Jobenomics received numerous positive comments about the Functionally Unemployed mentioned in several of our recent articles (Unemployment Scoreboard: Feb 2012, and 35% “Functionally” Unemployed Rate).

Jobenomics defines functional unemployment as the total number of underemployed, unemployed and not-in-labor-force as reported by the US Department of Labor’s Bureau of Labor Statistics (BLS).  In plain English, the ranks of the functionally unemployed includes US citizens currently: (1) underemployed with marginal or part-time jobs, (2) unemployed with no job yet still looking, and (3) unemployed with no job and not looking.  This third category is by far the largest group as well as the group that is most overlooked and under-reported.

The Jobenomics functional unemployment number (111 million) consists of the BLS’ U6 unemployment number (23 million) and the BLS’ “Not in Labor Force” number (88 million).   111 million functionally unemployed out of a total US population of 312 million yields a functional unemployment rate of 36%.

• The BLS defines U6 as “the total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.”
• The BLS defines not-in-labor-force in the following manner: “the US labor force is made up of the employed and the unemployed.  The remainder—those who have no job and are not looking for one—are counted as ‘not in the labor force.’”

Jobenomics acknowledges the gray areas between working and not working, and in-the-labor-force and not-in-labor-force.   For example, approximately 20 million postsecondary school (college) students are considered not in the labor force.  Nevertheless, most students do not work and are being supported by either familial or government sources.  This is also true of the general non-working population.  If a person is able to work but is not working, that person has to be supported by someone.  With the exception a few independently wealthy people, most non-workers are supported by families or government.  If they are working, they are likely to be independent of government handouts and likely paying taxes to support government programs and services.

As shown above, American decision-makers, opinion-leaders as well as the American public need a complete picture of all non-workers in order to formulate a viable jobs creation, economic and welfare strategy.  A nation’s economic health depends on a proper balance of the employed and unemployed.  Focusing on narrowly defined groups inhibits good decision-making.  To put the functional unemployment picture into better perspective, one must examine recent trends.

Prior to year 2000, the civilian labor force and the functionally unemployed usually increased in unison in relation to America’s ever growing population.

Since year 2000, the US civilian labor force grew by 11.1 million people or 8%.   During this same period of time, the functional unemployment number grew three times as fast (32 million or 40%) in relation to the civilian labor force.

In the last five years, since the Great Recession of 2008, functional unemployment grew 17% (16.27 million) while the civilian labor force lost -0.15% (-231,000).  If adjusted for population growth (8.2 million or 2.7%), the trends for the last five years would even paint a more austere picture.

If these trends continue unabated in the future, the functionally unemployed could equal the civilian labor force by 2021.

Our previous article (Unemployment Scoreboard: Feb 2012) compared the “official” U3 unemployment rate (8.3% or 12.8 million) versus the Jobenomics functionally unemployment rate.  Now let’s take a look at the so-called official U1 Long-Term Unemployment Rate.  The BLS defines the U1 Long-Term Unemployment Rate as “persons unemployed 15 weeks or longer, as a percent of the civilian labor force”.  The U1 is currently reported as 4.9% or 7.6 million Americans.  However, these 7.6 million are still looking for work.  When they stop looking, they become one of the 88 million in the not-in-labor-force category, which receives little public or media attention.  From a Jobenomics perspective, the number of “long-term” unemployed is much closer to 95.6 million than 7.6 million.

If America is going to solve the unemployment challenge, we must understand the scope and magnitude of the challenge that faces our nation.  Jobenomics firmly believes that this growing labor force problem is largely solvable via small, emerging and self-employed business creation.  The Jobenomics 20 by 20 Goal of 20 million new private sector jobs by year 2020 includes programs for the functionally unemployed.

For skeptics who believe that people would rather handouts rather than a hand-up, Jobenomics disagrees.  Our current national system of handouts, welfare and entitlement programs is essentially a non-work magnet.  Without a counter-magnet, people have no choice but subsistence on the government dole, which will eventually (probably soon) run out.   Jobenomics, and programs like it, provide opportunities for fellow citizens currently in the ranks of the functionally unemployed.

