Labor markets, like all other markets, change with time and the wishes of their participants. Over the last three decades, the entry of women into the labor force has been a major factor spurring economic growth. Over this same period, two-earner families increased so that today about 60% of all families with small children are two-earner households.
These demographic changes have shifted the focus of labor politics from union bargaining to issues such as telecommuting, family leave policies, affirmative action, and the question of how much employers should pay for medical benefits. As Social Security begins to look more fragile and the baby boomers begin flooding the retirement ranks, employer retirement packages will undoubtedly receive even more attention.
Immigration, legal and illegal, has caught the attention of labor economists. The United States has relatively open borders. Some argue that we need new immigrants to do the work that most Americans are unwilling to do. Other economists suggest that, in the absence of such inflows, salaries in these low-skill occupations would be high enough to attract the needed labor. This great tide of immigrants into lower wage jobs, together with the growth of high-skilled, high-wage jobs and the rise in dual-earner households, has resulted in a significant change in the types of jobs available today.
Ask your parents or grandparents about the job opportunities they had when they completed school and you’re likely to receive a description much different from the opportunities you have today. Prior to the Internet revolution and the globalization of manufacturing, the United States produced many of its own goods, including clothing, electronics, and household goods. As a result, work in factory plants was plentiful, and an individual with a high school diploma could find a well-paying job that led to a comfortable standard of living. What has changed over the past 25 to 50 years?
First, a shift from manufacturing to service industries occurred in the United States. Rather than producing physical products, considerable growth in the health care, computer programming, transportation, telecommunications, and technology industries led to greater production of services than goods. Service industries generally require a higher level of training as well as interpersonal and communications skills that one generally acquires with greater education.
Second, significant growth in international trade and foreign direct investment, components of globalization, changed labor demand. In addition to trading goods between countries, which reduces the need to produce certain goods in our own country, many industries have outsourced labor-intensive jobs to other countries, where wages are much lower than in the United States. At the same time, significant growth in high-skilled jobs in the United States has resulted from globalization, as the world demands better cell phone connectivity, health care services, and technology goods, which the United States is a leader in providing.
Third, the Internet has transformed the manufacturing process. With the ability to manage production in real time, many companies have moved away from producing and storing goods and now can source goods quickly from a variety of companies. For example, Amazon.com is a company that sells just about everything one can think of through their Web site, yet it hardly produces anything that it sells, but rather relies on thousands of individual manufacturers to provide ordered goods on demand. Similarly, for a small manufacturer, there are now thousands of Internet sites through which they can sell their goods. These changes have made the labor needs of firms much more flexible. Firms need not always rely on their own production to fill their customers’ orders, and thus do not require an abundance of labor on their payrolls.
The future growth of jobs in the United States will likely continue to focus on those requiring increasingly higher levels of education and training, which we refer to as human capital and will be discussed in the next chapter. Growing professions such as health care professionals, financial services analysts, Web designers, social media managers, telecommunications technicians, and others will continue to exert increasing pressure to achieve greater levels of education. Projections from the Bureau of Labor Statistics Occupational Outlook Handbook show that the industries that are expected to generate the most new jobs over the next 10 years are health care, scientific and technical services, and education.
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