

U.S. jobless rate hints at permanent structural change - petercooper
http://www.theglobeandmail.com/report-on-business/economy/us-jobless-rate-hints-at-permanent-shift/article1696060/

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100k
I think this "structural change" argument is nonsense.

An example: much of the unemployment is in the construction industry -- mostly
due to the housing bust. But look around you. There are billions of dollars
worth of infrastructure projects that need doing: potholes filled, sewer
systems upgraded, rail lines built, bridges fixed...The list goes on and on.
Yet construction workers sit idle because local and state governments have cut
back, and the federal stimulus was too small (and ill-targeted: tax cuts
instead of spending) to cover the gap.

The one thing that is true is the lack of labor mobility due to underwater
mortgages. That will take a long time to reach equilibrium, and in the mean
time, people will be reluctant to move, making the problem worse.

~~~
nanairo
I agree. Not sure where the ideas that a country where people cannot afford
any goods because they have no money need more tax cuts, especially for the
rich.

Poor people don't get many advantages from lower taxes because they often
don't have to pay that many (especially if they are not working). And rich
people will use the extra money to invest... but they may very well invest
abroad, and in the current situation they actually just prefer to keep their
money to their chest.

A government that paid for construction work, or subsidised jobs useful for
the community would help a lot more than one cutting the taxes.

Though of course it doesn't follow common sense, so there's no way society
will stop believing Fox news and friends.

~~~
anjuna
Here comes the arrival of Reddit Kensyian fanboys.

~~~
stretchwithme
Keynesian teaches wealth is created by fooling people into investing in things
that they would not ordinarily invest in.

But all it does is misallocate investment into things that are unsustainable
and that ultimately collapse, like the housing bubble. Or the dotcom bubble.
Or the recent mini-bubble in the stock market.

And the only response offered by the Keynesians to their collapsing bubbles is
an even bigger bubble.

Nothing can ever be allowed to return to normal in this bankrupt theory. A
return to organic growth with investments in things judged to be a value to
the people who actually are playing with their own hard-earned money is
somehow vastly inferior to the judgement of the illustrious leaders who spend
other people's money to make it through the next election.

In other words, when you've used up one credit card, its time to obtain
another. And this is the only way to become successful, according to the
Keynesians.

To defer consumption and invest in one's ability to produce works for the
individual and it works for societies in the long run. And societies that
cannot act sustainably, that eat their seed corn before it is even harvested,
will fail.

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tomjen3
I don't think the example they came up with is really useful - how many
engineers are really in the market for 50k/year jobs? It seems very low, so it
is no wonder that he can't find qualified applicants.

As for the structural change, yep that is partly what is happening, but there
is also a cyclical downturn.

~~~
dasil003
No doubt! I took a web development job for less than that 10 years ago in
higher ed when I was 22 and had no professional experience... of course they
also gave me free healthcare, free tuition for my whole family, generous
vacation, sick days and holidays, and a fantastic retirement system that when
I turn 65 is slated to pay me $650 a month until the day I die, even though I
only worked there 5 years.

Now I'm not sure what "qualified" means in this case, but it doesn't sound
like they are hiring people fresh out of school, which they should be at that
rate.

~~~
patio11
I have to ask: California state employee? (Edit: on reflection, the skimpiness
of the retirement plan makes me doubtful.)

~~~
dasil003
Nope, Minnesota.

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gaius
A government _cannot_ fix the job market, for the very simple reason that
structurally, the economy reacts slower than "before the next election".
Anything it tries to do in the short term will almost certain make the problem
worse. The best thing it can do is try not to.

We see this pattern repeated again and again in the UK. The voters, sick of
austerity, will vote in the high-spending Labour Party which promises all
sorts of largesse. Then they'll wreck the economy with high tax and high
borrowing, and voters will turn back to the fiscally responsible Tories, who
will balance the books but slash spending on public services in the process.
As soon as they've "fixed" the economy they'll be voted out again...

Another good example is the health service. All political parties promise to
improve it. But a government lasts 5 years and it takes 8 years to train a new
doctor. So rather than invest in skills, they spend the money on very visible
projects like new buildings, the boast about how much they've spent, not what
has actually been gotten for the money.

~~~
MC27
The Labour/Tory thing isn't that simple. The UK's economy is strongly focused
on London. When the Tories (conservatives) are in power, most of the money
goes to the South East and the rest of the country suffers _really_ badly.
When Labour are in power, they attempt to spread that wealth to the outskirts,
but they aren't good at doing it, so waste a lot. They are polar opposites,
each creating their own long term damage, especially to public services.

~~~
gaius
Mmm, this is exactly my point - no-one focussed on "the next election" can
safely undertake to deliberately make structural changes in the economy. The
timescales are all wrong. It probably takes "a generation" to do it, 20-30
years. The best thing - for the country as a whole - for either party to do is
just stop interfering. But, as is human nature, each will prioritize the
interests of its core voters.

~~~
MC27
Perhaps the biggest opportunity the UK had was when regional parliaments were
proposed for England, that would have made the central government less
influential and let locals focus on their main concerns. It was poorly
implemented but an interesting first step if the public had gone for it.

