May the source be with you, but remember the KISS principle ;-)
Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
(slightly skeptical) Educational society promoting "Back to basics" movement against IT overcomplexity and  bastardization of classic Unix

Chronic Unemployment Bulletin, 2012

Softpanorama > Insufficient Retirement Funds Problem > Structural Unemployment in the USA >

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Prev | Contents | Next

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec

Top Visited
Past week
Past month


Old News ;-)




[Oct 06, 2012] 'Middle-Skill Jobs Are Lagging'

Economist's View

While I search for something to post/talk about, a note on the declining middle class:

Middle-Skill Jobs Are Lagging, by Michael S. Derby: ...A report released Monday by the Federal Reserve Bank of New York puts some numbers behind the evolution of the work force. The report found that from 1980 until 2010, job growth happened "disproportionately" at the high and low ends of skill levels.

The middle-skilled jobs lost in recessions haven't been recovered in rebounds. Meanwhile, low- and high-skill jobs don't lose any notable ground during downturns and grow in better times. That means the pain of recessions is felt almost exclusively in the middle of the skills curve, the report noted.

Who makes up the ... medium-...skilled workforce? ...The broad swath of middle-level-skill jobs includes repair, construction, factory, office and sales workers, among other classes. ...

In a refrain common to the broader Federal Reserve view on the problem, the paper's authors argue policymakers need to find a way to promote education as a way to navigate the changing environment created by technology. "Given the reduction in opportunities for middle skill workers, it is especially important to help people build the skills necessary to take on the high-skill jobs that these forces can create," the report said.


[ Sep 20, 2012 ] Uncertainty, Unemployment, and Inflation

FRBSF Economic Letter

Sylvain Leduc and Zheng Liu of the San Francisco Fed examine how changes in uncertainty impact the economy (As I rush off to jury duty -- can hardly wait -- I'll just note that I wish we knew more about what is driving the changes in uncertainty they use in their empirical work.)

Uncertainty, Unemployment, and Inflation, by Sylvain Leduc and Zheng Liu, Economic Letter, FRBSF: Heightened uncertainty acts like a decline in aggregate demand because it depresses economic activity and holds down inflation. Policymakers typically try to counter uncertainty's economic effects by easing the stance of monetary policy. But, in the recent recession and recovery, nominal interest rates have been near zero and couldn't be lowered further. Consequently, uncertainty has reduced economic activity more than in previous recessions. Higher uncertainty is estimated to have lifted the U.S. unemployment rate by at least one percentage point since early 2008.

The U.S. economy has slowed substantially in recent months. Many commentators argue that uncertainty about future economic conditions has been an important factor behind the tepid recovery. According to a recent New York Times article, "A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth." However, evidence supporting this view is scant. In a 2011 Wall Street Journal interview, University of Chicago economist Robert E. Lucas, Jr., said he had "plenty of suspicion, but little evidence" that uncertainty was holding back the recovery.

[Sep 13, 2012] Where Have All the Workers Gone?'

Jessie Romero of the Richmond Fed analyzes why so many people are leaving the labor force, and what they are doing after they exit:
Where Have All the Workers Gone?, by Jessie Romero, Richmond Fed: Since September of last year, the unemployment rate in the United States has declined nearly a full percentage point, from 9 percent to 8.3 percent. On its face, this is an encouraging signal about the health of the labor market. But some of the change is due to a potentially troubling trend: a dramatic decline in the number of Americans who are part of the labor force. Prior to the recession, 66 percent of the population (not counting active duty military or people in a nursing home or in prison) over the age of 16 was in the labor force. Just four years later, this rate - known as the "labor force participation rate," or LFPR - has fallen to 63.7 percent. While this might not sound like a large decline, it is unprecedented in the postwar era. The dropoff is all the more striking because it does not include unemployed workers who are actively seeking work; such workers are still considered to be part of the labor force. It is only when the unemployed decide to stop looking for jobs, perhaps because they have given up on the possibility of finding one, that they are considered out of the labor force...

[Sep 08, 2012] A "Complete Straw Man Mischaracterization of Keynesian Views"

I'm getting tired of Jeff Sachs acting like he is the only one telling the truth about the economy, the problems are all structural we are told despite considerable evidence to the contrary, and -- surprise!!! -- his "truthtelling" somehow leads him to advocate the same pet projects he's been pushing for years.

Krugman covered this in July:

Brad DeLong is baffled by Jeff Sachs, and so am I. Sachs is opposed to fiscal stimulus; I get that. But his argument is a series of non sequiturs. Unfortunately, those same non sequiturs play a fairly significant role in policy debate.

Leave aside the complete straw man mischaracterization of Keynesian views. As far as I can tell, the Sachs-and-others argument comes down to the claim that we must not seek to remedy a shortfall in demand because the economy has long-term structural problems. What sense can this possibly make?

Consider the extended version of the "magneto trouble" metaphor I use in my recent book. Keynes argued that the Great Depression could be thought of as a failure in the car's electrical system; so let's think of it as a situation where your car won't run because it has a dead battery - that is, you could get it running again with a fairly trivial and easy intervention: just buy a new battery, which costs only a tiny fraction of the expense of a new car.

In saying this I am not denying that there may be other problems with the car, perhaps even big ones. Maybe it needs new brakes, or a new transmission, and these had better be dealt with soon.

Still, what sense can it possibly make to say that therefore you shouldn't start by replacing that dead battery?

I really don't get it.

I think "getting it" starts with Sachs adopting a view of the world that supports the types of projects and initiatives he's been pushing for years, and the fact that standard Keynesian policy and the deficit spending that comes with it makes it much harder for those projects to be realized. [Never waste a crisis, etc.]

I'll also note he is, in essence, calling for infrastructure projects which is precisely what many of us in the Keynesian camp have been calling for as well. So unless it's because we haven't specially named the projects he supports, it's not even clear there's a big disagreement here.


Seems to me the disagreement is over the transfer multiplier vs the real government spending multiplier. Krugman and Baker, for example, seem to argue that transfers such as unemployment benefits or SSI are stimulative. Most counter-intuitive is the unemployment benefits multiplier, by which the government borrows money from some people to pay other people not work. Why this should be stimulative is a mystery. We have a 10% of GNP deficit mostly due to transfers, and this doesn't appear to be stimulative at all. Sachs says build stuff, don't just transfer. But please no more freeways to subsidize carbon usage. And no bullet train systems like from LA to Vegas that only the wealthy can afford to use.

Pete, transfer payments get spent at least in part right ?

If you argue uncle's direct spending has a higher multiplier effect, fine. But the people getting to spend or save more of their own money Ie tax cuts has a far greater appeal. And can justify a far bigger deficit Safety net payments like unemployment insurance both provide relief And additional spending. Again likely to have broader appeal then off the cuff public works projects

One can carry this on in greater detail obviously.

One point: unemployment payments when unemployed out number job openings by 4 to 1. Hardly amounts to paying people in aggregate not to do job work ..right? So drop that silly reflex line. It's not like paying farmers not to grow more wheat. It's more like paying relief to landless peasants unable to get a tenancy

DrDick said in reply to Paine...

"In the end this outside injected income has to increase spending unless it's all taxed away or saved. Right?"

Which also illustrates why upper income tax cuts are so ineffective as stimulus, since the rich do not generally spend that extra money, while the poor and middle classes do.

yuan said in reply to Paine...

These people fervently believe that spending by "peasants" crowds out the spending of financial innovators, real estate moguls, and corporate job creators. They are, of course, wrong but since they own the media this point of view has become the mainstream point of view.


[["Krugman and Baker, for example, seem to argue that transfers such as unemployment benefits or SSI are stimulative."]]

This is pretty simple. We can think of aggregate demand from anyone person as: D = m*e; where (D) is demand, (m) is money, and (e) is the percentage of that money that does into creating demand -- this equation is deductive, so we know it is true by definition.

Therefore, a transfer will create a change in demand of: D = B(m*e) - A(m*e);

Were 'B' is the person money is being transferred to and 'A' is the person money is being transferred from.

In the current context:

'B' is a person without a job and lots of expenses. Therefore, for B, 'e' will be high.

'A' is a person that has so little immediate use for their money that they are willing to lend to government at 1.5% interest. Therefore, for A, 'e' will be low.

Since our economic condition is driven by a lack of 'aggregate demand' (I hate this term as it misleads, 'aggregate consumption' is more accurate), a positive generation of demand is good. Therefore transfer payments will be stimulative.

Note[1]: We could, hypothetically, generate this transfer via new taxes plus spending. This would have the benefit of generating no net deficit. However, it is easier to do this with debt issuance. This is because debt issuance, when interest rates are very low, are virtually guaranteed to have low 'demand' production (low 'e').


All this being said, actual job creation is better. This not only generates demand via the above explanation, it adds to this demand the productive activities of the job itself. Thus the 'multiplier' of such spending will almost always be higher.

Dan Kervick:

I think the political challenge here is rather clear.

Democrats want to raise taxes on the rich. They believe extreme income inequality is a bad thing, for a variety of social and political reasons. They also believe, from a more strictly economic point of view, that extreme income inequality is damaging to a well-functioning economy.

But the problem is that Keynesian stimulus consists in increasing spending and cutting taxes. So it is very hard to square a call for tax increases with a call for Keynesian stimulus. It looks incoherent.

What a lot of Democrats like Obama and their allies in the economics profession - like Sachs and Johnson - have done is join these Democratic agenda items to the budget and debt crisis brouhaha. Sachs says here that the reason not to cut taxes is that it would "plunge us into a financial and social crisis." Presumably this alleged financial crisis has something to do with the federal budget.

But again, cutting taxes is standard Keynesian fare, so Sachs probably worries that if the conversation is shifted toward immediate term stimulus, the obvious play is to avoid the "fiscal cliff" by not cutting taxes. But then the political opportunity to cut taxes will be lost. So he wants to focus the discussion on longer term structural issues, and fold the tax increases into the attack on the supposed long term structural issue of deficit reduction.

