Why Should We Care about Unemployment?
When anyone is unemployed it affects all of us negatively on many levels. Unemployed workers cannot consume effectively and become a drain on society’s resources. Underemployed workers lower our competitiveness as a nation and lead not only to a discouraged workforce, but also to an impoverished society more likely to turn to crime to support their families. A social issue can quickly become a security issue.
What is Unemployment?
Unemployment occurs when those seeking work are unable to find it. Of course there are some who simply do not want to work and who will attempt to game the system, but the vast majority of Americans are fairly hard working, especially when they begin having children.
What is Underemployment?
Underemployment occurs when those seeking work cannot find suitable employment for which they are qualified. For example, there may be jobs available for an engineer to mow lawns but none to write software because all the programming jobs have been insourced or outsourced (given to foreigners because they are able to work for less).
How is Unemployment measured?
Here is the current set of statistics for the first two months of 2009 from the US Department of Labor:
|U-1||Persons unemployed 15 weeks or longer, as a percent|
|of the civilian labor force.......................||3.1||3.7|
|U-2||Job losers and persons who completed temporary|
|jobs, as a percent of the civilian labor force....||5.6||5.9|
|U-3||Total unemployed, as a percent of the civilian|
|labor force (official unemployment rate)..........||8.5||8.9|
|U-4||Total unemployed plus discouraged workers, as a|
|percent of the civilian labor force plus|
|U-5||Total unemployed, plus discouraged workers, plus|
|all other marginally attached workers, as a|
|percent of the civilian labor force plus all|
|marginally attached workers.......................||9.7||10.1|
|U-6||Total unemployed, plus all marginally attached|
|workers, plus total employed part time for|
|economic reasons, as a percent of the civilian|
|labor force plus all marginally attached workers..||15.4||16.0|
NOTE: Marginally attached workers are persons who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. For more information, see "BLS introduces new range of alternative unemployment measures," in the October 1995 issue of the Monthly Labor Review. Updated population controls are introduced annually with the release of January data.
What we see here is that the government measures unemployment using six (!!?) different measures called U-1 through U-6. The most accurate picture is given by U-6, yet the news media reports the much lower U-3 number every day. Why? Because the government asks them to and they obey.
You can Make Statistics Say Whatever You Want – especially if you change them!
The US government has enacted some rather disturbing changes in the manner in which they report unemployment. During the Clinton administration, the government intentionally altered the manner in which they measure unemployment in order to make the number seem smaller than it really was – up to 100% smaller. These changes remain in effect today. So in reality, the unemployment figures reported daily are misleading at best. Whatever number they tell you, its not unreasonable to multiply by a factor of two to get a more accurate picture.
What the Future Holds
Here is the labor categories expected to see the biggest demand in the next decade in America:
1. Waiters / Waitresses
3. Food Preparers
4. Nursing Aides
6. Customer Service Representatives
7. Retail Salespersons
8. Registered Nurses
9. Operational Managers
10. Postsecondary Teachers
The future is bright, indeed.
How Did We Get In This Mess?
What we have accomplished via free trade policies is a direct transfer or wealth from America to the rest of the world, in particular to China, Saudi Arabia and India. Now the Arab transfer has been going on for years, but that is largely a commodity issue – they have something we don’t want to produce (oil) and we pay whatever they want for it. But the emerging economies transfer (to China, India and others) is something relatively new. This is an unwilling transfer of American wealth to foreign countries at the behest of special interests in the form of outsourcing entire industries. It is unwilling in that the electorate never voted to authorize the transfer – or did they?
Turns out our elected officials did vote for it – we are simply an uninformed electorate. The US government has placed many laws and supported agency export policies that have bankrupt the nation in favor of enemies like China – all for a buck! The plan was that we would trade their cheap labor for cheap goods. Unfortunately what we found was we traded the short-term gratification of what seemed to be cheaper TVs for a severe lack of jobs to pay for those TVs. The jobs went away and we are told they are not coming back. Now the government solution is to create jobs out of thin air, just like we create money out of thin air via stimulus packages. But we already know this doesn’t really work. So there are two solutions we need to focus on. The first issue is addressing the problems with the money supply and the banking system. The second issue is our labor and trade policies. We need to return our industrial capacity back to the US by eliminating all insourcing laws and placing massive tariffs on all goods & services that are outsourced. Such a move would bring many millions of jobs back to the US.
Labor Obsolescence or Replacement?
Labor obsolescence occurs when technology replaces the need for labor. The uninformed argue that labor replacement or job elimination occurs because technology advances and that that is the major cause of job loss. Of course, obsolescence exists, but it is not the major cause. Multinationals moved their entire manufacturing offshore to avoid obsolescence? Obsolescence occurs anyway. It would be much more cost-effective to stay here. No, they chose to bear the enormous cost of moving their entire organizations “offshore” because labor is over 70% of their cost, not because of technology efficiencies.
Consumption is more valuable to society than Investment and Savings
Have you ever noticed that the stock market seems to “go up” whenever layoffs are announced? Is it that investors are gleeful that people are losing their jobs? Sort of - many investors assume that layoffs are making the subject company “more competitive”. In one sense, they probably are. We have all worked places where there are slackers. No one can seriously argue against the truth that large corporations and government agencies are rife with waste and inefficiencies. However there is another side to this issue that is often overlooked. Every job producing things demanded benefits society as a whole. In fact, there is no other higher benefit to society than employment in the production of goods that are actually demanded. Savings are great for a rainy day and investments are a hope for gaining additional wealth but it is consumption that enables both of these. Savings and investments benefit individuals but consumption benefits the entire society. Savings and certainly investment will happen automatically as disposable income increases, but neither can occur without consumption.
It’s the Jobs, Stupid!
Some mistakenly believe that the banks and the stock market are what make the economy function. This is not true – it is employment that does so. Demand causes supply, which generates employment, which feeds demand. This is the economic circle of life. The economic health of an economy is best measured by employment and so most public policy needs to favor strong domestic consumption policies over investment or savings policies. “Free Trade” policies favor investment over consumption because “shareholder value” is promoted over domestic employment. In contrast, “Fair trade” policies favor domestic employment (and therefore consumption) over investment. In a nutshell, we don’t want to kill the cow of American capitalism by favoring Wall Street. Instead, we need to milk the cow by favoring Main Street.
“Increasingly, policy makers and economists are coming to realize that something dramatic has occurred that cannot be explained by prevailing economic theories and models. The Dow Jones Industrial Average has topped 12,000 yet people are still not finding jobs and many have stopped trying.”
~ Global Trade Watch