Thirty years ago, America was the largest creditor nation on earth.  Today, we are the largest debtor nation.  Looking to the future, when one calculates up-economics scenarios against down-economic scenarios, down scenarios dominate by a wide margin.  Consequently, it is safe to say that America is in economic decline.  The question that we should be asking is America’s decline reversible?  To answer this question, America needs to be brutally honest.  Political cheerleading and false bravado is not useful.  False hope is no hope.  From a Jobenomics perspective, hope starts in the heart.  The heart of America resides in its citizens – rich, middle-class and poor.  We can prosper only when our collective hope exceeds our collective fear.  There is much to make us afraid and there is equally as much to make us hopeful.  America’s hope resides not in our economy, but in our spirit.  The spirit of the American dream is bruised but alive.  To ensure the America dream stays alive for the financially downtrodden, it is paramount that we nurture and exploit the spirit of innovators and entrepreneurs with emphasis on those at the base of our economic pyramid.  Our economic base has to be rock solid – a house built on sand will not stand.

Today’s path to prosperity cannot be achieved through incremental changes to the status quo.  Nor can prosperity be achieved by top-down solutions.  While reduced bureaucracy, less regulation, and better financing to the base of America’s economic pyramid will help, these measures alone will not lead us to prosperity.  The path to prosperity resides mainly in our citizenry and our collective resolve to generate viable opportunities for all to achieve their American dream.  A nation divided against itself cannot stand.  This was true when Abraham Lincoln said it.  It is true today.

Over the last thirty years, America lost its focus on economic fundamentals.  $50 trillion of public and private debt caused by lavishing spending is only a symptom of a larger issue.  The American economic engine stalled because we turned from producing to speculating at all levels of or society – Main Street, Wall Street and Washington.

There is an old adage that states there are three ways to make money: (1) by your own hands, (2) by someone else’s hands, and (3) by making money-on-money.  Over the last three decades, making money-on-money became the first choice of Americans from Wall Street to Main Street to Washington.  Wall Street over-leveraged exotic financial instruments.  America’s largest corporations now make as much money on financial services as they do manufacturing.   Main Street over-extended itself by buying oversized homes, investing in the stock markets and 401Ks, and maxing out credit.  Washington not only let this happen, but became the largest trader of toxic financial instruments (mortgage-backed securities) on the global secondary market.

The path to economic security begins by changing America’s negative attitude towards business.  At best, Americans have become ambivalent towards business.  Business is taken for granted.  It is often looked upon as a necessary evil, checkbook, or social service provider, as opposed to the economic solution.  Anti-business sentiment causes big businesses to be cautious, limit hiring, close operations, and outsource overseas.  It is estimated that 25 million American jobs have been outsourced to China in recent years.   When iconic American companies, like Apple, employ more Chinese than Americans, there is a problem. Anti-business sentiment encourages small business to go out of business, layoff employees, and defer expansion.  Equally important, anti-business sentiment discourages business investment which is needed to start new businesses and grow existing businesses.

The only meaningful way to fix the American economy involves a comprehensive plan involving economics of business, job, wealth and tax revenue creation—the Jobenomics credo.  The Jobenomics Plan for America emphasizes small, emerging and self-employed businesses.  Small business is the US economic backbone.    Small business (less than 500 employees) employs 84% of the total US civilian labor force.  There are 6 million US small businesses and 22 million self employed businesses.  Since the beginning of this decade (2010s), small business generated 97% of all new jobs compared to large businesses that have produced only 3%.  Small business produces $6 trillion annual revenues, which equates to the second largest economy in the world.

If America wants to reverse its economic decline, small, emerging and self-employed businesses will have to take the lead role.  In this regard, the Jobenomics’ Team has instituted a dozen highly-scalable “proof-of-concept” business creation initiatives that can generate tens of thousands of new small, emerging and self-employed US businesses.  Current Jobenomics initiatives involve: community-based business generators, women-owned businesses initiative, veterans-owned businesses, a nation-wide system of electronic-waste recycling plants, energy and green job programs, cloud computing projects, direct-care centers, business ministries, real estate owned properties programs, minerals exploration and mining projects, a direct sales initiative, and foreign-owned US businesses and investment projects.  While most of these initiatives are in the planning phase, public response has been overwhelmingly enthusiastic.  The basis for the public’s enthusiasm resides more in the potential as opposed to the initiatives themselves.   If several hundred members of the Jobenomics team can implement businesses that could scale to tens of thousands of jobs, what could America do writ-large with a national level program?

