While Congress may have averted a self-inflicted economic wound by avoiding the fiscal cliff, the truth is that the country is still headed toward the edge, with only a two-month reprieve before across-the-board spending cuts take effect. If enacted, these cuts -- $120 billion in total, split between defense and non-defense -- would place an unnecessary drag on the economy and slow job growth. And yet another potential cliff looms at the end of March, as Congress must pass additional legislation to continue funding the federal government's obligations, either through a "continuing resolution" or individual appropriation bills. In other words, the American people are destined to relive the policy uncertainty of late 2012 all over again, perhaps multiple times.
Instead of creating artificial and unnecessary cliffs, policy makers should be building long-term and sustainable solutions to our current economic crisis -- specifically, and most critically, the creation of more job ladders. Unemployment remains high while wages and incomes continue to stagnate for the typical American family. The still-weak labor market is simply not working for those who want to work.
In particular, there are two challenges that threaten to have lasting consequences for individuals and the broader economy, and which won't be solved by congressional quick fixes: high levels of long-term unemployment, and stagnation of career development for young people.
Of the estimated 12 million unemployed people in the United States, about 39 percent have been unemployed for six months or longer. That means nearly 5 million people have run through their savings (if they had any to begin with), lost their health insurance, faced food or housing instability, experienced a debilitating loss of self-worth or are dealing with some other significant hardship. Fortunately, the fiscal cliff deal includes an extension of emergency long-term unemployment benefits, casting a lifeline to those most in need. But what people really want are jobs.
Even if those jobs are available, the long-term unemployed face unique challenges getting back into the workforce. These individuals may have lost their business networks. Others may face some degree of skill obsolescence. All must overcome the stigma of being unemployed for many months or years. Getting back to work is a full-time job.
Early Career Stagnation
The recession has been especially hard on younger people just starting out in their careers. The unemployment rate between the ages of 16 and 19 was 24 percent in December. For those between 20 and 24, it was 14 percent.
Many of those lucky enough to find jobs are still struggling. Hundreds of thousands of recent college graduates are working in jobs that do not require a college degree -- steaming lattes or selling mobile phones -- in order to pay off their student loans. Many employers are upping their educational requirements, with the knowledge that in this labor market they can ask for more while paying less. Where does that leave those with only a high school degree or no degree at all?
Even those who have moved successfully onto the first rung of their career are finding it difficult to develop the next level of skills, because companies have cut back on on-the-job training. According to Peter Cappelli at the University of Pennsylvania's Wharton Business School, young workers in the 1970s received two and a half weeks of training a year, on average. Last year nearly 80 percent of employees surveyed by Accenture said that they had no formal employer-provided training in the last five years. And in just the last four years, the percentage of companies cross-training employees in skills not directly related to their jobs dropped from 55 percent to 38 percent, according to the Society for Human Resource Management.
Needed: More Ladders
Whether it's an older worker trying to get back into the workforce or a young person trying to jumpstart his or her career, both face the danger that the labor market will effectively leap-frog over them, preferring new entrants for open jobs.
The Rockefeller Foundation is looking to better understand the characteristics, causes and consequences of both of these pressing challenges. We already know one thing for sure, and Congress and the Obama administration should, too: There is no simple solution.
But policy makers aren't the only ones who have a role. Individuals must develop their skills and boost their credentials as best as they can, and employers have an important responsibility, as well. By boosting educational, certification and experience requirements on the one hand, and by cutting back on training and skill development on the other, employers may lock out many potentially promising employees. Too many employers are thus placing that first rung of the career ladder out of reach.
We should not pretend that everything will be fine just as long as a deal is reached and the economy continues to recover. Millions of people in this country are falling off their own fiscal cliffs every day, leaving long-lasting scars that can't be solved with quick-fix solutions. As we begin a new year with a new Congress and a new term for President Obama, we have the opportunity to build long-term solutions to our greatest economic problems. A stronger job ladder for those barely hanging on is a good place to start.
John Irons is Managing Director of Foundation Initiatives at the Rockefeller Foundation, where he leads much of the Foundation's work in the United States, particularly initiatives on employment. To learn more, visit rockfound.org.
This blog post is part of a series produced by The Huffington Post that closely examines the most pressing challenges facing President Obama in his second term. To read the companion article by HuffPost's Dave Jamieson and Arthur Delaney, click here. To read the companion blog post by Robert P. Stoker of the George Washington University, click here. To read all the other posts in the series, click here.
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