The ball and chain here, from my point of view, is the bogus debt crisis nonsense. We indeed *should* be raising taxes on the rich to address the social, political and economic problem of inequality. This is a structural issue. But we should *also* be increasing spending on both long-term public investments and immediate term demand restoration. We should hire everyone willing and able to work. We should completely offset any fiscal contraction from the tax increases with even greater expansions of spending. We should tell Pete Peterson, Rogoff and Reinhart to get lost and get out of the way of recovery, dynamism, and absolutely necessary public investment. These nattering nabobs of negativity, and hand-wringing debt gloom-and-doomers are poisoning confidence and paralyzing the government's capability to act.

The government debt is a pseudo-problem. A large portion of it is owed to our own central bank, which is itself a government agency. It is meaningless. And as a monetarily sovereign nation, our government can always directly create whatever additional funds it needs to pay debt obligations, with the concern only for price stability issues - which in the current lingering depression with capacity is far off on the horizon.

Democrats should stop fudging and obfuscating. They should embrace the fight against inequality, embrace the need for countercyclical fiscal stimulus and embrace the need for significant public investment and structural transformation. And they should kick the hectoring debt warriors to the curb.

EMichael said in reply to Dan Kervick...

"But the problem is that Keynesian stimulus consists in increasing spending and cutting taxes."

But the cutting taxes part is reliant on that tax cut being spent, not banked. Right?

Dan Kervick said in reply to EMichael...

Yes, and its true that cutting taxes on those toward the bottom of the income scale leads to less being banked than cutting taxes on those at the top. But even the well-off and the rich don't bank everything. So it seems to me that a Keynesian approach would recommend not increasing taxes on anyone unless the tax increases are to be more than offset by spending increases. By no means should the focus on contracting the deficit; to stimulate, the deficit should be expanded.

So its the deficit mania that is above all killing the political case for Keynesian stimulus.

[Sep 08, 2012] Why have millions of Americans given up on looking for work The Raw Story

Michelle Black:


Both parties talk total nonsense about jobs. The Republicans say they
can create jobs by not taxing the rich. The Democrats say they can
create jobs by financing jobs programs. The Republicans say that the
Democrats' jobs programs simply take money from business investments and
give it to those who patronize bars and the drug trade. The Democrats
say that the low taxes of the Republicans just subsidize yachts, exotic
cars, private aircraft, and $800,000 wrist watches for the one percent,
most of which is produced abroad.

Neither political party will admit that when US corporations offshore
their production for US markets, Americans are removed from the incomes
associated with the production of the goods and services that they
consume. Offshoring is defended by both moronic political parties as
"free trade." In fact, offshoring is the gift of what was US GDP to
China, India, and the other countries to which US corporations locate
their production that they sell to Americans. US GDP goes down, the GDP
of the countries who make the American goods sold to Americans goes up.
The idiot free market economists call the de-industrializing of America
"free trade."

Flying Squid

Financing jobs programs worked pretty well in the 1930s. A lot of infrastructure was built in this country thanks to that.


Exactly! As a voluntary political activist-type who has been battling offshoring jobs (as well as other anti-American worker/citizen stuff) since 1979, this is the work of the Bankster Party (with its republicon wing and its democrat wing). Voting for one of the two "choices" from Wall Street the American electorate is presented with every four years won't cut it, and will never and has never, changed anything.

(And the chief enemy and supporter of jobs offshoring is Diana Farrell, one of Obama's very first appoinments (to his National Economics Council, she has since left).)

Short of a violent and most bloody revolution (which may be the natural outcome anyway) the only logical recourse is to elect Dr. Jill Stein of the Green Party. Sadly, it is highly unlikely the infantilized population of America is capable of such thinking.


meanwhile they pretend to talk about retooling America, the only Tools are the people buying into their big pile of BS


It's an old story.

The American Revolution, The Russian Revolution, the French Revolution have one thing in common which is it was a battle between the have and have not.

The American Revolution was unique in that the haves saw ways to make more money if they can have a country of their own. The problem was they could never convince the colonists to go along with it for no other reason than meet the new boss same as the old boss. It would be stupid for any colonist to give up their life for that reason.

The wealthy for almost 60 years couldn't figure out how to get the colonists on board. Until someone thought the unthinkable which is, you have to throw the little people a bone like turning them into a political force. Oh shock, but it's true, that's the only solution.

But not to worry. The little people will be to busy working from sun up until sun down, and at the meantime the rich can highjack the nation.

Now lets turn to the aftermath of the French Revolution. Napolean went around Europe kicking out money and power. He was considered the end of history. The story ended when Napolean was defeated Money and Power returned to whip the ungrateful little people.

The Russian Revolution. It was a Capitalist system. Instead of paying workers enough to have their own home, the workers were crammed into a warehouse building with rows and rows of beds like in a chain gang prison camp in Georgia, U.S.A. The workers at the time was not a political force and they were shot to death if they ever get the idea of forming a trade union.

This cronic unemployment in the U.S is what Mr. Moneybags wants. Employers can stop giving raises because employees have no place to go. Mr. Moneybags is out to completely destroy the Middle Class. Once the Middle Class is crushed, Mr. Moneybags has it all.

Mitt Romney is the stranger in the car. He wants to pick you up. No he won't show you his tax returns, no he won't let you know the numbers and math to his economic plan, he has candy for you, but you have to get in the car with him first. Oh and that other guy in the car, that's Ryan.

You see the car doesn't have a kiddie seat but Ryan will hold onto you real tight, while Romney drives. No Ryan won't show you the math or the numbers on his budget. They want to take you to Uncle Mr. Moneybags.

Ryan and Romney will tell you not to listen to mommy and daddy, ie the Russian Revolution, the French Revolution, the American Revolution about getting in the car with strangers. Don't listen to what those Revolutions has to say about Mr. Moneybags agenda.

You can trust Mr. Moneybags, you'll see just get in the car with Romney and Ryan two complete strangers


Oh great. Now I have this image of Mittwit and Lyan hanging out around the schoolyard saying..."Hey, little kid, I have some candy for you." The really sad part is, it so totally fits. "Come here, America. If you just go with me I promise I'll show you things you never saw before. But I can't tell you about it, I have to show you (smarmy smile)".


When I was a kid America was all about competition. We had lots of companies selling various products to America. Cars, appliances, clothing, hardware, you name it. We had one guy trying to convince America that he knew how to make and sell hamburgers better than anyone.

Today? We have 3 car companies. Most of our appliances are made overseas. Same for our clothes. Unless you live in a really small town your choices for shopping involve some major nationally operated chain like WalMart or Lowes or Home Depot and all of them are selling cheap imported products. Restaurants? Look in your phonebook and if the nationally run franchises don't out number the locally owned operations I will kiss your ass on Main Street.

Locally owned small businesses are being smothered by big chains. Competition has died as monopolies have risen.


All of the corruption money that has and is being stolen/printed/loaned/borrowed would have been better spent on helping these people and those in even worse shape ( homeless, mentally ill, elderly, young people ) to find training/employment/food/shelter/ health care. The way Capitalism is played here , it is actually a plus for the so called Creators to pay nothing or as close as they can get for labor without benefits. As long as The Creators can ride on the backs of the poor and actually pad their own lifestyles, the more they giggle, smile, and dance. You see the wealthy see these unemployed as Parts for their machine, they can be thrown out and the next day used by another.



It was so exciting listening to those cheering crowds for Bill Clinton at the convention.

One finds it perplexing though, as to what they were cheering Bubba for?

Was it because as governor, Clinton killed collective bargaining in Arkansas and helped to make that state a "right-to-work" state?

Was it because as president for two terms, Clinton helped to offshore even more American jobs than Reagan did during his two terms?

Or was it because, after leaving the presidency, Clinton made over $100 million as a lobbyist for the jobs-offshoring industry?

Perhaps one of those witless, infantilized Ameritard sheeple who fancy themselves to be rocket scientists could answer this question for me?

Somehow, at the midnight hour for America, accepting either of the usual Wall Street choices for president is completely unacceptable.

A thinking citizen, one able to come to their own opinions independently and not hampered by various mental illnesses so prevalent among this almost-completely infantilized population in America today, would naturally opt for the most sane choice, Dr. Jill Stein of the Green Party.


We have no one but government to blame for this depression. Had Obama let the TBTF entities fail then we would be back on track already. The real cost of these bailouts was ~21 trillion dollars. Backstopping the Frannie Mae and Freddie Mac, alone, put the taxpayer on the hook for 6 trillion. 14 trillion went to bail out European banks. The middle class saw their wealth fall by 1/3rd while those at the top now make record pay.

This worthless president didn't even bother to prosecute any of the criminals involved with this. Worthless, worthless, worthless.


The American people ( including myself ) are to blame for letting decades go by with no accountability and all the while the real power behind this Country has been filling their pockets. I would say that although both Parties are greed hungry bastards, The Republicans are more comfortable in the role of toadies and they never fail to deliver, as opposed to those pesky independent Democrats who have occasionally punched these Interests in the nose.


We have no one but government to blame for this depression. That's a somewhat silly statement; the gov't is owned by the banksters and it was they who performed their ultra-leveraged bank run which melted down the economy by selling layer upon layer of debt, then shifting that debt onto the public

[Sep 07, 2012] Gross Says Jobs Growth to Spur Fed on Quantitative Easing By John Detrixhe and Tom Keene

Sep 7, 2012 | Bloomberg

...Gross cut the proportion of U.S. government and Treasury debt in his $270 billion Total Return Fund to 33 percent of assets in July from 35 percent the prior month, according to the latest data on Pimco's website. Mortgages were his largest holdings at 51 percent, down from 52 percent in June.

The Total Return Fund gained 8 percent during the past year, beating 97 percent of its peers, according to data compiled by Bloomberg. The fund gained 0.4 percent in the past month, topping 85 percent of comparable funds.

Gen Y:

Like Quantitative easing helped the country's chronic U-6 unemployment rate of 15.6%.
If it didn't work the first 10 times, why do they insist on putting us at high risk for inflation during times of high unemployment? What's that called? STAGFLATION.

Oh btw, has anyone noticed how both Mario Monti and Mario Draghi both have revolving doors between Goldman Sachs and the Italian government?

