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Old 01-17-2011, 09:55 AM   #61
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We've borrowed money to extend unemployment benefits, pick up COBRA for unemployed workers, keep state/local workers employed, give tax breaks to businesses and individuals, all to directly reduce the pain and/or try to break the spiral. Maybe early retirement would be a more efficient way of using those borrowed dollars. Gone4Good has a good start at analyzing this idea, the next question is how many of those dollars will go to people who would have retired at 62 without the extra incentive.
This is part of the equation. On one hand it would significantly increase the public burden of benefit payouts, but this is partially offset by a reduction in unemployment benefits paid out, as well as other public assistance programs to the involuntarily unemployed. To what extent there would be an offset, I can't say.

And to some degree, reducing unemployment boosts consumer confidence which might be one of the primary drivers of economic recovery. But at the same time, at some point the ratio of workers to benefit receivers could become dangerously high.
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Old 01-17-2011, 10:06 AM   #62
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The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.
Creative destruction is nothing new. Nor is productivity growth that destroys jobs. In 1870 75% of all jobs were agricultural, now only 2-3% are. Manufacturing employment in the U.S. has declined by 40% from it's peak, and yet our manufacturing output is 75% higher. If thousands of years of innovation haven't prevented economies from reaching full employment before, I have no reason to believe it will now.

Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment rate on innovation. Nothing really new changed in the past few years that would account for an additional 7-8MM workers becoming obsolete. Rather the old explanations still serve best. A fall in aggregate demand caused by a tightening of lending standards has resulted in an economy with excess capacity. That excess capacity will persist until the constraints on overleveraged players are somehow relaxed. If debt paydown is the the sole, or primary, path to relaxing those constraints, the process will take several years. But the situation is not permanent.
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Old 01-17-2011, 10:10 AM   #63
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It is undeniable that at a given level of productivity, a smaller work force results in a smaller economy.
A more reasonable scenario would be one where worker productivity declines, as well matched and desirable employees are replaced with second choice candidates. It is also likely that some skilled workers will retire where no suitable replacement exists, resulting in a less than one for one retirement to new employment ratio. That means lower current GDP, lower potential GDP, and higher than promised unemployment.
One of the reasons for the apparent jobless recovery seems to be another round of productivity boosts, so any view of the workforce should look at productivity growth.

I wonder if higher productivity comes from training an entire workforce of "second-choice candidates" or if it comes from just one or two tools being powerful enough to raise the productivity of any bunch of monkeys. It doesn't take a big training investment for the users to realize the benefits of a more powerful computer network or a smartphone or social networking. Infrastructure, sure, maintenance & repair, sure, but not at the user level.

Unfortunately FICA payments come from workers, not from better tools or productivity or profits, so as the employment pool shrinks even faster than the available workers then SS becomes tied to the economic growth of businesses beyond their productivity improvements.

At least the cost of the safety net of Social Security is paid for from the wages of workers. I'd rather support that than have my personal ER's income taxes rise to handle welfare or other safety-net programs. And imagine what would happen to runaway CEO compensation if a company's payroll taxes were tied to the size of its executive compensation, including options & perks & deferred benefits...
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Old 01-17-2011, 10:24 AM   #64
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Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment on innovation.
Not entirely, at least within the context of a single nation's economy. Innovation in the past has always displaced workers, not eliminated the need for them. Robots in auto assembly plants, for example, displaced assembly line workers but that was offset by the creation of good jobs that produced the robotics. When we became more industrial than agrarian, people moved from the farms to the cities and worked the factories -- but the jobs weren't overseas.

But now we're at a point where most "innovation" jobs can be done anywhere in the world. Computer hardware and software advances up into the 1990s eliminated the need for some other jobs but produced a lot of domestic jobs in computer engineering and software development. Needless to say, much of the engineering is done elsewhere now, the assembly of computers and computer parts are done mostly in China and the software is increasingly done in India.

So while your statement may be true for the *global* economy, for the first time it seems like most domestic jobs being displaced by technological advances are being filled in other cheap-labor nations, so we're not really reaping the benefits of it in terms of employment.
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Old 01-17-2011, 11:03 AM   #65
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Another way to look at it is that if we are going to accept the prevailing notion (and pay for) 10+% of the workforce to be unemployed for the next 5? 10? years, it might as well be those who WANT to be ER'd unemployed.

And the recipients of those jobs vacated by ER's will be gaining work experience and skills that will help us 5? 10? years down the road instead of having them just entering the workforce when the last few boomers retire, certainly the boomer-gen x transition would be smoother than the class warfare the current unemployment/SS situation is formenting.

