Economy Continues to Frustrate

Economy

In spite of numerous reports that the economy has been growing since the Great Recession, evidenced by job gains and a continually surging stock market, the United States continues to exhibit signs of financial frustration. The unemployment rate is down, yet the public still complains that the economy needs fixing. It seems strange that as investment in stocks continues to rise, general fears about the market continue to increase and discretionary spending remains stagnant.

Even though jobs are being created and stocks are up, reports constantly show that the labor-force participation rate keeps falling. In a recovering economy one would expect more participation. If the pie is bigger, then more people will want their piece of it. Unfortunately something seems to be interfering with that logic.

Economists continue to indicate that the economy needs more discretionary spending and they are continually frustrated by the lack of growth in that sector. Studies also show that in spite of the additional jobs created economic output continues to shrink. Even though wages are generally increasing, data from the Commerce Department indicates that average household spending actually declined when adjusted for inflation.

There must be some variable to account for this inconsistency. If stock investment continues to rise but output continues to fall, something needs to be recalibrated. Kristen Shingleton with New Focus HR has a few ideas that may be worth considering.

Shingleton questions whether companies are assessing their investments correctly. Specifically she indicates that, to their detriment, companies are treating their employees as liabilities rather than assets. Companies pay their employees as little as possible to cut the costs in human resources. They may also treat their employees with less respect than they deserve. Ultimately, she says, these attitudes result in smaller gains for the companies, more customer frustration and general unhappiness in the staff.

Shingleton could take her argument further, though. It seems that the world is obsessed with the concept of austerity over the past few years. While Shingleton addresses individual company attitudes about investment and reward her ideas could be equally applied to national and even international economics. If her ideas were translated from a business environment to a governmental environment austerity would be exactly what she is arguing against. Cutting benefits and salaries at the company level would equate to increasing taxes while cutting back on services at the government level. The end result becomes the same. A nation that refuses to see its citizens as its assets will continue to see its economic performance slow. On the other hand, a nation that invests in its citizens will see an increase in productivity and growth.

In frustrating economic times it is important to understand that continuing a path that treats assets like liabilities will ultimately leave an economy without assets. Discussions about everything from minimum wage to health care need to be seen in terms of investment in the national labor-force. Whether it is forward thinking businesses or governmental action that moves the U.S. to treat its labor-force like an asset, it needs to happen. Just like a plant must be watered and fed every economy must be nourished.

Opinion by David Morris

Sources:
The Wall Street Journal
New Focus HR

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