Lisa Simpson
Nov 18,2009
In: Finance

Free Market is not the Answer for Generating Jobs

USA has traditionally been a nation of hard workers who are thrifty and self-reliant. Americans are inspired by the words of Benjamin Franklin, “Early to bed and early to rise makes a man healthy, wealthy, and wise.” It is this attitude that has helped to generate jobs.

The notion of creative destruction as expounded by Schumpeter was illustrated when 44 million jobs vanished in the 80’s and 90s. But at the same time it created 73 million jobs in the private sector. A staggering 55% of the total working population was engaged in new jobs by the beginning of the 21st century. Two thirds were in the industrial sector that paid much more than the average salary. This scenario has not happened accidentally but is because of a distinctive type of capitalism that works bottoms up.

Today there are no signs of job generation – rather unemployment is on the ascendancy as millions of jobs have vanished. Instead of thrift USA has been transformed into a country of debtors, overburdened by underwater mortgages with the value of property being less than that of the loan amount. Credit lines are exceeding the ability of the borrower to repay.

This Great Recession is also changing the type of unemployment making it more difficult for the unemployed to be re-employed. The system can be mended only by changing the infrastructure and introducing innovations.

Nearly one third of the 15 million unemployed have remained so, for a minimum of 6 months. This is the highest ratio since records are being maintained from 1948. At the same time those who are still clinging on to jobs are working for reduced number of hours – 33hours per week. It is the lowest since the last 60 years. The companies are reducing hours, snipping off wages as well as benefits and discharging even more workers. Today all the sectors of labour – income, hours, wages and benefits are under siege.

Most of those who are jobless cannot find ways to replenish their earnings. Unemployment benefits make up for nearly a third of the lost wage. The condition is that the person should have worked full time on the previous assignment for a minimum of 12 months. The majority does not qualify as they have been at their work for less than a year before the curtain fell; or they were part timers. Some were self-employed contractors. 43% qualify for unemployment benefits. But they too are anxious. 61% are apprehensive that their benefits will shut down before they are re-employed. This is evident by observing the sudden increase in dependency on food stamps. 6.2 million are relying on it since the recession took off.

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