~~~
arethuza
Yeah - like that has worked so well in Scotland. All it has given us is a
crazily expensive extra tier of government who feel that they can spend
English taxpayers money to give Scots things that the rest of the UK don't
get.

And yes, I am Scottish and no I have never voted Tory (in fact I used to vote
SNP until I met Alex Salmond).

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stretchwithme
The US economy is built on debt. And all that borrowing pushed up wages in the
US and caused trade deficits and migration of workers into the US.

After all, it is not paper we are borrowing. It is the labor of others that we
are borrowing. We must take delivery of it somehow.

And it seems likely that our borrowing will continue until it becomes
impossible to continue. Neither the Republicans nor Democrats have the balls
to break the debt habit in a downturn. And this downturn is far from over.

But the US keeps committing to more spending and absorbing all of the risks of
private risk takers in favored industries. It insures many pension funds, is
on the hook for your social security, your medicare and your house when you
finally decide to walk away.

No individual would ever make such a grand series of errors and anyone who did
would face consequences pretty quickly. Only the United States has the
resources, trust and good will to piss away on this stupidity.

~~~
nanairo
Where does this economic theory come from?

If the government cuts expenditures to pay the debt, then more people are
without a job or without services. Therefore the economy cools down and the
government gets even less money from taxes. At which point they may not be
able to pay the debt, so they need to take more cuts and so on.

That's what happened to Argentina a few years back, and I think (though I may
be wrong) it's what has happened to Ireland now.

The problem you have in the USA is that what should be done is government
taking debt to support the economy in the bad days and paying it off in the
good ones. But unfortunately the Repubblican are suggesting exactly the
opposite: they wasted a surplus and got you a huge debt when the economy was
doing fine, and now that's in a mess they want you to cut expenditures.

~~~
stretchwithme
Is it the government's job to ensure that everyone has a job? Should it be
hiring everyone? Where does this economic theory come from? And why is its
logic never questioned?

Yes, the government can continue to borrow massively to spend so much that
everyone has a job and subsidize lending so that otherwise unviable economic
activity occurs.

But this is the economic thinking that produced the housing bubble and the dot
com bubble before it, both of which left economic disasters in their wake.

More of the same faulty action will not resolve the underlying massive
structural problem being created.

Some day, the bill will come due for borrowing trillions that do not result in
an improvement in our ability to produce products and services the world is
willing to pay for.

Both parties have wasted massive amounts of money on things which add no
value. The difference between Argentina and the United States is that the US
has far greater wealth and ability to borrow and thus can piss away vastly
greater amounts before the bill comes due.

The government is like a rich child that is never disciplined by his parents.
Its easier to throw money at all of the problems created than to impose the
same discipline that created the wealth in the first place.

Yes, more people will be without jobs. But the

~~~
nanairo
I don't think it's the government job to grant everyone a job (at least in the
USA, in other countries it is). But that wasn't my point.

What is important for a country is the ratio of debt to GDP. Currently if you
keep cutting like this the debt may decrease, but the GDP will have decreased
so much more than it will be HARDER and not EASIER to pay the debt.

Government economics are not the same as household economics. When the economy
is picking up steam, then the government can start to withdraw support.

------
Stwerner
I've been bouncing an idea around in my head related to this for a little
while now. While I don't think it's as specific as 'no engineers qualified to
fill 50k/year job' I have a feeling that in general it is lack of computer
skills that is keeping these people unemployed.

There is a huge amount of the population - in America at least - who cannot
handle the most basic of tasks on their computers without assistance or a
large waste of time. Not that I'm blaming them, as they got along just fine
(though less efficiently than their more computer literate co-workers) before
the downturn, but now that they have been laid off and are looking for new
jobs, the employers willing to hire people who don't have the basics down are
few and far between.

~~~
Qz
A friend of mine recently finished a 5 year architecture program, but for
whatever reason her curriculum didn't include computer aided design (more
traditional focus she said), but now she can't find a job because everyone
wants people with CAD skills.

~~~
Stwerner
Wow, I wasn't really even thinking about recent graduates not knowing how to
use the software particular to their industry.

I'm worried the article may be right, that there needs to be a massive re-
training effort or there is going to be a whole generation of people spending
the second half of their lives jobless or underemployed. I imagine the only
thing keeping it from being a more pronounced effect year round is big
corporation's typically slow adoption of new technology.

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dotcoma
Hey, can't have it both ways! If productivity goes up, and low-productivity
jobs get outsourced to developing countries - which, by the way, is probably
one of the reasons productivity goes up in the rich world - of course we will
need less working hours to be done. But what should be regarded as a success -
and to some extent as neo-colonialism against the world's poor - is seen as a
problem. I think this speaks worlds about how backwards and still stuck in a
work-and-produce mindset we are...

