3
Out of Sync
What went wrong? While a college or university degree was never a guarantee of a great job, a high income, and a house with a two-car garage in the suburbs, it served as the closest thing North America had to offer as a guarantee of such an outcome—second only to being born into a wealthy family. That so many college and university graduates struggle to find good jobs is due, in part, to the over-enrolment and massive over-selling of the career benefits of a college degree. But the transformation of North American and global markets has played an equally important role in creating the gap between the dreams and aspirations of twenty-first-century youth and the realities of the world economy.
We can put this very simply. The massive effort to get as many people as possible to college or university is not matched by a comparable effort to create jobs for the increased population of young people and for those dislocated from the workforce as the result of various competitive forces. As James Clifton argues:
The coming world war is an all-out global war for good jobs. As of 2008, the war for good jobs has trumped all other leadership activities because it’s been the cause and the effect of everything else that countries have experienced. This will become even more real in the future as global competition intensifies. If countries fail at creating jobs, their societies will fall apart. Countries, and more specifically cities, will experience suffering, instability, chaos and eventually revolution. This is the new world that leaders will confront.[1]
Outsourcing Jobs to Cheaper Labour Markets
With surprising speed, economic globalization and the rise of East Asia, India, and China have undercut some of the key foundations of the Western economy, displacing hundreds of thousands of workers and dashing the expectations of the young in many countries. What happened to the airline industry fifteen years ago serves as a good example. In the late 1990s, airlines found themselves facing a dilemma. They could continue to hire reservation agents in their own countries, paying a decent wage to get the college and university graduates that they preferred to hire. With benefits thrown in, they were paying more than $35,000 a year as a starting salary for what was, to North American youth, an entry-level and temporary job. But then improvements in telecommunications and computer systems provided access to huge pools of well-educated overseas talent. When India became readily accessible, the airlines (and other businesses) could hire from among tens of thousands of well-educated, highly motivated university graduates. The key differences? In India, these jobs carried an annual salary of $5,000—and any candidate fortunate enough to get one of the positions typically held on to it. The choice seemed obvious: one reluctant North American college graduate at $35,000 a year, or seven university graduates from India, the latter being more grateful for the jobs and often demonstrating a stronger work ethic and more commitment to the position. It makes sense that many telemarketing and reservation systems link phone calls to Bangalore or Mumbai, where staff from India are trained, with greater or lesser success, to speak with North American regional accents.
But that was only the beginning. Factory workers were laid off by the thousands throughout the early twenty-first century, with hundreds of North American factories shuttered and the jobs relocated to Mexico, China, Thailand, the Philippines, and India. The damage got worse during the 2008 global recession—brought to you by your friendly Wall Street subprime mortgage companies and their banking allies—a financial catastrophe that ended only when the United States government bailed out some of the most mismanaged and borderline corrupt institutions in the world. Things started to pick up in 2014–2015 at the macro-level, with “good news” circulating about the recovery of the American economy, although the crash in oil, natural gas, and commodity prices damaged the resource sector and Euro-instability, associated with the near-death experience in Greece and China’s recent boom-and-bust cycle in the stock market, made it clear that a return to stability was a long way off.
Still, the much-ballyhooed recovery carried some ominous news. The jobs did not come back as expected. Much was made about a few promising developments. Apple, one of the world’s richest corporations and one of the best American firms at hiding its profits overseas (Apple Luxembourg is fabulously wealthy, thanks to US tax laws), noisily congratulated itself on opening a new factory in California, primarily to offset growing criticism of the labour practices at its Foxconn and other Chinese manufacturing facilities. But the reality was that jobs did not follow the upsurge in manufacturing in America. Why? In large part because the country’s impressive productivity gains and continued high level of investment in production-improving technologies increased manufacturing—but not manufacturing jobs. Economic recovery without a surge in employment seemed a partial victory, at best, and a worrisome sign about the economic future.
The New Economy Versus the Old Economy
The new economy produced some high-tech jobs, but the much-hyped growth turned out to be a whimper rather than a roar. Google and Facebook do not employ as many people as General Motors and John Deere. Google, worth $365 billion as of August 2015, heading, apparently to $1 trillion[2] and one of the world’s richest firms, had 53,600 employees in 2014, a drop of 200 from two years earlier. That same year, General Motors had 216,000 workers worldwide, a drop of 3,000 from 2013. But let’s get real here. Walmart—an impressive retailer with a fabulous high-tech backbone but not the dream employer of many young Americans—has 2.2 million employees worldwide and is the largest private-sector employer in the United States. It is a big drop back to the second-largest American employer, Yum! Brands, which has over 500,000 workers, mostly overseas. (Yum! operates Pizza Hut and Taco Bell.) UPS, a parcel delivery service and one of the best-automated firms in the USA, has almost 400,000 workers. There are high-tech or knowledge-based companies in the mix, with IBM (434,000), Hewlett-Packard (332,000), and General Electric (305,000) making the American top ten. The point is that Google is a drop in the employment bucket. Walmart has many times more employees.
For so-called “knowledge workers,” the target of governments and universities around the world, an uncertain future lies ahead:
… there is really a double dose of bad news. For not only are their jobs potentially easier to automate than other job types because no investment in mechanical equipment is required; but also, the financial incentive for getting rid of that job is significantly higher. As a result, we can expect that, in the future, automation will fall heavily on knowledge workers and in particular on highly paid workers. In cases where technology is not yet sufficient to automate the job, offshoring is likely to be pursued as an interim solution.[3]
Much the same has occurred in the finance sector, remarkably one of the most desired career paths for young North Americans. Because of the appalling scandals and malfeasance that have wracked it in recent years, you’d think the young would avoid it like the plague, but such is not the case. The banking system has actually continued to grow, particularly in the United States, with the expansion of service outlets in a highly competitive market, but most of the growth has been in service or teller-type positions. In Canada, where an oligopoly of five large banks controls the majority of the financial market, job reductions have been more pronounced. It needs to be said that Canada has one of the world’s most stable and dependable banking systems anywhere. While the USA was recovering from the collapse of Bear Stearns, Wells Fargo, Andersen Consulting, Fannie Mae, and many other financial institutions in the wake of the 2008 financial crisis, not a single Canadian bank closed down or was even seriously affected. Computerization has brought about sweeping changes, with work shifting from in-person support to online banking and heavily computerized systems. Banks hire many high-technology employees. The financial service and insurance industry remains a major employer—with close to six million employees (three times Walmart’s workforce) in 2014. The securities sector, with almost 890,000 workers in 2014, is expected to grow by an additional 12 percent by 2018. Employment data shows that this remains a service sector, with over 500,000 tellers, 367,000 insurance sales agents, and almost 300,000 securities and financial services sales agents.[4] This is, of course, old-economy work, knowledge-based to be sure, but not exactly the exciting new jobs-of- the-future stuff