[Sep 03, 2012] 'The Decline of the Middle Class'

Barry Ritholtz presents several graphs showing "critical evidence on the decline of the middle class" in recent years, and then remarks:

One final note: Despite the overwhelming data, some people dispute that the middle class has been struggling or that they have suffered any sort of set back in income or purchasing power.

The Brookings Institution's Scott Winship maintains that "conventional accounts of how the broad middle is doing systematically overstate economic insecurity." If one wants to argue exactly how far the Middle Class has fallen behind, and make the claim that the MSM has overstated it, well, that is a legitimate debate. I think its a losing argument, but, hey, its hardly incredible to say conventional wisdom overstates something.

On the other hand, the American Enterprise Institute fallaciously makes the less than credible or honest claim that there has been "considerable improvement in material well-being for both the middle class and the poor … over the past three decades."

This is the sort of statement that you expect from a group that has given up any pretense towards reality. The AEI has moved from intellectually bankrupt to utterly dishonest, and I assume anything I read from them, on any subject, are willful lies, misinformation and propaganda.

As an asset manager, I cannot risk falling into an alternative universe that diverges form reality. That is the sand box AEI plays in. As such, I have been forced to SEQUESTER their nonsense, as their detachment from the real world is an expensive and potentially dangerous money loser for anyone who reads their foolishness. I mostly ignore their idiocy, and suggest you do the same.

DrDick said in reply to R...

WTF?! Dude, we warned you about that brown acid. As numerous economists have pointed out, the decline of the middle classes in the US is a direct consequence of increasing rent seeking by the rich, who are also paying a record low level of taxes.

Kaleberg said in reply to R...

In the 19th century and early 20th century, most Americans were what they then called working class, just getting by on a paycheck, renting, owning little and with few prospects for their children. The middle class existed as the "business class", but this was a small group of business owners and better paid, better educated employees. The middle class started to grow under FDR, but it didn't become central until after WWII when the government made a concerted effort of education, bonuses, guaranteed loans, grants, pro-union policies and so on, backed by extremely high progressive tax rates.

If you go back to 1912, there was only a tiny middle class. If you go back to the 1930s, there was a growing middle class. If you go back to the 1950s through 1970s, most Americans were middle class. The middle class was created by the government, as it has been in every society to date.


Sorry I thought it was a funny analogy for saying exactly what you've posted statistics to show... The middle class have picked up the slack for funding government expansion. I'll refrain from vague analogies in the future..

Xylix said in reply to R...

The middle class 'picked up the slack' because the wealthy dropped it.


to R... Again, it is not taxes that have caused this decline, it is wages remaining flat or declining as the rentiers (management and investors) have seized an ever increasing portion the value of workers' labor. The fact that the rich have defaulted on their patriotic and civic duty to pay their share just compounds the injury.
to DrDick... You shouldn't abuse the term rentier. Rent is income not due to labor or capital (which is stored labor). Mere savers/investors are not normally rentiers, though they are currently to the extent they profited from the bailouts. Had the right thing been done during the crisis (let the bondholders of Citibank et al take a haircut) all the financial system rent profits for the past 2 decades would have been vaporized instantly.

Rent are either natural (land, telecom spectrum) or artificial (created by government policy). Examples of artificial rents:

Want to cut rents? Cut government involvement with the economy in favor of simple income redistribution (high progressive taxes on the rich, negative taxes on the poor)

to revelo...

Very few of those you list (none except intellectual property owners, and not necessarily all of them) are actual rentiers. A rentier, in the original Marxist sense, is someone who gains a living through ownership of property rather than labor. Interest, profits, and other capital gains are indeed rents, as all unearned income. Wages, except those for executives who largely set their own compensation and the like, are by definition not rents.

to DrDick...

Yes, rent originates from the concept of receiving pay due to ownership rather than labour (e.g I get paid even if I don't do anything).

Revelo attempts to excuse this by claiming that capital is a lump of 'owed' labour.

His absurd argument is instantly revealed by the existence of 'inheritance'.

to revelo...

All rents are artificial. Your so-called "natural" rents can only be extracted because the government enforces property rights and contracts. As your blinders seem to allow you only to see overpaid workers, you overlooked a primary form of rent extraction, charging rent on money, which is the privilege of those owning and/or minting the money (banks). That in turn is also all based on government license, property/contract enforcement, and policies allowing a small sector of business to control most flows of money.

to cm... [["As your blinders seem to allow you only to see overpaid workers"]]

And 'overpaid' as according to a selective version of Lord God Market at that. Revelo doesn't even show the prudence to invoke the always incalculable 'Marginal Utility'.

to revelo...

Even most "entrepreneurs" who have to loan the seed money for their business, are essentially working for the man, i.e. their creditor, who extracts a good part of the fruits of their labor, and often requires being given a say in business decisions, sometimes to a dominating extent.

That's a common experience of tech startup founders. Many are walking away with what amounts to a more or less generous salary for a few years of hard work, unless the business becomes spectacularly successful and they have negotiated terms that leave them with a good chunk of the gains.

to revelo...

Land ownership is not natural. It is a government service. Telecom spectrum is not natural. The exclusive right to use a frequency range is a government service. In fact, private property is a government service.

There's no point in being mystical. This isn't Star Wars with "the force".

Maybe that was natural.


[Aug 25, 2012] People Lucky Enough to Find New Work are often Taking Steep Wage Cuts

Are you surprised?:
New Jobs Come With Lower Wages, by Sudeep Reddy, WSJ: During the recession, people who lost long-held jobs struggled to find new employment and often took substantial pay cuts if they did find new work. Little appears to have changed after the recession ended, a new Labor Department report shows. ...

People lucky enough to find new work are often taking steep wage cuts. Of the displaced workers who lost full-time wage and salary jobs from 2009-2011 and were reemployed by January, just 46% were earning as much or more than they did in their lost job. A third of them reported earnings losses of 20% or more. Both figures are almost identical to those from the prior report. (See our article from last year about these workers: "Downturn's Ugly Trademark: Steep, Lasting Drop in Wages")


[Jun 18, 2012] Broken Trust

Economist's View

Tyler Cowen:

Broken Trust Takes Time to Mend, by Tyler Cowen, Commentary, NY Times: president Obama caused a stir recently when he said that "the private sector is doing fine" and pinned many of the nation's economic troubles on a decline in public-sector employment. He cited some interesting numbers, but he didn't draw the right lesson - namely, that America is witnessing a collapse of trust in politics, including the shaping of its broad economic policy.

Since Mr. Obama took office, 780,000 private sector jobs have been created, while the number of public sector jobs has fallen by about 600,000, mostly at the state and local level. A quick look might suggest that we need only to bolster the number of public sector jobs to have a healthier economy, but there is a deeper way to think about the problem.

State and local governments are controlled by politicians and, indirectly, by voters. And for better or worse, those voters have lost faith in the social returns of these jobs and our ability to afford them.

The voters have responded by looking to cut expenses, and they've chosen state and local government employment as a target. ...

No time to comment -- will leave that to you.

ben fenster:

Cowen is the paid voice of the Koch Brothers. Most states have some type of restriction on the ability to run budget deficits, because they cannot print money. When the economy is in shambles the revenue constrains government employment, not the voters. Many of these budget balance requirements cannot be undone by simple majority vote. To say that this is the choice of the voters, even when one has ideologically rigid economists like Cowens making false analogies between the government's budget and a family budget, is not being honest.


to ben fenster...

Cowen is the paid voice of the Koch Brothers

can't be repeated enough

Barkley Rosser

to ben fenster...

49 of them have balanced budget rules as do most local governments, although CA has broken its rules big time, but it is a special case. Revenues have collapsed, and the feds withdrew the support they were providing under the Obama stim, now ended. So, they have been in free fall. Under pressure not to raise taxes in a recession, well, that means cut spending. Has not a damned thing to do with trust.

Cowen is generally pretty smart and not just a Koch mouthpiece, but this has got to be one of the most misleading and tendentious commentaries he has put up in a long time. Just nonsense that does not even recognize the basic facts of what is going on.

John Emerson

to Barkley Rosser...

Why are you people so nice to Cowen? He's consistently misleading and tendentious.

Oh, I forgot. Economics has no code of ethics at all, because it is a pure science and values are subjective and unscientific. For this reason, economists can be as dishonest as they want to without losing their professional credibility.

[Jun 13, 2012] Eichengreen: Share the Work

An excess of labor is a permanent feature of the global economy. Technology will eliminate jobs at increasing rates if the trends of recent decades are an indication.
June 12, 2012

One more from Barry Eichengreen -- like Dean Baker, he supports work sharing as a way to create more jobs and increase employment:

Share the Work, by Barry Eichengreen, Commentary, Project Syndicate: The United States today is facing a crisis of long-term unemployment unlike anything it has seen since the 1930's. Some 40% of the unemployed have been out of work for six months or more... For those unfortunate enough to experience it, long-term unemployment ... is a tragedy. And, for society as a whole, there is the danger that the productive capacity of a significant portion of the labor force will be impaired.

What is not well known, however, is that in the 1930's, the United States, to a much greater extent than today, succeeded in mitigating these problems. Rather than resorting to extensive layoffs, firms had their employees work a partial week. ... The 24% unemployment reached at the depths of the Great Depression was no picnic. But that rate would have been even higher had average weekly hours for workers in manufacturing remained at 45. Cutting hours by 20% allowed millions of additional workers to stay on the job. ...

Why was there so much work-sharing in the 1930's? One reason is that government pushed for it. ... Second, legislation encouraged it. ... [Today,] unemployment insurance ... could be restructured to encourage it. Partial benefits could be paid to workers on short hours...

In fact, the US already has something along these lines: a program known as Short-Time Compensation. Workers can collect unemployment benefits pro-rated according to their hours... Unfortunately, the financial incentives that the federal government provides are ... limited... And those programs, in turn, are too modest...

Other countries have gone further. ...Germany, for example... The US federal government could emulate this example by compensating the states more generously for their Short-Term Compensation programs. Its failure to do so not only inflicts avoidable pain and suffering on the unemployed, but also threatens to inflict long-term costs on American society.

