"Most job loss is highly concentrated: more than two thirds of all lost jobs occur at businesses that shrink more than ten percent, and more than one-fifth of workers whose jobs were destroyed worked at businesses that shut down. This explains one of the reasons for the newspaper headlines that trumpet job loss: because job loss is much more concentrated, it's also much more visible."
-- Economic Turbulence: Is a Volatile Economy Good for America? Clair Brown, John Haltiwanger and Julia Lane
Economic populism is one of the more striking features of our politics today. Wal-Mart is excoriated by liberal intellectuals and labor unions. Sen. Jim Webb recently argued that in "the age of globalization and outsourcing, and with a vast underground labor pool from illegal immigration, the average American worker is seeing a different life and a troubling future." CNN's Lou Dobbs characterizes this troubling future as a result of a "War on the Middle Class."
These populist concerns, voiced primarily on the left, are shared by many conservative Republicans and intellectuals. Writing in the Weekly Standard, Ross Douthat and Reihan Salam argue that "having risen to power at a time when most Americans were worried about losing their economic freedom, the [Republican] party needs to adapt to a new reality--namely, that today, Americans are increasingly worried about their economic security--and reorient its agenda to address those concerns."
A disquiet with our turbulent economic times is at the root of the political concern over economic security. And it has yielded an economic dialogue shrouded in pessimism and unease.
But is it entirely warranted? To answer that, it helps to know if the overall economic turbulence is beneficial or not.
The authors of the new book, "Economic Turbulence: Is a Volatile Economy Good for America?" are not ideological gun-slingers. Clair Brown, John Haltiwanger and Julia Lane have studied the overall impact of America's dynamic economy on jobs, workers and firms by examining in depth five major economic sectors -- semiconductors, software, retail food, trucking and financial services. They are careful not to overstate or inflate claims.
And what they find, given the current climate of opinion about American economic change, is surprising:
"The analysis of literally millions of worker histories and hundreds of career paths for workers and job ladders for firms leads to the reassuring finding that although turbulence imposes short run costs, in the long-run job change leads to improved jobs for most workers."
"Although a major concern has been that 'good jobs' (meaning high-paying jobs) have been lost as a result of economic turbulence, this is not the case..."
"The general idea that low-wage workers have suffered as a result of economic change does not hold up. Although there is high worker turnover at the bottom end of the earnings distribution, low-wage workers have typically gained ground."
The authors present no brief for laissez faire government policies. They frequently point out that there are workers who get pinched by economic changes and we would be wise think more clearly about how they might be empowered to cope better in a turbulent world. They make suggestions for a possible "interventionist policy" or two.
But more than anything they help clarify the picture of what's actually happening with job loss, job creation, and overall economic change in America. Yes, economic turbulence can yield a kind of psychic unease -- unease that's exploited for political gain. But that same turbulence is also the source of significant beneficent changes. If this is a War on the Middle Class, we should want a troop surge to keep it going.
So if the dynamism of the American economy is, in the main, advantageous for Americans, why do we hear about so much more about pain and dislocation and so little about the benefits?
The quote at the beginning of this piece is a good place to start. Job losses tend to be highly concentrated, making for good media fodder. Just last week an announcement came down that Sprint-Nextel is set to cut 5000 jobs. When was the last time you read about a firm creating 5000 jobs in one stroke? Job creation is more gradual than job loss by comparison, but over time there are more than enough jobs created, and better ones at that.
Moreover, the economic role played by innovators and entrepreneurs is typically couched in terms of new products they create (anybody heard about this iPhone thing?) The role played by entrepreneurs in new job creation is frequently overlooked or understated. Moreover, innovation and its resultant job creation often happen in less established, and thus less visible, segments within industries or the economy as a whole.
The overall media effect is that we "see" painful employment dislocations much more than we see the uplifting stories of job creation. But with Brown, Haltiwanger and Lane's work, we are now able to see better what's right under our noses.