COMMENTARY

Jobs Are the Key to Any "Capitalistic Democracy"

August 2003

By Donald J. Pfundstein*
for New Hampshire Business Review

In June I expressed continued concern over the economy's permanent shedding of jobs. When a recovery gains pace, jobs are not replaced. In fact, it has become cool for pundits to refer to the current recovery as "jobless." Well, a recovery that is jobless will not do the trick.

Jobs are being permanently eliminated in part due to productivity gains resulting from technology. Other jobs simply are no longer necessary. The tasks involved require fewer people to perform them or process changes have eliminated intermediate steps.

In January I suggested that the consumer would not provide the robust stimulus needed during 2003. In June I worried that consumer confidence was necessarily tied to the job outlook. Sure, liquidity and low interest rates helped but what the economy really needed was, and is, jobs.

Unfortunately, my concerns were not simply uncontrolled paranoia. The Conference Board's Consumer Confidence Index for July declined nearly seven points. I saw one report that described the decline as "unexpected." What is it that people don't get? You cannot permanently eliminate jobs at the pace our economy has shed them and expect people who are unemployed or fear unemployment to continue spending.

"The rising level of unemployment and sentiment that a turnaround in labor market conditions is not around the corner have contributed to deflating consumers' spirits this month … Expectations are likely to remain weak until the job market becomes more favorable," said Lynn Franco, Director of the Conference Board's Consumer Research Center on July 29.

I don't know Ms. Franco, but I agree with her comments. I am a major proponent of the use of technology. In fact, I am thrilled that my law firm is featured in the August/September '03 issue of Law Office Computing, (lawofficecomputing.com), the national authority on use of technology by law firms. However, the productivity bounty does have its adverse effects. The more efficient and productive we all become necessarily requires fewer people to produce the same or greater results. This will continue. No sane leader would intentionally pursue inefficiency or lower production ratios.

The conundrum we find ourselves in is how to create meaningful jobs when our success in so many areas eliminates or minimizes the need for labor. When the costs of health insurance, payroll taxes, workers' compensation and retirement and other employee benefits are factored in, the task is truly daunting. It's not a phenomenon of this decade only.

The Industrial Revolution was really quite similar. The consolidation in the railroad business that followed wasn't any different than the burst of the technology bubble. I wish I'd seen that locomotive coming again! The problems are not new. But our solutions need to address today's circumstances — which are new.

I am fond of repeating: "The strength of our country lies in the hard and creative work of a free people. A capitalistic democracy needs to be guided by great political leaders, but its most fundamental underpinning — a vibrant economy shaped by a solid business sector — requires business leaders focused on success."

True. But we need jobs or, long term, our capitalistic democracy will reach the breaking point. Our challenge will be to maintain internal peace and avoid economic and political marginalization of the majority. What is it that you don't understand about jobs?

*Donald J. Pfundstein is admitted in New Hampshire.

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