The unemployment problem ought to be a national emergency. The fact that it's not tells me that our political institutions are broken, at least when it comes to defending the interests of the working class (other interests are anything but ignored). Millions of people are struggling to get by without a job, and instead of mobilizing on their behalf and finding some way to make things better -- there is plenty to do and plenty of people who would be glad to do it -- some policymakers are calling them lazy and trying to make it even worse by cutting what help they do get, while others who ought to know better stand by passively watching this happen, or worse join the cause. We can do better than this, but it has to be a priority for those who control the levers of power. Unfortunately, in our dysfunctional political system, improving the lives of the working class is less a priority than serving the interests of those who finance, and hence hold the keys to, reelection.

ken melvin:

Beyond the wretchedness of the unemployment, we are throwing away the futures of many of our young. Maybe it doesn't know what's happening, or worse, America just doesn't seem to care.


Instead of spreading the work hours and payroll around even more thinly, how about more sharing of the financial gains of productivity growth over the last 30 years?

Work sharing is fine as an emergency response to a temporary problem.

If the financial benefit continues to flow so disproportionately to a tiny portion of the population, the problem will not be temporary and work sharing will be a disaster.


I'm afraid you haven't quite grasped the mechanism connecting long hours and unemployment to the concentration of income at the top. That's understandable.

The tiny portion of the population at the top doesn't want you to.

That's why you never heard of Ira Steward or Sydney Chapman.


reply to btg...

"its a strategy only appropriate for a sudden economic shock when a quick recovery is expected within the year "

It is a strategy that would be useful to incorporate into the bag of tricks known as "automatic stabilizers".

It's more than that , though.

It's a strategy that should be in the bag of tricks to deal with a changing economy , even in good times. An excess of labor is a permanent feature of the global economy. Technology will eliminate jobs at increasing rates if the trends of recent decades are an indication.

I remember going to the World's Fair in NYC as a child. At the time , I saw no reason to doubt the future that was depicted in the exhibits there : Higher standards of living for all , along with copius leisure time and extended retirements , all made possible by technological advance.

That future didn't pan out for most of us , but there's no reason it can't for our children and grandchildren.

Policy choices are how we make that happen , if we want to make it happen.

Bryan Willman:

There are in fact some broken institutions and incentives that make this difficult.

For example, unemployment is funded by unemployment taxes which are assessed on employers as part of the cost of employing people. If you lay somebody off, the unemployment insurance authorities will raise the UI rate your company pays. (WA got smart and scuttled one increase.) But you will notice the perverse incentive here - if I hire somebody, and then have no work and have to discharge them, I get a bigger bill. This in effective incentivizes me to NEVER HIRE ANYBODY.

Likewise - for *each* employee I would have to deal with workman's comp. This is a strong incentive to (a) never hire anybody and (b) hire as few individuals as possible.

All of this ignores the rather large set of jobs where 2 people working 20 hours each cannot do the job nearly as well as one person working 40 hours.

Of course, unemployment insurance and worker's comp are important things - but the means we use to pay for them does create disincentives for employers to employ people.

[We're leaving out other kinds of insurance, other resources the org must provide for anybody to do their work, the number of interfaces with customers, the number of people to train, and so on. In general companies do better by being very lean both in labor input and in number of people providing it. Job sharing faces a huge uphill battle.]

John Cummings:

Sorry, but again, there is no unemployment crisis. It is a "employment" crisis.

aka the workers are not making enough to live the middle class lifestyle which in turn powers the US economy. This was a large reason for the private debt bubble buildup in the first place as wages finally could no longer keep up enough to satisfy basic demand in 2001. It is also a chunk of the structural federal deficit, to fill in that "middle class" hole.

Getting a job isn't that hard in America. Compared to Spain and the Euro boys, it is far easier. Getting a job that pays well is hard. Once that realization starts coming in, your goal isn't to just "create" jobs, but put conditions down on the global capitalist where they can no longer run and hide from wage inflation or face their doom.


in reply to John Cummings...

"Getting a job isn't that hard in America. ... Getting a job that pays well is hard."

Tell that to the 5 or so unemployed to each 1 job opening, and all the "overqualified" who will not be considered for jobs below their level of qualification when enough candidates with a just sufficient level of qualification are available.


The bosses, ie the wealthy, pay themselves too much. If they paid themselves less, there would be more money to pay the people who actually do the work. More people would have jobs. More work would get done. See:

Mark A. Sadowski:

"What is not well known, however, is that in the 1930's, the United States, to a much greater extent than today, succeeded in mitigating these problems. Rather than resorting to extensive layoffs, firms had their employees work a partial week. The average workweek in manufacturing and mining fell from 45 hours in 1929 to 35 hours in 1932. We know this from a 1986 article by my Berkeley colleague James Powell and his co-author, none other than – wait for it – Ben Bernanke."

The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Pre-War and Post-War Eras - Ben S. Bernanke, James L. Powell

Abstract: "This paper studies the cyclical behavior of a number of industrial labor markets of the pre-war (1923-1939) and post-war (1954-1982) eras. In the spirit of Burns and Mitchell we do not test a specific structural model of the labor market but instead concentrate on describing the qualitative features of the (monthly, industry-level) data.

The two principal questions we ask are: First, how is labor input (as measured by the number of workers, the hours of work, and the intensity of utilization) varied over the cycle ? Second, what is the cyclical behaviorof labor compensation (as measured by real wages, product wages, and real weekly earnings) ? We study these questions in both the frequency domain and the time domain.

Many of our findings simply reinforce, or perhaps refine, existing perceptions of cyclical labor market behavior. However, we do find some interesting differences between the pre-war and the post-war periods in ther elative use of layoffs and short hours in downturns, and in the cyclical behavior of the real wage."

We should also not forget the role that the New Deal's Fair Labor Standards Act of 1938 (FLSA) played during the Great Depression by setting ceilings on the workweek and by requiring overtime pay for employees working long hours.

[Jun 03, 2012] America's Transition To A Part-Time Worker Society Accelerates As Part-Time Jobs Hit Record


Back in December 2010 Zero Hedge was the first to point out what is easily the most troubling characteristic within America's evaporating labor force: its gradual transition to a part-time worker society. We elaborated on this back in February when we noted that the quality assessment of US jobs indicates that this most disturbing trend is accelerating. Finally, yesterday, the BLS' latest jobs report confirmed that our concerns have been valid all along: as of May, part-time jobs just as disclosed by the Bureau of Labor Statistics hit an all time high, over 28 million! These are people who traditionally have zero job benefits, including healthcare and retirement, and which according to the BLS "work less than 35 hours per week." In other words, as little as one hour per week of "work" is enough to classify one a part-time worker.

More disturbing: the increase in part-time jobs in May compared to April: 618,000, or the fifth highest on record. It gets better: when added with the 508,000 increase in part-time jobs in April, this is the largest two month increase in part time-jobs in history. Which means of course that full time jobs in May must have declined: sure enough, at a -266,000 drop in full time jobs, the quality composition of the NFP report was just abysmal and makes any reported "increase" in those employed into a sad farce.


[May 31, 2012] The Asymmetric Recovery by Casey B. Mulligan

The Asymmetric Recovery
Casey B. Mulligan is an economics professor at the University of Chicago.

By one measure, the labor market has not recovered at all. By another, the recovery is complete.
...The employment-to-population ratio fell more than 5 percent during the official recession period and fell almost an additional 2 percent in the second half of 2009. The ratio has been essentially constant since then; there has been no meaningful increase in the fraction of Americans who are employed.

...The hours series reflects a large contraction of more than 2 percent during the recession years. In other words, a number of employees found that their hours were cut during the recession and that long-hours jobs like construction were lost to a greater degree than short-hours jobs.

Unlike the employment-to-population ratio, average work hours have largely recovered since 2009. Earlier this year, the average hours series reached 100, which was its value for much of 2007.

To put it another way, 93 percent of the people who would have been employed in an economy such as we had in 2007 are employed today and are likely to feel that they are as busy with work today as they were then. The other 7 percent are not working at all.

...Yet another theory is that employers are concerned that their economic conditions may change quickly and find it easier to adjust work schedules than to adjust the number of employees.

And still another theory notes that the employment-to-population ratio would have fallen even without a recession as baby boomers reached retirement age. At the same time, those retirements might not reduce average work hours among those who had not yet reached retirement and might even increase them.

In any case, it is worth monitoring the separate recoveries for employment and for hours, as they can shed light on supply-and-demand factors that caused the recession and have prevented a full recovery by all measures.

Declan Canada

I wonder how many years the debate over the demographic impact will d has had a normal, quick rebo .)

There is definitely something to learn here.


Very interesting discussions here. I suspect some of that 7 percentage point drop from 2007 includes hundreds of thousands, nay, millions of us "unemployed" that volunteer our time (many hrs per day) and sweat equity for no pay. And I'm not just talking about simple tasks that are close to home - but sometimes nearly full-time work requiring expensive travel (via car/bus/train) -and all without pay. Sure sometimes these positions develop into part- or full-time employment; yet in this post-2008 economy, most of the time they don't. We get no Social Security funding, no health care coverage, no tax advantages that someone earning a wage gets (and interestingly all very akin to the situation of stay-at-home parents). Besides the slow decimation of the middle class, the other tragedy of this so-called recovery is the utter lack of imagination from the government (e.g., 21st century versions of the WPA or CCC), a government by and for the people wrought dry by the past 30+ years of laissez-faire, casino capitalism.

Ross Williams, Grand Rapids, MinnesotaRoss

The use of the percentage of the population in the workforce is a very odd choice for measuring the recovery from recession. If the percentage of working age people in the population has changed, this number will change.

The other problem, which ought to be obvious to someone who works with statistics, is the comparison a change in average work hours to a change in the percentage of population.

To be clear suppose an employer has 20 employees, 10 half time and 10 full time. If he lays off two half time employees, the percentage of employed goes down while the average hours of the remaining employees goes up since he has 10 full time employees and 8 half-time.

If he lays off a full time employee, the percentage employed goes down by half as much, but the average hours of the remaining workers also declines since he now has 9 full time employees and 10 half time. Either way, the employer cut back 40 hours of time.