So, where do I sign up for this exciting new ER stimulus package??
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Old 01-17-2011, 11:24 AM   #66
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The biggest problem I'm having with this thread is that solutions suggested in this (and the bulk of previous) Post start from a sufficient number of Jobs (to support the solution) and expect the number of jobs to grow in the future. Yet, here we are, starting with a (greater than?) 11 million deficit and a reasonable expectation that the gap will increase in the future not diminish.
I call it the 'one variable' solution i.e. changing only on variable will solve the problem (we've seen similar solutions with the health care and illegal drug discussions). It ignores, population growth, off-shoring of jobs, productivity increases, skill mis-matches, decrease in salary, benefits etc.

Over the next few years I think we will have a new normal:
- higher systemic unemployment
- higher underemployment - high skilled workers taking low skilled jobs
- limited job advancement as older workers do not retire until they are forced to by the company
- more people on government assistance
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Old 01-17-2011, 11:33 AM   #67
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I call it the 'one variable' solution i.e. changing only on variable will solve the problem. It ignores, population growth, off-shoring of jobs, productivity increases, skill mis-matches, decrease in salary, benefits etc.
On the contrary... or exactly. I am not quite sure of what you are saying. Everyone seems to be concentrating on those issues and ignoring my point. (And, I am not proffering it as a "solution.")

Additonally, I am not thinking in the short term (~50 years) but gradually over the next hundred or so years. In any event, it will be gradual (becoming worse going forward) and non-stoppable.

Yeah, this is exactly like the "Global Warming" issue (not that I am completely sold on that) and should be looked at it in that vein.
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Old 01-17-2011, 11:49 AM   #68
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Additonally, I am not thinking in the short term (~50 years) but gradually over the next hundred or so years. In any event, it will be gradual (becoming worse going forward) and non-stoppable.
From the previous posts, I think we agree.

I think I disagree with you on the cycles. I think what I outlined as the new normal will be our next phase but it will not last 50 years - look towards Europe that is our immediate future and it is under a strain now. So, that is our 'new normal' for less than 50 years while costs in China and India increase. They begin social programs similar to the west or like the mid east where basics are subsidized e.g. food and energy. After that period the west decreases its unsustainable subsides and jobs slowly begin to move back to the west. Then again, the unknown is Africa and South America. Maybe, one of those places becomes the low cost producer and the economic growth moves from China/India to Africa or South America.

It is difficult for us to think of the USA this way because we are so close to the issue and we love it. But, no empire has reversed its decline once the debt has gotten to our current levels. The debt will be another drag on reducing unemployment.

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Old 01-17-2011, 11:51 AM   #69
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I think for the time being, a weak economy, depressed job market and people and businesses looking for the "cheapest" solutions will continue the net job exports overseas for a while. But the combination of rising standards of living in emerging economies *and* Peak Oil and its aftermath could combine to move jobs closer to the end consumers, at least where stuff that has to be transported is concerned. It will take longer for the trend of job loss to reverse where "moving information" instead of "moving stuff" is concerned, since the Peak Oil factor doesn't much come into play.

But I think I'll be retired or dead before we really see this happen in large numbers (though Peak Oil and oil prices that far outpace inflation may hit a bit earlier than that).
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Old 01-17-2011, 12:07 PM   #70
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Creative destruction is nothing new. Nor is productivity growth that destroys jobs. In 1870 75% of all jobs were agricultural, now only 2-3% are. Manufacturing employment in the U.S. has declined by 40% from it's peak, and yet our manufacturing output is 75% higher. If thousands of years of innovation haven't prevented economies from reaching full employment before, I have no reason to believe it will now.

Considering that we were at full employment just a couple of years ago, it is hard to pin the current high unemployment rate on innovation. Nothing really new changed in the past few years that would account for an additional 7-8MM workers becoming obsolete. Rather the old explanations still serve best. A fall in aggregate demand caused by a tightening of lending standards has resulted in an economy with excess capacity. That excess capacity will persist until the constraints on overleveraged players are somehow relaxed. If debt paydown is the the sole, or primary, path to relaxing those constraints, the process will take several years. But the situation is not permanent.
This is all true. But, looking forward, I think we still have to deal with the results of globablization.

