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. Last Updated: 07/27/2016

Two Nations in U.S. Economy

JACKSON HOLE, Wyoming -- Even as the U.S. economic expansion continues to create jobs, the disparity between those at the top and those that work at the lowest wage levels continues to widen, officials say.


The growing gap between the young and the old, the skilled and those without much formal training, minorities and others, is troublesome to policymakers, who worry that America may be creating what amounts to two societies.


"If something isn't done, it will only get worse," Labor Department chief economist Lawrence Katz said at a international meeting here sponsored by the Kansas City Federal Reserve.


The Clinton administration, while enjoying relatively low unemployment levels as the U.S. expansion has continued to create jobs, has attempted to address a problem that has been growing for many years -- that of the long-term unemployed.


The administration has proposed legislation designed to deal with the fact that large numbers are finding themselves sidelined for long periods by forces that many can do little about.


"While cyclical and seasonal unemployment still exists, the problem of structural unemployment has grown in importance as technological progress, corporate restructuring, the integration of the world economy, and defense downsizing have accelerated the pace of fundamental change," Labor Secretary Robert Reich said recently.


It was a theme that repeatedly surfaced at the international seminar as policymakers puzzled over far-reaching changes in the global economy, many of them unanticipated and with few certain answers.


Central bankers, from the Federal Reserve chairman, Alan Greenspan, to the Bundesbank president, Hans Tietmeyer, generally agreed that about the worst thing they could do would be to turn their back on inflation even if it brought short-term employment gains.


Greenspan said that while persistent high unemployment was costly, a Herculean effort to stimulate the economy by rate cuts and government spending would amount to economic suicide.


"Any tendency to seek a bit of micro policy relief by pushing on the outer limits of monetary policy risks longer- term financial instability," Greenspan told the gathering.


To an extent, the growing levels of poverty and long-term joblessness reflect the fact that the pace of technological change has escalated with the cutting edge becoming commonplace with meteoric swiftness.


Those who can't keep up or are not well prepared, falter, are left behind, and drop out.


As Tietmeyer, discussing Germany, put it: "It is reflected among other things in the fact that high unemployment and substantially unsatisfied demand for labor coexist simultaneously," he told the group.


In the United States, the problem is far worse for the have-nots although unemployment stood at a relatively reasonable 6.1 percent in July. By contrast it is running at 8 1/2 percent in Germany and around 11 percent for Europe at large.


Reich, for his part, says about half of the U.S. workforce is not well-prepared for the economy that it is supposed to be serving.


But for former Secretary of State George Shultz, this was only part of the problem.


In remarks to the high-powered group of global officials and economists, Shultz noted that at the very least, the people they had been talking about were in a system that they recognized.


"It seems to me that our discussion has been largely about people, who while unemployed, are in a sense within a system and we understand the parameters of that system and we can argue about and work at it," he told the group.


But he said another economic system -- that he felt was growing -- revolved around drugs and crime and no family attachments and gangs, and this would prove threatening to the major system if they were not addressed.


"They're unemployed in one sense but they're busy as all get out in another sense," said Shultz.


For others at the meeting, the gathering also seemed to lack a human face. "Unemployment has a devastating impact on people," AFL-CIO Research Director Rudy Oswald observed. "It is being told by the system that 'we don't need you.'"