Either way, when he adds a full time worker, the average hours worked will go up faster than if he adds two part time workers. In other words, the relationship between these two numbers is almost entirely driven by the composition of the work force. Whether that says anything about the economic recovery is questionable.

CThomas, East Texas

Never having received unemployment insurance (UI) I can only speculate, but I assume that it is an all or nothing proposition (you either get 100% of UI if you have no job or 0% if you do have a job, no matter how few hours/week). Anyone on UI who can't find a 40hr/week job but does find a 20hr/week job (which, say, pays essentially the same as UI) has to make an economic decision: 1) do I spend 20hrs/week getting no more money than I now get (reducing the time available to find full time employment) or do I 2)wait until I find a 40hr/week job which will make me much better off financially.

Saying (or implying) people who choose option 2 are lazy, shiftless, loafers is incorrect. They are simply making a rational economic choice not necessarily better or worse (ethically) than those who choose option 1.

Brett, Colorado

This all seems pretty obvious. From looking at the chart, it appears that the average worker is back to a 40 hour work week. This makes sense, if an employer has cut everyone back to 32 hours, the first move will be to let everyone go back to 40 hours as it becomes possible.

Only then would the employer consider hiring more people. In fact, I would probably want to have people work overtime until I became convinced that demand was sufficient and steady enough to warrant hiring someone else.

bill, NYC

Saying unemployment pays people not to work is like saying insurance pays people to have cancer. Your bitter partisanship can only get in the way of your point.

rationalexpectations New York, NY

A correct parallel would be that people who pay for their own healthcare out-of-pocket visit the doctor less than those whose bills are paid by insurance. If you are going to make an argument regarding the behavioral influence of incentives, you have to pick something where there is a choice involved, not something like coming down with cancer. This is not about partisanship, this is purely about logic.

Matthew CarnicelliBrooklyn, New York

The unemployment extensions have no bearing on this dynamic, none at all.

What's going on here is that Corporate America has decided that it prefers to emphasize greater employee productivity - and when that approach proves insufficient: a) contract workers rather than full-time employees; b) de-facto serf labor in police states like China.

As more companies become public multinationals, they exhibit less loyalty to their local population, and more loyalty to their shareholders around the world.

While this choice may reflect nothing more than human nature, it is nonetheless disastrous for the nation state in which they originally thrived - and especially the US.

I have no doubt that worries about future healthcare costs must also be factored in here. But IMHO, the solution to this problem was for America to jettison its employer-based model for a national healthcare system funded via a payroll tax that everyone who works would automatically pay. Healthcare costs will continue to rise in America so long as profiteering providers and insurers are allowed to run the show.

What corporate America needs to understand is that the US could be headed towards a tipping point - and once that tipping point has been reached, the social equilibrium necessary for commerce could become scarce.

If our "Masters of the Universe" types welcome the "creative destruction" that inevitably accompanies a whirlwind, then my advice would be to keep it up.

Hughes, Philadelphia, PA

Did I read that right? You concede that demand might be a factor? This is real progress, Casey.

Jim S., Cleveland

Add that these days almost any job where the employee occasionally uses his brain can be classified as managerial or professional, thereby allowing the employer to force the employee to work unpaid overtime under the threat of losing his job in a lousy job market.

Banty, Upstate New York

I meant, being 'exempt' vs. being 'non-exempt'.

A lot of people actually avoid certain promotions, with which would come this change in status.


If you analyze the individual occupational date from the BLS you come up with a more comprehensive picture of the structure of today's labor force as compared to the labor force at the end of 2007.

In almost every occupation listed on the BLS website has shown a decrease in the number of employees, with the notable exceptions of education and healthcare, which has added nearly 2 million jobs since December 07'.

Some occupations have returned to December 07' levels, but this includes leisure and hospitality, which is not exactly a high paying occupation.

You noted construction work, which has lost all of the jobs gained by the education and health sectors, but other high paying jobs have also shown a significant decrease in the number of employees, including IT, transportation, utilities, and durable goods employees. The combined total of job losses for this group is approximately 3 million jobs since 2007.
Moreover, the number of individuals working part-time for economic reasons has increased by an additional 3 million employees, which while slight probably skews the average number of weekly workhours.

As to the Baby Boomer retirement argument, it is estimated that over 3.6 million boomers reach retirement age each year, but it is estimated that at least 20% of those 65 and over remain in the labor force, which leaves less than 3 million job openings for the 4 million annual new entrants into the labor force.

Overall, the labor picture looks pretty gloomy.

Disappointed, France

I came back to this comment after reading the one immediately below it by Bill New. Mr. New, citing specifically teachers and professors, has theorized that those salaried employees are forced to work more hours and pick up the slack for retiring teachers and professors in what he refers to as a practice of "nimbleness" by education administrators. Perhaps I'm missing something like a serious demographic trend; however, it strikes me that if this is going on in the educational sector, one would expect *lower* employment in that sector rather than higher employment. And yet, you have indicated the education sector (along with health) has, in contrast to other sectors, actually experienced *increase* employment.

Do you have a link to the data you had in mind when this comment was written?



Disappointed, the following link is to the statistics I cited.

Bill NewBeloit, WI

In other professions, where one receives a salary rather than an hourly wage (like teaching) it has become commonplace to simply demand that workers (teachers, professors) do more for the same (or reduced) pay and benefits.

When someone retires or leaves, the work that this person did does not disappear or lessen much, but those who remain are expected to become more "efficient" and pick up the slack. The administration as my college refers to this as "nimbleness," and counts it as a virtue, though it's not the sort of virtue you can paid extra for exhibiting.


I wonder why any of the scenarios listed above by Prof. Mulligan are presented as *theories.* Anyone who works, manages, sells or buys in America would recognize those as *reasons,* not *theories.* They are all valid, and they are all happening right now. I don't need any charts or graphs to show me that; I just need to go to work every day. Time to get out of the classroom a little more, Professor.


I understand the use of *theory,* and how the creationists like to use it to explain away evolution. I was being facetious, JW. Perhaps I should have used a winking smiley face, although in my experience, people of science are quite aware of the use of irony.

My point remains: charts and graphs look pretty, but human behavior can be quantified only so far. We shouldn't need those visual aids to justify common sense.

Disappointed, France

Mulligan gives *four* theories to explain the data presented here. I wonder how many "theories" one can come up with for the same phenomenon and yet claim all are "in the scientific sense". I could maybe buy this if there were two reasons. Three might be a stretch. But, when you are up to four, that starts to sound a lot like "hunches" to me.

"The article uses the word in the scientific sense."

More on this:

  1. The term theory, in "science", is typically used to refer to a scientific explanation that has, over a considerable period of time, gained general acceptance in the scientific community as something that is empirically capable of proof (or falsifiability) and that has survived the proof test.q Four possible explanations cited by a blogger in a rather casual setting for a very recent phemomenon hardly rises to the level of "scientific theory", although, so long as they are not contradictory, might all hold true to some degree. In fact, it is my "theory" that the explanation for most economic consequences do *not* have only one cause. If Mulligan is admitting that here, and he seems to do so at least tacitly, that would be cause for celebration;
  2. Since when has economics risen to the status of a "science", a term that is normally reserved for a field that is capable of making accurate predictions?;
  3. Whether or not "the article" uses (or even misuses) the term "theory" in the scientific sense would, I submit, be a question only Mulligan would be capable of answering. Anything else is merely a theory in the true colloquial sense---i.e., idle speculation.

Banty, Upstate New York

Prof. Mulligan is more correct with his last theory, riding his old horses with the rest. But if he had spend any time as an employee in the real world, or had more connection with such, he'd know the obvious answer.

Businesses and firms don't hire people for jollies or celestial credits with the Employment God. They hire as few as they deem necessary, in all economic conditions, as labor appears on the red side of their ledger.

When the labor market favors them, as it does now, they can demand long hours of employees. When the labor market does not favor them, employees have more latitude as they could quit and go to another employer.

Ed M., Brookline, MA

Another theory is that excessive contraction in the public sector, fueled by Republican anti-government sentiment, might have something to do with the discrepancy.

Or don't public sector jobs matter?

utechmanhattan, ny

Besides adding my recommend, I too can't fathom why public sector work isn't mentioned. Is this an oversight, or we living in some statistical ether world? It's been my impression the private sector has been adding jobs at a steady, if not robust, rate. One of the main reasons for our anemic recovery is a stagnant construction industry and the shedding of public sector jobs. If that is indeed true, this graph, while true in the broad sense, is short sighted regarding employment as a whole.

Francis X., GindhartBluffton, SC

Suppose the U.S. were to remove health insurance as a benefit of employment by nationalizing it, would not that ease employer expenses and encourage hiring in lieu of longer work weeks, and would not it also add jobs in the health-care sector?

R., New York

Despite all the academic theories and posturing, Americans know that this has not been a real recovery.

Michael, North Carolina

As several readers have commented, employers have become enamored of the fact that they can increase profitability, at least in the short run, by increasing the workload on existing employees, due primarily to the factors mentioned in the article - avoidance of marginal health and benefit costs.

Those whom I know still in the workforce can and do attest to that. Toss in the fear on the part of employers that improvement in demand is fragile, and hiring will remain tepid at best. And demand is fragile because so many unemployed see their prospects for meaningful employment remote, while those with jobs fear becoming unemployed, and understandably so. Those with confidence are so because their skills are required locally, for which demand is not elastic. Plumbers come to mind. Meanwhile, the middle class in the US is on life support.

blasmaic, Washington DC

Now isolate the last 12 months. In the last 6 months of 2011, both average hours and number employed trended back toward pre-recession levels. Then something changed in 2012. Both hiring and average hours dropped.

The employment to population ratio does have some rosey-scenario bias in it, as the author notes. Boomers retiring aren't the only dynamic though. Self-deportations have cut in-migration to zero, while graduating students add to the adult population.

And it's all benefits, not just health insurance, although it may be the biggest cost. Eventually, health insurance will be just another payroll deduction. Like the farmer who must buy price-set wheat if he raises wheat-gobbling chickens, employees must buy specific health care if they work. Farmers who feed their chickens cardboard and employees who work for no income aren't required to buy at all.

