The Economy Has Changed for American Workers – And There’s No Going Back – Pacific Research Institute

The Economy Has Changed for American Workers – And There’s No Going Back

It used to be that political parties would argue over which policy was more effective at helping the largest number of people achieve the American dream.

Now, a growing chorus on the left have begun to argue that the American dream itself is a lie, and that our only option is to remake ourselves into something akin to one of the small Northern European countries that have achieved near mythical status among progressives.

It is true that the American economy has been substantially transformed over the last few generations. Most of these changes represent major progress, as the continuous improvement and hard work incentivized by competition and free markets has led to incredible advancements in nearly every good and service available.

But to consume we must first produce, and the nature of work has transformed in ways that are not as universally beneficial to our role as producers.

The most obvious change has been the level of “churn” for workers in the new economy. American workers that graduated between 1986 and 1990 held an average of 1.6 jobs in the first five years after college. This grew to nearly three jobs for those graduating between 2006 and 2010. Of course, increased job switches are not in and of themselves an issue. What matters is the reason for the increased churn.

If people are leaving their jobs voluntarily due to their ability to find better pay and opportunity from other employers, this is a net positive. However, at least some of the structural shift in job tenure is due to other less laudable changes, such as outsourcing and technological innovation, which reduce the demand for workers (at least in certain industries).

The steel industry is an illustrative case study for the broader employment trends that many parts of our country are currently living through.

According to a 2015 paper published in the American Economic Review, the U.S. steel industry experienced a 75 percent decline in its workforce between 1962 and 2005, and more than 400,000 jobs eliminated. Given the concentration of these jobs in certain great American cities, their loss is far more devastating as it presents a sizeable proportion of those laid off with the troubling choice of either struggling in their hometown or leaving their community to provide for their families.

Waiting for these jobs to return is also not a plausible strategy, as even with the loss of 75 percent of the workers employed, the American steel industry experienced no loss in overall steel output throughout this period. With growing productivity, there is simply no need to hire as many workers to meet stable or even growing demand. Apart from embracing a neo-Luddite model of destroying progress and ignoring innovation, we must accept that these jobs are not coming back.

It’s not only workers experiencing less certainty in the new American economy. Large companies increasingly find themselves having to consistently innovate and improve to stay competitive in the modern economy or get left behind.

In the 1950s, the average age of an S&P 500 company was 60, meaning that most of these companies could trace their roots back to the 1800s. Today, the average age of a company in the S&P 500 is less than 20 years old. This dramatic change in the expected life cycle of large American companies impacts everything from the investments they make to the retiree pensions and benefits they can offer their workers.

For better and for worse, there is ample evidence that long-term employment is on the decline in the United States. The commonly-held understanding that after some turnover experienced early in their careers most workers would find a job that lasts for a long period of time (a “lifetime” job) has been challenged in recent years.

Politicians are lying when they act as if they can bring back the “good old days.” They can’t, nor should that be our goal. We should instead focus on preserving what was good about those times and embracing the great and unique opportunities available in our own time.

We must make sure that every American has the skills to ensure that when they leave an employer, regardless of the reason for separation, they have the skills to rapidly find another job, or to create their own. Americans have never been a backwards looking people, and now is not the time to start.


Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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