America’s focus has to be on private sector business innovators and entrepreneurs.   The Jobenomics 20 by 20 Plan calls for small and emerging business innovators to generate 18 of the 20 million new jobs required for economic recovery by year 2020.   On a level playing field, small businesses can operate internationally.  In the near term, America needs to focus on business creation in the service-providing industries as opposed to the goods-producing industries (predominantly manufacturing, construction).  Why?  Because 78% of all American jobs are services-related, and service industry jobs can be implemented much faster than other industries.  Rapid implementation is essential to enhancing consumer and investor confidence.

America has faced many historical crossroads and has repeatedly chosen the path to prosperity.   Several hundred years ago, the vast majority of Americans worked on the farm.  Today, only one percent works in agriculture or ranching.  Over the last hundred years, the vast majority of Americans lived in rural areas.  Today, eighty percent live in urban areas.   Fifty years ago, half of our citizens worked in factories.  Today, eight percent of our workforce is employed in manufacturing.  America now faces yet another crossroad.  One path leads to continued decline.  The other path leads to renewed prosperity.  Big government, big business and top-down strategies are essential to a strong economy.  However, small business has been, and will be, the engine of economic and social transformation.  With the decline in manufacturing, construction and government funding, urban areas are struggling to support jobless masses.  Empowered by 21^st Century technology and public support, small business has the wherewithal to employ tens of millions, create wealth and transform our nation.

Transformation will be lead not only by traditional innovators and entrepreneurs, but by non-traditional Generation X’ers and Generation Y’ers who are the most qualified people to monetize the internet and social networks.  Facebook alone has 800 million users.  The country that learns how to monetize social networks will be transformed almost overnight.   Tens of millions of new businesses (mostly small and self-employed) will be created.  Millions could migrate from urban to rural or virtual communities, and create a new American way-of-life to fulfill a different American dream based more on self-sufficiency and economic independence than wealth creation.  70 million Generation Y’ers are now entering the workforce.  They are tech-savvy, team-oriented and socially conscious.  They have a much different view of corporate culture and how to do business.  Most importantly, they own the future.

America’s future depends on sustainable, environmentally-friendly communities that will be more rural/virtual than urban.  Self-employed, home-based business could be the norm.  Today, there are 22 million self-employed, home-based businesses.  Tomorrow, it could be two or three times as many.  To empower growth of highly-networked small businesses, a national broadband system is essential.  From a Jobenomics perspective, building a national broadband system is the most important thing that government and big business can do for jobs creation.  Today, 40% of American households have no broadband or high-speed access and 30% have no internet access at all—mostly in rural areas.  While America has the largest total number of broadband subscribers, internationally the US ranks 15^th per capita when adjusting for population size.  A state-of-the-art national broadband system is tomorrow’s business superhighway.  Just as the railroads opened the American West to commerce and Eisenhower’s interstate highway system facilitated explosive economic growth, a national broadband system will enable e-commerce and e-business between billions of people and organizations across the planet.

In conclusion, the highest percentage way to reverse America’s economic decline is to focus on business creation with emphasis on small, emerging and self-employed businesses.   Jobenomics Community-Based Business Generator projects, like Jobenomics-Harlem, are designed to create 1,000 new small businesses per year per city.  The Jobenomics Women-Owned Business initiative estimates that up to 7,000 new, predominantly home-based self-employed businesses could be created by the end of the decade.  And, these are only two of the twelve proof-of-concept initiatives that the Jobenomics team is trying to implement.  If America would implement a national small business initiative with initiatives of this nature, we could have an excellent shot at reversing our economic decline.  It all starts with an achievable vision.  President Kennedy focused American science and technology on getting to the moon in a decade.  In comparison, the Jobenomics 20 million new private sector jobs by year 2020 (20 by 20) goal should be very achievable.