Tim Bal, Belle Mead, NJ

It is curious that this column has focused so much on the trees and not the forest.

The financial crisis (brought on by deregulation) caused a depression, and there was not a large enough fiscal stimulus (e.g., on the scale of the government spending increases in the lead up to the American participation in World War II) to counter it. The result is a continuation of the depression.

Weak government demand coupled to weak private demand equals high unemployment.

Emil Bauer, NYC

The blue line only relates to private employment. The red line seems to relate to all jobs, public or private. If so, the simple explanation for the divergence is that public employment has dropped substantially as a result of the Great Recession and has not recovered, while private employment has recovered and grown.

The loss of jobs at the state and local level is a major contributor to the unemployment rate today.


According to the BLS the number of current government employees is 400 thousand less than those employed at the end of 2007. I doubt this has a significant effect on the overall rate of unemployment.

Stephen J, New Haven

Don't neglect the fear factor ("job jitters"). In a booming economy, if an employer makes excessive demands on a small workforce, the better ones will decamp for jobs elsewhere - or at least be willing to confront the employer with the fact that they are being abused. But in times when lots of folks are unemployed for the long haul, the workers are too scared to say anything. The supply and demand equation favors the employer, even the employer who makes unreasonable demands of his or her employees.

Adam, Upstate

The other part of the equation you're missing, it seems is that the employment-to-population ratio (which has fallen and remained low) includes public sector workers and the avg weekly hours statistic only includes private employment. While the private sector has made a bit of a recovery, public employees have been cut and remain out of work. I suspect that looking at the avg weekly hours of all employees, not just private employees, would look more similar to the employment-to-population ratio. It seems to me that one way to cope with that problem would be to help some of the state and local governments that have been laying off so many employees (who do in fact contribute to economic growth) to rehire our teachers, police, and other public servants.

ClearEye, Princeton, NJ

Employers have shown they can accomplish the same work with fewer employees, particularly employees who are constantly worried about the security of their employment. Tax code preferences for capital (investment incentives) over labor (increased payroll taxes) encourage the shift from employment.

In 2007, two years after the Census Bureau reported that the US had 5 million more housing units than households, we were still building new houses at the rate of 2 million per year. More recently, that rate has been closer to 500 thousand per year, which may go up, but is unlikely to reach 2 million for a very long time.

Economies elsewhere, particularly in Asia and South America, are growing much faster than the US and Europe. US multinationals invest in operations in growing economies to meet the needs of expanding middle classes, not in the US where the middle class is in decline.

It is widely accepted in the business community that ''uncertainty,'' like last year's near suicidal congressional standoff on raising the debt ceiling (i.e., taking responsibility for paying our bills) is baked into our political system for years to come.

It is impossible to know whether Speaker Boehner might force a ''crisis'' before the election, or what might come out of lame duck action to address the ''fiscal cliff'' issues of Bush tax cut expiration and deep budget cuts in current law (which, without action, will drive the economy back into recession in 2013.)

Facts trump theories.

Mark T., New York NY

I'll give you two more (related) theories. One, borne out by years of working with companies in restructuring, is that there are marginal workers or marginal business units in every organization that are not very productive but can be tolerated at peak demand, because management is hitting its bonus plan numbers despite their lack of productivity. But only in that environment.

The other is that it's not just the wages and not just the health insurance costs but also the day to day productivity hits that come from employing bad workers that factors into hiring decisions. There are a lot of bad apples out there - from marginal excuses for missing work, and substance abusers to theft, violence, and discrimination and hostile environment risks - who can poison a work setting and create real headaches for an employer. For those people, having everyone chip in to pay them unemployment is probably better for total productivity than for any one firm to employ them.

BantyUpstate New York

Difficulty in finding good workers would be reflected in an *increase* in wages, and that is not being observed. With an unemployment rate as it is, it should be easy to flush out the deadwood, and I can attest that in my firm that has happened years ago even before the current downturn.

Furthermore, productivity has been rising over the past two decades, and union participation has plummeted. So you really have nothing to hang your hat on as far as blaming the workers themselves. If you believe your comment, I would encourage you to ask why employers allow themselves to be so encumbered, in this extremely favorable environment, that they explain these numbers. It would seem someone is not doing their job, and that would be management.

Mark T., New York NY

It's an ivory tower, baby-level microeconomics myth that difficulty in finding good workers would be reflected in higher wages. That assumes many things, including most obviously favorable conditions regarding pricing power - the ability to pass through wage hikes (as if). In the real world, there are major constraints on that notion. In the real world, the market does not clear every possible supply and demand input. There are labor market frictions that many professors have spent their lives talking about. There are non-wage factors. There are multiple equations that the employer has to solve for, not just the labor price equation but the product price equation, the capital available equation, the supervisory burden equation etc. Sometimes the solution is not to raise wages to hire someone today. but to wait. In the real world, where human beings live and theory sits in a book on the shelf, supply and demand do not clear 100% of the time.

Wandering the Streets

May 25, 2012

In "Millions Homeless in US: Report," China Daily details an interesting take on economic conditions in our country:

BEIJING - Millions of homeless people wander around streets in the United States, according to a Chinese report on the US human rights record released on Friday.

The Human Rights Record of the United States in 2011, released by the State Council Information Office of the People's Republic of China, said that about 2.3 million to 3.5 million Americans did not have a place that they called home to sleep in the night, and the number of homeless families grew by 20 percent between 2007 and 2010.

Over the past five years, the percentage of singles arriving at shelters after living with family or elsewhere in the community has jumped from 39 percent to 66 percent, the report said.

There is a simple explanation for this, according to China's largest English language newspaper:

The problems concerning human rights were the reflection of the US ideology and political system that ignored people's economic, social and culture rights, and the financial crisis was far from being the sole reason, the report said.

Of course, we know this is not true.


[May 16, 2012] How Older Workers Weather Layoffs By MOTOKO RICH

the report's authors estimated that a person who stopped working at 62 and began collecting benefits would receive a median monthly benefit of $909, about 25 percent less than the $1,212 per month available to those who hold off claiming Social Security until age 66.
May 15, 2012 |

While the recession and its aftermath have been particularly rough on the youngest workers, the oldest workers may end up suffering the longest.

A new Government Accountability Office report on unemployed older workers looks at the difficulties they face finding new jobs if they are laid off, and how their financial security in retirement may be compromised as a result.

As has been documented, older workers have not been laid off at the same rate as younger workers, but once they lose their jobs, they tend to spend much longer finding new jobs, if they find them at all.

In 2011, 55 percent of workers older than 55 had been out of work for 27 weeks or more, compared to 47 percent of those 25 to 55. Of workers who lost their jobs between 2007 and 2009, just under a third of those 55 to 64 had found full-time jobs by January 2010, compared with 41 percent of those 25 to 54.

The report's authors convened focus groups of unemployed older workers and prospective employers to discuss the barriers to re-employment, finding that older workers believed they suffered from age discrimination but also had trouble adjusting to new technology and online job searches. Employers were hesitant to hire older workers because of perceived higher health-care costs, as well as concerns that older workers would not stay long enough for the employer to reap a good return on investment.

Those older workers who do find jobs are much more likely to take a pay cut than younger workers. According to the report, 70 percent of workers 55 or older who were laid off between 2007 and 2009 and found a new job are now earning less than in their previous job, compared to 53 percent of those 25 to 54.

At the same time, older Americans are trying to work longer. The labor force participation rate – the proportion of people of an age cohort who are either working or looking for work – has steadily risen since 1990 for workers 55 or older. People are living longer and healthier lives, but are also trying to save more for retirement.

But those who are laid off and never find another job can see their retirement savings shrivel as they spend fewer years paying into employer-based plans and Social Security once they are out of work. Some older workers who lose their jobs also draw down from their employer-based pensions or 401(k)s to cover living expenses before they are officially eligible for retirement, and those who have no other options are very likely to claim Social Security early.

By doing so at 62 rather than 65 or 66, these workers will receive lower monthly payments for life. In a simulation, the report's authors estimated that a person who stopped working at 62 and began collecting benefits would receive a median monthly benefit of $909, about 25 percent less than the $1,212 per month available to those who hold off claiming Social Security until age 66. A person who lost a job at 55 and began collecting at 62 would have a median benefit of just $855 a month.

For those trying to get by primarily on Social Security benefits, such low levels "could become problematic as retirees age and if health care costs and premiums continue to increase," the authors wrote.

The Rule of Capital

By Sell on News, a global macro equities analyst. Cross-posted from Macrobusiness.

In the movie Margin Call, which is broadly about the financial crisis and the insidiousness of the financial sector, one of the characters laments about how he used to be an engineer who did useful things like build bridges (he calculates that one he built saved people thousands of years of travel time). But of course the money was better in finance. An angst about people who do useful things and financial people who just feed off everyone else, runs through the whole film. It is a neat reflection of a serious problem at the heart of the post-industrial, globalised system we are creating, which is causing serious imbalances between capital and labour and weakening middle classes in the developed world.

A recent article in The Economist noted that past four years have been bad for workers and savers but good for the corporate sector. Profit margins in America are higher than at any time in the past 65 years, which it said partly explains why the equity market has rebounded so strongly despite a lacklustre economy. The question is why aren't cashed up corporations investing, especially in putting on workers?

The answer, or at least one answer, is that an implicit compact between capital and labour has been broken in developed economies; a compact that said we have to pay our workers a decent wage so that they buy our stuff. The globalisation of labour means that firms can choose not to pay middle class wages at least for some parts of their operations - so of course that is what they choose to do.

But the systemic cost is that demand in developed economies weakens and the incomes of those in developing economies are not high enough to take up the slack. Witness the attempts to make Chinese consumers consume more. It hasn't worked, partly because they need to save for health and education, but also because they simply do not have the discretionary income to afford it. This is the hidden cost of the race to the bottom on wages. The Economist article describes a somewhat dangerous balance of capital and labour (cheap wages are the reason margins have risen):

Margins have been boosted by firms' tight control of labour costs and by a reduction in interest expenses caused by the policies of central banks throughout the rich world. Whether such margins can be sustained is important for equities. Most stockmarket bulls build their case on the trailing price-earnings ratio for the S&P 500, which stands at 16. But there is a warning sign in the cyclically-adjusted p/e (which averages profits over ten years). At 22, this ratio is well above the historic mean, making the market look a lot less attractive.

