The Rise of the Temporary Worker

"It is the working man who is the happy man.  It is the idle man who is the miserable man." - Benjamin Franklin

I could not agree more with this quote.  I have had a few times in my life when, for a few weeks, I was unemployed and by the end of that time I was miserable.  One time many years ago I finally found a job as a gardener in London in the middle of winter and even though it was bitterly cold and the work hard I enjoyed that far more than sitting idly in front of the fire.  This is the issue facing many Americans today, finding full time employment is difficult so more and more are turning to part-time employment and a number are giving up altogether.  This is having a huge impact on GDP growth in the United States and will continue to form a drag on the economy until there is a structural change that unlocks the unemployment conundrum.

Digging into the numbers reveals a lot of interesting data points.  The first is that the group that is worst off is the 25-54 demographic.  This age group is bearing the brunt of the problem.  In fact with over 7 million jobs being created since 2010, this demographic has barely seen an improvement in their employment level.  Interestingly, the over 54 demographic has enjoyed continued employment growth throughout and subsequent to the recession.  The problem for the economy though is that the 25-54 age group is the main consumer group.  The older generation is in saving mode as retirement looms while the younger generation is consuming as they buy houses and start families.

The jobs that have been created using a 7 year trailing average shows that the majority of the employment comes from part-time work.  In fact over 3 million permanent jobs have been lost and these have been filled by part-time workers.  This change in the status has been caused by many things but there is a study that points to this difference accelerating in lock step with the Federal Reserve's monetary policies and Obamacare.

Looking at the Federal Reserve's current monetary easing policy, they are reliant on the trickle down effect as the Federal Reserve has no control over where the money goes.  In effect they give dirt cheap money to the banks in the inner circle and relies on them to distribute these funds.  The result is there is a transfer of wealth and power to a lot of elderly bankers skewing the playing field in their favor.  The result has been a long period of prosperity for the 55 and older demographic particularly bankers and investment professionals who have a direct benefit from the asset appreciation of the stock market at the expense of the lower class and younger generations.  A burgeoning stock market it turns out does nothing to help the underemployed find work but it does allow the already entrenched manager retain their position.  What a surprise!

Worse still is that Obamacare has created turmoil in the small business world as it is far cheaper to hire a part-time worker than a full time employee for the simple reason that part-time workers do not require the company to pay for their health insurance.  This law has effectively slowed down the growth of permanent employment and once again has passed the cost of the insurance back onto the part-time employee.  A part-time employee now earns less and has the burden of health care loaded onto their already meager wages.  This is not a way to expand consumer spending.

Finally the problem is that with the increase of part-time employment comes the lowering of median household income and the loss of worker power.  Now some will argue that a loss of worker power is a good thing but as with all things there is a delicate balance between management and workers and this balance has skewed its way too far to the managers benefit and this is not a desirable outcome.  This is not a recipe for success as not only does this point to slow economic growth but the structural change will create an unstable political, financial and economic environment.  Unless this structural divide can be repaired quickly the result will be catastrophic and will affect the wealthy as much if not more than the less privileged.

With weak leadership in the White House and at the Federal Reserve there is little chance that the necessary structural changes will happen any time soon.  In fact when the Federal Reserve finally hinted at a tapering of the monetary policy the knee jerk reaction of the stock market had the Fed backtracking faster than Matter reversing in the movie Cars!  So we are stuck with a policy that is creating more and more problems with little in the way of change for at least the next three years.  Better hold on when the wolf finally comes knocking as he will not huff and puff but will send a hurricane through the living room.