US workers are accustomed to earning much higher real wages than Indian and Chinese workers. That difference is harder to maintain today than it was 40 years ago. Now that more US workers compete in a global labor market, I think that getting back to full employment will require lots of US workers to accept jobs at wages that compete against the global standard. That will take time and put a lot of downward pressure on living standards.
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Old 01-17-2011, 12:18 PM   #71
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14.5 million at last count. Employment Situation Summary
And that's just here at home:

Global Unemployment Rates

CUR.JPG
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Old 01-17-2011, 12:51 PM   #72
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And that's just here at home:

Global Unemployment Rates

Attachment 10991
Where's China on your chart?
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Old 01-17-2011, 01:05 PM   #73
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Where's China on your chart?
China don't count.
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Old 01-17-2011, 02:04 PM   #74
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"Thanks to all the hard work, the United States produces twice the goods and services per person that it produced in 1948. Everyone in the country could, in principle at least, work a four hour day or a six month year and still maintain a standard of living equivalent to that enjoyed by our parents. Almost uniquely among the developed nations, America took none of its productivity gains in additional leisure. It bought consumer items instead. And that, if it is any comfort to you, explains why you have a houseful of labor saving appliances and are more tired than ever." -From Bill Brysons book Made In America
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Old 01-17-2011, 02:07 PM   #75
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This is all true. But, looking forward, I think we still have to deal with the results of globablization.

US workers are accustomed to earning much higher real wages than Indian and Chinese workers. That difference is harder to maintain today than it was 40 years ago. Now that more US workers compete in a global labor market, I think that getting back to full employment will require lots of US workers to accept jobs at wages that compete against the global standard. That will take time and put a lot of downward pressure on living standards.
This will be impossible given US politics. It just isn't going to happen.

Ha
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Old 01-17-2011, 02:25 PM   #76
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RonBoyd,
Do you know how these rates are calculated per country? It appears that the US rate is 9.4, however, this does not count those that are not longer looking, and the real rate is somewhere around 16-17%. (no source, just what the talking heads have said)

So if the rates are what the countries report, are they adjusted for sampling method. Not really expecting an answer, I just get curious when people start using statistics, and here I mean the original author.
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Old 01-17-2011, 02:43 PM   #77
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This will be impossible given US politics. It just isn't going to happen.

Ha
Maybe you mean that we'll just have high unemployment rates and high unemployment benefits (say our unemployment benefits will exceed Indian wages)?

Or, do you see some way that we can maintain higher market wages than other countries?
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Old 01-17-2011, 02:58 PM   #78
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Maybe you mean that we'll just have high unemployment rates and high unemployment benefits (say our unemployment benefits will exceed Indian wages)?

Or, do you see some way that we can maintain higher market wages than other countries?
Only if:

GDP in $/#of FTE workers= higher productivity than the rest of the world.
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Old 01-17-2011, 03:07 PM   #79
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Maybe you mean that we'll just have high unemployment rates and high unemployment benefits (say our unemployment benefits will exceed Indian wages)?

Or, do you see some way that we can maintain higher market wages than other countries?
I really can't say. Germany, Singapore, Netherlands, Switzerland and Sweden seem to be mostly doing #2 (especially Singapore) with a good dose of # 1 thrown in especially in Northern Europe. A third possibility is protectionism, relatively slow economic growth and a pullback from military and economic engagement around the world.

I believe these things tend to be path dependent, what happens is not really foreseeable. But one thing I cannot envision is US citizens getting up and going to work for Indonesian workers' wages. Whatever goverment that tried to let that come about might as well give up immediately- why wait until the next elections?

We could go the route of Latin America, with some very wealthy people living behind razorwire, and only clueless tourists venturing into poorer sections- but that model seems to be very much under stress even down there. (Venezuela, Bolivia come immediately to mind.)

Minority respecting Democracy is hard to maintain with extreme poverty among large goups of voters. Eventually voters say, I have 2 possible ways to make ends meet- work, and voting for confiscation. When work no longer suffices, confiscation is not far off, no matter what we may say about the rule of law and property rights. One man, one vote rules-save of course the plutocrats who finance our politicians.

Our system is becoming more and more simlilar to SE Asia, especially Indonesia and Phillipines. Some very wealthy industrialists/ businessmen who are mostly ethnic Chinese own most everything, expect what they pass to whatever General or puppet is governing. In our case the plutocrats are ethnically more diverse, but the system is the same.

I have no idea what will happen, but it is very hard for me to envision either muddling along for decades more, or a return to what was US style democratic capitalism up until the 1980s

Ha
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Old 01-17-2011, 03:08 PM   #80
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RonBoyd,
Do you know how these rates are calculated per country?
First... don't shoot the messenger. Such a Poll and subsequent Chart is way beyond my Pay Grade. I put a Link in the Post in case of these kind of questions.

Nevertheless, you make a good point. Yeah, one that many others have but still. I would guess, however, rather than fight with Uncle Sam the Pollster(s) simply used the "Official" numbers.
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