Contrary to Perceptions, U.S. Job Dislocation Is at Very Low Levels; Bigger Challenges Include Lack of Productivity, Slowing Job Creation, and Skills Gap, ITIF Concludes in New Report

WASHINGTON—While a growing percentage of U.S. workers fear that forces such as technology innovation and globalization will cost them their jobs, job security has in fact been steadily increasing since the 1990s, according to a new report from the Information Technology and Innovation Foundation. ITIF, the country’s top science and technology think tank, concludes that the more pressing causes for concern stem from a lack of “creative destruction” in the economy. The pace of new job creation has been slowing, the study finds, and companies are having trouble filling openings because workers don’t have the right skills.

The report argues that policymakers should not respond to misplaced fears of job insecurity by adopting unduly restrictive labor protections or by opposing technology innovations that improve productivity. Instead, ITIF suggests the United States should encourage more disruption to spur more growth and job creation, while adopting more robust policies to facilitate job adjustment and reduce skill mismatches.

“There is a widespread view now that the U.S. labor market is much less secure than it was in the 1990s, for high-skill and low-skill jobs alike,” said Robert D. Atkinson, ITIF’s president and the report’s co-author. “Opinion elites have been referring to this as the ‘new normal,’ with new technologies and globalization making it more likely people will lose their jobs. But when you look at the data, job loss is lower, not higher than in past decades. The real problem is not the risk of losing a job, it’s the risk of not getting a good new one if a worker does lose a job. There isn’t enough ‘creative destruction’ happening in the economy, so good new jobs aren’t being created as fast as they used to—and when they do appear, a lot of people aren’t qualified for them. So if you find yourself unemployed, you’re likely to stay unemployed for a long time.”

Atkinson and co-author John Wu, an economic research assistant at ITIF, draw on data from the U.S. Bureau of Labor Statistics to clarify what’s really happening. Among their findings:

• In 1995, U.S. workers had around a 7.3 percent chance that their jobs would be eliminated in any given quarter. Two decades later, that figure is down to 5.7 percent, suggesting that globalization and technology innovation are not the problems that some think.
• But job creation also has fallen and now remains stagnant, with new jobs as a percent of total employment in the economy on a quarterly basis down nearly 2 percentage points from the mid-1990s.
• While there has been improvement since the Great Recession, displaced workers still face a historically low re-employment rate compared to the period from 1989 to 2007.
• Between 1991 and 1999, slightly over half of displaced workers went on to find work that paid as well or better than their previous jobs. Over the next nine years, a 4 percentage point decrease meant that fewer displaced workers went on to find equal or better employment. Since the Great Recession, this proportion decreased by a further one and a half percentage point.

The authors argue that it is important to understand the real cause of worker unease so policymakers do not tamp down on efforts to drive innovation and boost productivity in an elusive effort to protect workers from dislocation. Doing so would not address the real challenge, which is the lack of dynamism and productivity-enabling disruption, especially from technological innovation. While the United States needs stronger policies to help displaced workers adjust and acquire new skills, we should not be resisting firms using technology to restructure work or even disrupt existing industries, because that would put a drag on productivity and inevitably hamper growth and job creation.

“The rate of job loss was higher in the 1990s than it is now, but people weren’t fretting back then because we had robust productivity growth, which spurred investment, which led to hiring and increased wages,” said Atkinson. “We need to bring back that positive cycle. But we can’t do that if we wring our hands and try to slow the disruptive power of innovation. That very disruption is what will ensure the U.S. economy thrives again. We need more of it, not less.”

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