Why the jobless recovery is unique to America

You might not know this, but while the Great Recession is still hammering American workers and small businesses, recovery is well under way in other nations. What’s more, the pain of our recession is no longer spread evenly across the economy.

While the effects of the recession have all but disappeared in some industries – most notably in the financial sector, where profits and bonuses are higher than ever before – in construction and manufacturing, there are few jobs for a plethora of qualified workers.

Why have some jobs have been slow to return? And why is this type of “recovery” peculiar to America? A recent New York Times article has this insightful answer:

This jobless recovery…is the third straight recovery since 1991 to begin with months and months of little job growth. Why? One obvious possibility is the balance of power between employers and employees.

income shares 1979-2007

Follow the money and you'll find the power (graph from Mother Jones News)

The author, David Leonhardt, outlines a number of policy solutions for addressing this problem — among them, restoring the balance of power to employer/employee relationship. And Kevin Drum illustrates why this balance of economic power is so crucial for the nation’s long-term economic growth:

For the upper middle class, labor markets are fairly competitive, but then, they always have been. They never needed collective bargaining to begin with. For everyone else, though, employers have been steadily gaining at their expense for decades.

Your average middle class worker has very little real bargaining power anymore, and this isn’t due to chance or to fundamental changes in the economy. (You can organize the service sector just as effectively as the manufacturing sector as long as the law gives you the power to organize effectively in the first place.) Rather, it’s due to a long series of deliberate policy choices that we’ve made over the past 40 years.

America should start the search for solutions to our jobs crisis by borrowing from what other countries are doing right – and changing our labor policies would be a great place to begin.

About Aaron Keating

Aaron Keating is the Communications Director for the Economic Opportunity Institute in Seattle, WA.
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