America's Labour Market: The Art of Killing Jobs

Since the 2008 recession, the United States has added almost 9 million jobs and reduced the unemployment rate back down to around 6%,   its pre-recession level.  But hold the celebration - the truth behind these statistics tells a very different story.  Many workers have been forced to accept part-time work and many people have left the job market, driving down the labour force participation rate.  (which automatically reduces the unemployment number)  Why?  Of course, there are many reasons but let's look at two  - the welfare state and high business taxes.

The Obama administration's relentless policy of generous and extended benefits has reduced the incentive to work.  Look at the age group 24-54, the prime working years.  Fifteen percent are unemployed;  in the l970's the rate was 6%.  For workers of all ages without high school graduation, the unemployment rate is a whopping 50% higher than the national averaage.

The only age category with unchanged statistics are older workers;  perhaps because the lifelong habit of work is still more attractive than a life of leisure;  perhaps because the recession eroded their savings;  perhaps because the current near-zero level of interest rates does not generate enough new income.

Of course, statistics can be twisted, turned, bent any way you want to fit generalized conclusions.  But to me, the obvious, commonsense way to increase jobs and reverse the decline in the labour force participation rate is to grow the economy - not raise minimum wage, hand out food stamps, outlaw unpaid summer internships for young people, over-regulate small and large businesses, increase government bureaucracy and pile on national debt to be paid by some future, unborn generation.

Then there are the high business taxes in the U.S.  A recent study by KPMG, "Focus on Tax", ranked developed countries by adding up a wide range of tax costs to businesses - from statutory labour costs to harmonized sales tax.  Canada ranked No. 1 as the most business-friendly tax regime in the world.  The result - not only are American companies not investing in new plants, technology and job creation because of high taxes - many are considering buying or have bought a Canadian subsidiary so they can eventually move their incorporation to tax-friendly Canada.  The irony is that 15-20 years ago, Canadian companies were moving to America for the same reason!

Once again the good intentions of a "progressive"  government have been trumped by human indolence and the reality of the business world.  When will they ever learn - free the entrepreneurial spirit and watch the eagle soar!