Why Employment In The U.S. Isn't Coming Back

If we understand the simple dynamics of value creation, total compensation costs and the cost-basis of doing business (general overhead), then we understand why employment isn't coming back in the U.S.

It is impossible to understand job creation without understanding value creation and labor/overhead costs. People hire other people when their labor creates more value than it costs to hire them.
When labor costs are high, the value created must also be high; it makes no sense to hire someone if doing so generates a loss.
When labor is cheap, the bar of value creation is lowered, and so the risk of hiring a worker is also lower: they don't have to add much value to be worth their wage.

This is why you see many low-value jobs in developing-world countries. There are night watchmen on duty in virtually every parking lot and building in urban Thailand, for example; these workers are providing a fundamental value, "eyes on the street," but it is a low-value proposition: no special skill is required other than being a light sleeper. The cost of their labor is equivalently low, but in a low-cost basis economy such as Thailand's, a very low wage is still a living wage.

In a self-employment example, many vendors in urban Thailand set up their informal food stall (a cart or a tent) for a few hours a day. Their net income is low, because what they provide--readymade food and snacks--is available in abundance, i.e. there are many competitors.

Nonetheless, because the cost basis of life is relatively low, modest earnings from a low cost, low-profit enterprise make the enterprise worthwhile.

Compare that with the typical government job in the U.S. or Europe. It is difficult to measure the true cost of government pension costs, as local governments do their best to mask their pension costs and inflate their pension funds' projected returns. But a back-of-the-envelope calculation yields about a 100% direct labor overhead cost for the typical government job with full healthcare, pension and vacation benefits. So an employee earning $50,000 a year costs $100,000 in total compensation expenses.

Many local government employees on the left and right coasts earn close to $100,000, so their total compensation costs are roughly $200,000 per worker.

How much value must be created by each employee to justify that compensation? Government needn't bother itself with that calculation, as the compensation is not set by market forces and the revenue stream can be increased via higher taxes, junk fees, tuition, licences, permits, etc.

As the legacy costs of healthcare and pensions for retirees become due, local government operating budgets are being gutted to pay these ballooning legacy costs.
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