(Photo: Joe Raedle, Getty Images)
The real challenge of economic growth is not changes to taxes or regulation, as important as those policies are. It is not innovation and education, even though both are necessary and important. The economic problems will not be resolved through legal or government reforms, although without those reforms the prospect of economic growth is slim.
At the root, our economic problems are cultural.
If we reduce and simply the tax code, and eliminate onerous regulations that stifle building business, manufacturing and innovation…
If we retain jobs on our soil instead of outsourcing entire industries to third world countries…
If we revamp and refurbish our education system to hold students to the high standards that are necessary to compete in a global economy and do the technical and collaborative work of this digital age…
If we unleash a wave of innovation through legal, tax, administrative and financial reforms that favor entrepreneurship, repatriotization of overseas profits and corporate investment…
Even if we do all these things there is still one big question: will people work?
The cultural problems that diminish personal motivation and discourage work stem from government dependency and the victim mindset that binds people to weakness and stunts self-sufficiency.
Say we target 4% growth in our economy, this is only possible if more people begin working. Our current labor force participation rate is 62.6%.
“The country’s labor force participation rate – which measures the share of Americans at least 16 years old who are either employed or actively looking for work – dipped last month to a 38-year low, clocking in at an underwhelming 62.6 percent.”
Our real unemployment rate U6 is 10.6%. “U6 adds on those workers who are part-time purely for economic reasons.”
The total part-time and underemployment rates when added to unemployment, are declining from a high of around 26% but remain at around 18%. This false recovery is really a part-time jobs boost. “The number of full-time jobs today is 0.7 percent, or 822,000, lower than it was at the pre-recession peak and that was eight years ago.”
Fewer millennials are starting new businesses. New entrepreneurs ages 20 to 34 fell to 23%.
The median income is $52,000. Basically adjusted household incomes (meaning a family of four being supported by one or two working adults, rather than a single person) for the middle has stagnated over the last 15+ years. Factor inflation into purchasing power and you have a huge pinch.
These statistics and trends militate against the hopeful mentality of people taking on new challenges and striving for a better future. Many recent college graduates and those in their prime working ages are being used up in dead end positions. They will not have the earning power to build up the nest egg that their parents have. Many workers nearing the artificial retirement age of 65 are anticipating gearing down. They believe that they have finished their life’s work. In some cases they have carried a heavy burden for 30-40 years. Many deserve the break that they have earned, but not all.
Instead we have a shrinking economy with a shrinking labor force in a shrinking population.
Immigration alone is not the solution. We can and do benefit from intelligent and driven people who come to America from other nations to escape the oppression they faced. Whether to pursue education, employment or entrepreneurship limited legal and directed immigration is a good thing. However, with increased illegal immigration comes a variety of other concerns including a cultural shift that isn’t 100% positive. The idea that we can import a new cheap labor workforce without suffering the consequences of cultural baggage that attends many illegal immigrants is foolish.
The only way that America will be able to revive its prior greatness is through hard work. And I am afraid I see people losing the will to put in the work. I am not saying that we do not have hard workers – God knows that the people reading this post are working their butts off. But many people are not getting the returns for their labor because the rest of country is stagnating. If we don’t have productive consumers – that is people who add value and extract value from our economy – then all your work is in vain. No one is there to buy what you are selling, no matter how many 80 hour weeks you put in. And the unproductive class is only expanding.
This is the danger looming on the horizon: we’ve created an entire class of citizens that don’t exhibit the discipline or motivation to pursue the NEXT job. In many cases people are struggling to live off of the proceeds of underemployment. When they have to move on it’s because of downsizing, termination or personal tragedy.
How many people in this growing lower middle class are advancing and developing their own capacity? This goes beyond education. Getting a degree is part of the equation, but the mentality of our culture has become accepting of LESS. Many Americans believe that they will have less than a self-directed career over the course of multiple employers and industries fostered by life goals.
Changing this mentality requires leadership and inspiration that catches like wildfire and ignites our national engine once again.