The balance between capital and labour is typically seen as a contest between a thing (capital) and an act (labour). If one follows the metaphors, the thing (capital) is seen as more substantial and invariant. The act (labour) is seen as negotiable, movable - and dispensable.

The impression created by this language is false. Money is a social artifice, the outcome of what people (bankers, financiers) do. What is important about labour is what it leads to. What people (managers, workers) do. Their industrial output. Thus both capital and labour are, in the end, acts.

What has happened with the financialisation of developed economies is to say that one type of act: the creation of financial transactions, is intrinsically superior and worth more than other types of acts, the various forms of industrial output. Such as building bridges, for instance. Now why is one type of act seen as so much more worthwhile and valuable? As the billionaire in Margin Call, played by a rather sinister Jeremy Irons, says: "We are just salesmen." It is true, that is what most financial players are. Usually they are selling the notion that they have some sort of superior insight when of course they cannot. They just are selling the appearance that they understand a system that in truth no-one understands, not least because the system is itself made up of the various opinions people have about it. It is a disappearing point. Financial gurus tend to be charlatans when they claim to have anything more than common sense.

So what does this imbalance between capital and labour say about us? One conclusion is that we have let the rules we have created rule us. The machinery we have created now runs us.

Finance is just rules. We have let those who exploit those rules become the rulers, partly because governments have decided to stop governing in the financial arena. It leaves us with this question. Why do people who play with numbers on a screen in an endless game of manipulation get so much greater rewards than people who do useful things like build bridges, or teach or care for the sick? It is a value system that reveals a dispiriting passivity, especially when it is obvious that if you give up your destiny to the logic of a system that you have created, you risk something worse than what happened in the GFC.

NOTE Lambert here. Sell on New's "finance is just rules," reminds me of David Graeber's "debt is just a promise."


I like counterfeiting as a way to describe how the Federal Reserve functions. Basically it's no different than naked short selling of stocks, which is essentially counterfeiting and increasing the float of a stock (debasing it). In the case of the Federal Reserve currency, we're all naked short sellers: we're borrowing the dollar into existence and hope to pay it back with cheaper dollars in the future. In both cases, the added liquidity to the markets is extolled as a virtue. As this works in one direction, you get a liquidity pump. But when it goes in reverse (which it will unless we all become TBTF), then watch out, all players who live by the liquidity pump will die by the liquidity pump.

Bruce F :

Stan Goff, on money as the "universal solvent":

"In this essay, Hornborg crystallizes what he said in The Power of the Machine, albeit focusing in a bit on that old question, what is to be done? Whatever it is, says Hornborg, it has to do with money. I believe him when he says that. That is precisely what I mean by the term, "strategic imperative." The strategic imperative is to get off the money grid.

Hornborg and a lot of other people have studied the impending consequences of our influence-without-control; and the prognosis is not merely disturbing, it's scary as hell to anyone with a puff of imagination. We are in an epoch of inconceivable unintended consequences, in every dimension of human experience; and if money is the problem, we all inuit in a second how utterly overwhelming the problem is because we understand our own abject dependency on this thing that this man just said is a "sign," a dangerous chemical - a solvent that attacks human connectivity, a change agent that can be as destructive as a flood of assault rifles into a big city slum."


The Marxian economic idea of Primitive Accumulation of Capital helps explain this. Basically, investors demand ever-increasing profit rates, but this is of course impossible in a finite world. In fact profit should tend to decline as the best and most easily-found resources are used up first. Capitalism's response is to invent new and ever more exotic investment vehicles, culminating in variants on Ponzi schemes. The end result of Financialization of the economy is either that a new source of wealth is found (for example, in this interpretation the Great Depression was in fact ended primarily by the Oil-based economy; we obviously can't replicate that advance since we already have it), or the economy collapses (which results in a Revolution of one kind or another).


[Apr 01, 2012] In Rich Europe, Growing Ranks of Working Poor -

This can be called underemployment... From comments: "This is the failure of the Ruling Class everywhere. They are corrupt, from top to bottom. They only care about themselves." It is a road to three tier society...

Melissa Dos Santos, 21, and Jimmy Colin, 22, live in a trailer in a campground 30 miles north of Paris. Readers' Comments Share your thoughts. Post a Comment " Read All Comments (28) " "I grew up in a house; living in a campground isn't the same," Ms. Dos Santos, 21, said wistfully.

Her dreams of a more normal life in an apartment with her boyfriend evaporated when they both took minimum-wage jobs - she in a supermarket and he as a Paris street sweeper - after months of searching fruitlessly for better-paying work. "People call us marginal," she said. "Little by little, it's eating us up."

Europe's long-running euro crisis may be cooling. But the economic distress it has left in its wake is pushing a rising tide of workers into precarious straits in France and across the European Union. Today, hundreds of thousands of people are living in campgrounds, vehicles and cheap hotel rooms. Millions more are sharing space with relatives, unable to afford the basic costs of living.

These people are the extreme edge of Europe's working poor: a growing slice of the population that is slipping through Europe's long-vaunted social safety net. Many, particularly the young, are trapped in low-paying or temporary jobs that are replacing permanent ones destroyed in Europe's economic downturn.

Now, economists, European officials and social watchdog groups are warning that the situation is set to worsen. As European governments respond to the crisis by pushing for deep spending cuts to close budget gaps and greater flexibility in their work forces, "the population of working poor will explode," said Jean-Paul Fitoussi, an economics professor at L'Institut d'Ιtudes Politiques in Paris.

To most Europeans, and especially the French, it seems this should not be happening. With generous minimum wage laws and the world's strongest welfare systems, Europeans are accustomed to thinking they are more protected from a phenomenon they associate with the United States and other laissez-faire economies.

But the European welfare state, designed to ensure that those without jobs are provided with a basic income, access to health care and subsidized housing, is proving ill-prepared to deal with the steady increase in working people who do not make enough to get by.

The trend is most alarming in hard-hit countries like Greece and Spain, but it is rising even in more prosperous nations like France and Germany.

"France is a rich country," Mr. Fitoussi said. "But the working poor are living in the same condition as in the 19th century. They can't pay for heating, they can't pay for their children's clothes, they are sometimes living five people in a nine-square-meter apartment - here in France!" he exclaimed, speaking of an apartment of about 100 square feet.

In 2010, the latest year for which data were available, 8.2 percent of workers in the 17 European Union countries that use the euro were living under the region's average poverty threshold of 10,240 euros, or about $13,500, a year for single adult workers, up from 7.3 percent in 2006, according to Eurostat. The situation is nearly twice as bad in Spain and Greece.

While direct comparisons are difficult because of different standards, the Labor Department estimated that 7 percent of single adult workers in the United States earned less than the poverty threshold in 2009 of $10,830 in 2009, up from 5.1 percent in 2006.

France fares better than most European countries, at 6.6 percent, but perhaps nowhere is the phenomenon more startling. While the country seems to exude prosperity, the number of working poor is up from 6.1 percent in 2006, and experts predict it will grow.

In France, half the nation's workers earn less than $25,000.

The median monthly paycheck is $2,199, 26 percent above the average for the entire European Union. But the high cost of living and the difficulty many people face securing affordable housing (home prices have surged 110 percent in the last decade, and most rentals require large advance deposits), leaves a growing number out in the cold.

Ms. Dos Santos and her boyfriend, Jimmy Collin, 22, moved to the trailer because they did not want to live with their families and lacked upfront money for an apartment. Mr. Collin, a high school graduate with some additional technical training, searched for work for more than six months before landing a minimum-wage contract last year, at $1,800 a month, cleaning streets near Parisian jewels like the Eiffel Tower. He gets a small government stipend for low-income earners, but they still found it hard to save after paying taxes and living expenses. The wait for subsidized housing is more than five years.


1 in 6 people in America live in poverty. There are almost 50 million people in the US without health insurance. Doesn't seem like capitalism is doing much to improve the common good either. Globalization is causing a world-wide equalization of wages and demand for goods is increasing world-wide raising the prices for all commodities. US has only 5% of the worlds population but uses 20% of all energy resources. Bottom line - US standard of living is not maintainable and the citizens in the lower and middle class are going to suffer the most because their wages cannot compete with impoverished nation wages and therefore cannot keep pace with increasing prices of goods and services from the higher demands.

The people at the top realize all the gains because their money, power, control of production allow them to exploit globally impoverished workers where-ever they may reside. Unfettered capitalism is just as evil and dysfunctional as communism. This is not to say that globalization or wealth redistribution to less well off countries is a bad thing, but we have to recognize that its not in our nations best interest to allow wealth to be so inequitably concentrated at the top that for people who want to work hard are unable to obtain health insurance and make a living wage.


[Feb 27, 2012] Paul Krugman- Romney's Economic Closet

Romney's Economic Closet, by Paul Krugman, Commentary, NY Times:

According to Michael Kinsley, a gaffe is when a politician accidently tells the truth. That's certainly what happened to Mitt Romney on Tuesday... Speaking in Michigan, Mr. Romney was asked about deficit reduction, and he absent-mindedly said something completely reasonable: "If you just cut,... as you cut spending you'll slow down the economy." A-ha. So he believes that cutting government spending hurts growth, other things equal.

Kalle said...

[Beyond that, we know who he turns to for economic advice; heading the list are Glenn Hubbard ... and N. Gregory Mankiw... While both men are loyal Republican spear-carriers ... both also have long track records as professional economists.]

From the Wikipedia entry on spear-carrier:

"A spear carrier is somebody who stands in the hall when Caesar passes, comes to attention and thumps his spear. A spear carrier is the anonymous character cut down by the hero as he advances to save the menaced heroine. A spear carrier is a character put in a story to be used like a piece of disposable tissue. In a story, spear carriers never suddenly assert themselves by throwing their spears aside and saying, 'I resign. I don't want to be used.' They are there to be used, either for atmosphere or as minor obstacles in the path of the hero. "

Andy Parrott

to anne...