~~~
anamax
> If productivity goes up, and low-productivity jobs get outsourced to
> developing countries - which, by the way, is probably one of the reasons
> productivity goes up in the rich world - of course we will need less working
> hours to be done.

You're assuming that consumption doesn't go up.

If we're paying unemployment benefits, those folks should either be looking
full-time or doing public service. Yes, that includes things that might
otherwise be done by public employees.

~~~
dotcoma
I'm not assuming that consumption won't go up. I'm hoping it won't go up.
Bigger, better, faster can't go on forever. We have this thing called the
"economy" and instead of trying to "economize", we want to consume more and
more forever...

Also, did I speak about unemployment benefits? I think we should try to keep
as many people as possible employed, and have them all work fewer hours,
whenever it is possible. Obama can't really relax too much, or share his job
with another co-President, and of course if you're launching your startup and
it's the challenge of your life you have to give it all - but not every job is
really that important. To a large extent, the truth is that the world is full
of small people who have trouble finding value and joy in their lives and want
to "seem important" by working way too many hours (nor does the system help
them give up part of their working hours, truth be told).

~~~
anamax
> I'm not assuming that consumption won't go up. I'm hoping it won't go up.
> Bigger, better, faster can't go on forever.

Doesn't it depend on the goods in question?

For example, it's unclear why more digital books would be a bad thing. Same
for digital music and maybe even movies.

------
gmlk
At the core of the economic problem is the mismatch between the price of basis
necessities (which include healthcare, shelter, energy, mobility, education,
clothes, food and water, etc) and a normal income: The last century wages
haven't increased at the same rate as the real cost of living.

The only way to get out of this mess is that either the incomes at the bottom
must rise or basis necessities must come down. At the sometime jobs have
become more mobile then people, moving to places where the labor force is even
less expensive. Failing that, there is automation which increases productivity
per worker, which also will result in less jobs overall.

So we get to a point where a large part of the population will be permanently
unemployed because there are not enough jobs for everyone. These people will
need to be able to pay for basic necessities just like anyone else. Even the
people who do have a job will find that their wage is not enough: Giving the
surplus in workers the wages will go way down.

The only way to solve this is to introduce an unconditional livable basic
income for every individual citizen.
<http://en.wikipedia.org/wiki/Basic_income_guarantee>

~~~
dantheman
This is a completely ridiculous statement -- there will always be more work
than can be completed. The problem is in identifying what it is. The more the
government manipulates the market they more difficult this is.

The problems with healthcare a largely government created - why is health
insurance tied to employment?

The large population that is unemployed needs to change jobs , or what their
expectation of compensation should be. The wage is directly correlated to the
value that they produce, the more value the higher the wage.

~~~
gmlk
At which price is doing the work still viable?

What if the added value of the work being done is lower then the minimum wage?
Then no employer will pay you to do it. Or consider a machine which can do the
same job cheaper then some employees earning minimum wage: How long before the
job will be automated?

In a world where much physical work is automated away there might not be
enough remaining work left for everyone. And the simple law of supply and
demand a labor surplus will lead to increasingly lower wages. As soon as this
hits minimum wage the work will either move to a place with a lower minimum
wage or none at all, or the work is just eliminated (not done) if one can get
away with it.

It all ends up the same… With a surplus of (some kinds of) labor, wages will
decrease so that some people are unable to earn a livable income. At the same
time a shortage of (some kinds of) labor will lead to higher wages, which
means that automation becomes viable at higher prices. In either case, given
enough time most people will end up without a job, without an income: Only the
owners of businesses will share in the profits.

~~~
dantheman
<http://en.wikipedia.org/wiki/Luddite_fallacy>

------
known
Since Corporations have become bigger and smarter, Govt cannot monitor their
day-to-day illegal & immoral activities. It is better to breakup these
corporations into smaller entities to promote competition and solve
unemployment crisis.
<http://en.wikipedia.org/wiki/List_of_companies_by_revenue>

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known
If there are only 2 options for America,

    
    
       1. H1B
       2. Outsource

What would you choose?

------
known
I've a somewhat radical solution to US unemployment problem. Breakup all mega
corps for e.g. <http://en.wikipedia.org/wiki/Bell_System_Divestiture>

~~~
asmithmd1
That would increase efficiency in those corporations and INCREASE
unemployment.

When I have worked for "mega corps" I saw more people getting paid to much to
do nothing.

~~~
nanairo
What? So now mega-corporations are less efficient than small companies and
hence we have to keep them?

You break up the big corporations and with many suppliers suddenly they need
to fight it off in the free market. It will lower prices and despite the
efficiency going down (because you have no economy of scale).

You may get a lot of people losing their job at first as the economy resettles
which is why it's probably not the best time to do it. But generally I think
it would be a good thing.

------
known
Globalization, outsourcing, war on terror and internet will saturate America.
And USA will be inhabited with people living on Passive income

