Structural Imbalances in the U.S. Economy

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Structural Imbalances in the U.S. Economy

• The uneven pattern of employment and income
  growth in the current economic
  recovery

Phillip LeBel, Ph.D. Emeritus Professor of
Economics Montclair State University Montclair,
New Jersey 07043 Lebelp_at_mail.montclair.edu
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• The U.S. is a global leader in output recovery,
• but lags in employment growth.

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• Lags in employment reflect a structural shift
  from traditional blue collar manufacturing to a
  knowledge-based human capital skills economy

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• Part of the employment shift has been driven by
  outsourcing of traditional manufacturing. The
  current rift in Congress over fast-track trade
  negotiations reflects concerns over the pace of
  adjustment, not unlike the debates over NAFTA
  twenty years ago. Today, this is being
  counter-trended somewhat by insourcing of jobs
  from foreign direct investment in the U.S.

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• As real wages have grown more slowly, there has
  been a major increase in two-person working
  households, in greater annual working hours, and
  in fewer vacation days. Much of this shift has
  been well documented by Juliet Schor in
• The Overworked American (Basic Books, 1992), and
  updated periodically by many studies since then.

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• While productivity has grown, average wages have
  remained stagnant, with most increases in income
  accruing to those at the upper end of the income
  scale.

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• Some differences in income can be explained by
  the number of hours worked, and some can be
  explained by a secular decline in wage and
  salaried workers under collective bargaining
  agreements. But most of the changes reflect the
  overall shift from manufacturing to service
  employment in the economy in which human capital
  skills are key.

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• Women now outnumber men in terms of undergraduate
  college degree graduation numbers, account for a
  majority of law school and medical school
  graduates and other human capital intensive
  occupations. All of this is reflected in an
  uneven shift in the composition of household
  activity, and in the formation and dissolution of
  households. Hanna Rosin examines these changes
  in her book The End of Men and the Rise of Women.
  (Penguin Riverhead Press, 2012).

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• Not surprisingly, in a structurally changing
  economy, while nominal economic indicators point
  to more robust health, poverty has risen, as
  measured by the number of food stamp recipients,
  and the overall poverty rate.

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• As a result of both the deep recession that began
  in late 2007 and the uneven pattern of economic
  recovery, federal spending and federal deficits
  have been under upward pressure. Without
  structural reforms in incentives, austerity alone
  will not lead to a sustainable recovery in either
  jobs or in public deficits. Reforms need to
  address the changing nature of work in a human
  capital intensive service economy.