— if it’s available—is still slow, which means they have to pay for more hours of childcare.
- The criminal justice system increasingly punishes the working class with high fines, fees, and sometimes asset forfeiture for minor offenses. The traffic cameras that are a minor nuisance for wealthy people can lead to arrest warrants, job loss, and jail time for low-wage workers… which then makes finding jobs even harder.
These are tough problems because economic growth can’t solve them—at least not in the near future. Maybe we’ll have childcare robots at some point, but it doesn’t help today’s single parents.
Cash Flow Hiccups
Speaking on the same panel, Sheida Elmi from the Aspen Institute noted that short-term stability is a necessary condition for permanent success. Federal Reserve surveys show that four in 10 American adults can’t handle an unexpected $400 expense. These people have no cushion. Just one minor crisis—car repairs, illness, etc.—can quickly reverse any upward progress they make.
Elmi also said low wages aren’t the only barrier. Wage consistency is also problematic for “gig” workers and others whose income varies. On an annual basis, their income can look sufficient… but it really isn’t if the cash doesn’t come in at the same time bills are due.
Every business owner who’s had to plan cash flow should understand this. You try to match revenue and expenses, and have reserves for when they don’t. The reserves are some combination of savings and access to credit. Low-income Americans lack both, so the slightest cash-flow hiccup can be disastrous.
Lately, we hear Wall Street people and their media allies lament about “socialism,” by which they mean higher taxes on the wealthy and more public benefits for the poor.
Looking at the way the lower half of the population lives, I don’t see why this surprises anyone. Low-income people can still vote. Of course they support policies that they believe will favor their own interests. That helped elect Donald Trump and helped give the House to Democrats last year.
These problems aren’t imaginary, and they won’t go away on their own. If you don’t want the affected people to rise up against you, the answer is to help solve their problems.
We should debate how to best do that, but we aren’t. I see mostly…
- Denial that the problem exists (“These people don’t know how good they have it!”), or
- Blind faith that a growing economy will solve it
Neither is correct. That today’s poor Americans suffer in different ways than previous generations doesn’t mean they are prospering. And it’s far from clear that the economy will keep growing or that the growth’s benefits will trickle down if it does.
Your particular part of the economy may be fine, but the economy isn’t just you. It will not stay fine if millions remain left out.
Helping them may be the best way to help yourself.