It's not just nonsense. It's entirely possible that Hubbard and Mankiw are broadly sympathetic to the economic goals of the GOP establishment while simultaneously rejecting the ultraconservative economic axioms adherence to which has become a litmus test for the approval of the GOP base. I actually think this is quite plausible.

Winston Smith

to anne...

Mankiw first made his name with his research in "New Keynesian" economics. It would seem to be very hard for him to agree with the current Republican orthodoxy without repudiating his own best-known work.


Romney's twisted himself into a pretzel shape in his efforts to gain nomination from an increasingly radical GOP.

That said, he's consistently hewed to the belief that those at the top of the income ladder are the ones who produce all wealth and jobs. So he's comfortably in the fold of the GOP, including the 'smallest government' agenda.

If you believe that the answer to everything is lower tax rates, and lower government involvement in terms of regulatory powers, then Romney has been doctrinaire.

And yes these beliefs are simplistic and ineffective. But they are his beliefs.


"What can we learn from the fact that Mitt Romney is "running a campaign of almost pathological dishonesty"?"

I just would have said that he is a Republican.


to DrDick...

Come now
Enter electoral politics and no mater the class you plan to agency
u better leave the truth at the hatcheck booth


to Paine...

While I do not disagree with your central premise, there substantial differences in the degree and nature of the distortions. Democrats hedge and fudge around the edges, but the Republicans just plain make stuff up and straight out lie.


Romney wouldn't recognize a pro-growth tax policy if it hit him with a glitter bomb. Right now, in this economy, the only pro-growth tax policies that will do any good at all are those which will result in rapid growth in consumer spending. Boiled down to its simplest terms, that means "transfer payments".

[Feb 27, 2012] Autor, Dorn, and Hanson- When (and Where) Work Disappears

"For one thing, Autor says, "We could have much better adjustment assistance - programs that are less fragmented, and less stingy." The federal government's Trade Adjustment Assistance (TAA) program provides temporary benefits to Americans who have lost jobs as a result of foreign trade. But as Autor, Dorn and Hanson estimate in the paper, in areas affected by new Chinese manufacturing, the increase in disability payments is a whopping 30 times as great as the increase in TAA benefits."
February 24, 2012 | Economist's View

The loss of manufacturing jobs to overseas producers has large negative impacts on workers and their communities. I'm with David Autor, one of the authors of the study described below, when he says "policymakers need new responses to the loss of manufacturing jobs: 'I'm not anti-trade, but it is important to realize that there are reasons why people worry about this issue.' ... Trade may raise GDP, but it does make some people worse off. Almost all of us share in the gains. We could readily assist the minority of citizens who bear a disproportionate share of the costs and still be better off in the aggregate":

When (and where) work disappears, MIT News: ...A new study co-authored by MIT economist David Autor shows that the rapid rise in low-wage manufacturing industries overseas has ... had a significant impact on the United States. The disappearance of U.S. manufacturing jobs frequently leaves former manufacturing workers unemployed for years, if not permanently, while creating a drag on local economies and raising the amount of taxpayer-borne social insurance necessary to keep workers and their families afloat.

Geographically, the research shows, foreign competition has hurt many U.S. metropolitan areas - not necessarily the ones built around heavy manufacturing in the industrial Midwest, but many areas in the South, the West and the Northeast, which once had abundant manual-labor manufacturing jobs, often involving the production of clothing, footwear, luggage, furniture and other household consumer items. Many of these jobs were held by workers without college degrees, who have since found it hard to gain new employment.

"The effects are very concentrated and very visible locally," says Autor... "People drop out of the labor force, and the data strongly suggest that it takes some people a long time to get back on their feet, if they do at all." Moreover, Autor notes, when a large manufacturer closes its doors, "it does not simply affect an industry, but affects a whole locality." ...

The findings highlight the complex effects of globalization on the United States. "Trade tends to create diffuse beneficiaries and a concentration of losers," Autor says. "All of us get slightly cheaper goods, and we're each a couple hundred dollars a year richer for that." But those losing jobs, he notes, are "a lot worse off." For this reason, Autor adds, policymakers need new responses to the loss of manufacturing jobs: "I'm not anti-trade, but it is important to realize that there are reasons why people worry about this issue." ...

Double trouble: businesses, consumers both spend less when industry leaves

In the paper, Autor, Dorn (of the Center for Monetary and Fiscal Studies in Madrid, Spain) and Hanson (of the University of California at San Diego) specifically study the effects of rising manufacturing competition from China, looking at the years 1990 to 2007. ...

The types of manufacturing for export that grew most rapidly in China during that time included the production of textiles, clothes, shoes, leather goods, rubber products - and one notable high-tech area, computer assembly. Most of these production activities involve soft materials and hands-on finishing work. "These are labor-intensive, low-value-added [forms of] production," Autor says. "Certainly the Chinese are moving up the value chain, but basically China has been most active in low-end goods."

In conducting the study, the researchers found more pronounced economic problems in cities most vulnerable to the rise of low-wage Chinese manufacturing; these include San Jose, Calif.; Providence, R.I.; Manchester, N.H.; and a raft of urban areas below the Mason-Dixon line - the leading example being Raleigh, N.C. "The areas that are most exposed to China trade are not the Rust Belt industries," Autor says. "They are places like the South, where manufacturing was rising, not falling, through the 1980s." ...

And as the study shows, when businesses shut down, it hurts the local economy because of two related but distinct "spillover effects," as economists say: The shuttered businesses no longer need goods and services from local non-manufacturing firms, and their former workers have less money to spend locally as well. ... "People like to think that workers flow freely across sectors, but in reality, they don't," Autor says. ...

New policies for a new era?

In Autor's view, the findings mean the United States needs to improve its policy response to the problem of disappearing jobs. "We do not have a good set of policies at present for helping workers adjust to trade or, for that matter, to any kind of technological change," he says.

For one thing, Autor says, "We could have much better adjustment assistance - programs that are less fragmented, and less stingy." The federal government's Trade Adjustment Assistance (TAA) program provides temporary benefits to Americans who have lost jobs as a result of foreign trade. But as Autor, Dorn and Hanson estimate in the paper, in areas affected by new Chinese manufacturing, the increase in disability payments is a whopping 30 times as great as the increase in TAA benefits.

Therefore, Autor thinks, well-designed job-training programs would help the government's assistance efforts become "directed toward helping people reintegrate into the labor market and acquire skills, rather than helping them exit the labor market."

Still, it will likely take more research to get a better idea of what the post-employment experience is like for most people. ...

"Trade may raise GDP," Autor says, "but it does make some people worse off. Almost all of us share in the gains. We could readily assist the minority of citizens who bear a disproportionate share of the costs and still be better off in the aggregate."

[Feb 12, 2012] "Mean-Spirited, Bad Economics"

Simon Johnson wonders why we are so stingy when people are having trouble through no fault of their own:

Mean-Spirited, Bad Economics, by Simon Johnson, The Baseline Scenario: The principle behind unemployment insurance is simple. Since the 1930s, employers ... have paid insurance premiums ... to the government. If people are laid off through no fault of their own, they can claim this insurance – just like you file a claim on your homeowner's or renter's policy if your home burns down.

Fire insurance is mostly sold by the private sector; unemployment insurance is "sold" by the government – because the private sector never performed this role adequately. The original legislative intent, reaffirmed over the years, is clear: Help people to help themselves in the face of shocks beyond their control.

But the severity and depth of our current recession raise an issue on a scale that we have literally not had to confront since the 1930s. What should we do when large numbers of people run out of standard unemployment benefits ... but still cannot find a job? At the moment, the federal government steps in to provide extended benefits.

In negotiations currently under way, House Republicans propose to cut back dramatically on these benefits, asserting that this will push people back to work and speed the recovery. Does this make sense, or is it bad economics, as well as being mean-spirited? ...

Why would anyone now seek to punish these people when they seek work but cannot get it? ... Extended unemployment benefit provides on average about $300 a week – ...only about 70 percent of the poverty level for a family of four. If you strip even this money from people who remain out of work through no fault of their own, you will push more individuals and families onto the streets and into shelters. The cost of providing those fall-back services is very high – and much higher than providing unemployment benefits.

How does it help any economic recovery when the people who lose jobs cannot even afford to buy basic goods and services – enough to keep their family afloat? ...

The recent attempt to portray the unemployed as lazy, TV watching, video game playing, frauds living off the benevolence of the government when they could be working is part of the effort of those who have managed to do well even though we've had a recession to avoid paying to help those who have been less fortunate. We will always be able to find people doing their best to take advantage of just about any program that helps people, but making a big deal out of those exceptions does not change the fact that the vast majority of the unemployed are just like the rest of us, just not quite as lucky. Whre's our compassion?

[Feb 7, 2012] Unequal Recovery

Lower skilled workers haven't benefited much from the recovery:
Unemployment drop still leaves low skill workers behind, by Michael A. Fletcher, Washington Post: The nation's jobless rate has declined to its lowest level in three years, a fact that has left Jamie Bean, an unemployed air-conditioner repairman, feeling more left out than ever.

Bean, 36, lost his job in December. ... Bean's predicament is not unlike that of many workers who have a high school education or less. Not only were they hit especially hard by the recession, they also have continued losing ground in the recovery that has followed.

By disproportionate numbers, these Americans have given up looking for work, making the nation's recovery appear better than it is. ...

The number of Americans facing this predicament isn't small. Nearly a third of the nation's labor market has only a high school diploma. ... The news is worse for high school dropouts. ...

The recovery, economists say, has highlighted the consequences of not earning a college degree. ... The improvements that have occurred since the start of the recovery have accrued mostly to better-educated workers, analysts say. The economic challenge that lies ahead is finding a new place for workers such as Bean, who lack advanced academic credentials. Many of them rely on community colleges for their training, but those budgets have been cut in recent years. ...

It's easy to imagine Congress forgetting about this group (even more than it already has).