Saturday, November 15, 2014

On Labor, Trade, Skills, College, Taxes and Unemployment

(* Recent tid-bits I found today.)

OECD Secretary-General Angel GurrĂ­a: "As recent revelations have demonstrated, the frayed international tax system has long allowed multinationals to plan their way around paying corporate taxes. And bank secrecy has let individuals stash money undetected, and untaxed, in hidden corners of the world. Such practices erode the integrity of our tax systems, damage the capabilities of our governments, diminish economic growth and corrode the trust of our citizens who are the vast majority of taxpayers. The way tax is levied and spent is one of the most important levers to address social inequalities, create jobs, pay for education, infrastructure and other public services and encourage investment in innovation." (More)

VOX -- High marginal tax rates on the top 1%: "Overall we find that increasing tax rates at the very top of the income distribution and thereby reducing tax burdens for the rest of the population is a suitable measure to increase social welfare. As a side effect, it reduces both income and wealth inequality within the US population."

VOX -- Globalization and the rise of the robots: "Recent advances in artificial intelligence could affect manufacturing and the labor markets in a number of ways. [This study] finds no confirmation that machines have decreased the cost of labor and brought manufacturing back to rich countries but finds machines could replace highly skilled workers rather than increase the demand for their labor. Technology and skills are thus substitutes not complements."

I just heard media pundits on CNN bashing Bloomberg for suggesting that many people should consider being a plumber rather than going to college. (The New York Daily News has an article about this, as does Fox News). To me, Bloomberg makes perfect sense, so why was CNN in such an uproar? Not everybody can really afford to go to college, and many can’t hack it and drop out. And a plumber's job can't be outsourced to China either.

Economic Policy Institute: The Number of Unemployed Exceeds the Number of Available Jobs Across All Sectors -- "The main problem in the labor market is a broad-based lack of demand for workers — not, as is often claimed, available workers lacking the skills needed for the sectors with job openings."

Zerohedge: "Contrary to the pervasive and erroneous propaganda, the collapse in the labor force has little to do with the alleged millions of retiring baby boomers (quite the contrary: as a result of ZIRP crushing their lifetime savings, baby boomers have been forced to remain in the workforce in ever greater numbers) and everything to do with the lack of employment opportunities, or perhaps an unwillingness to work, for young Americans." (Zerohedge links to Pew Research: "More and more Americans are outside the labor force entirely. Who are they?")

Economic Populist: A Global House Of Cards (by Paul Craig Roberts): "In the US QE caused inflation in stock and bond prices as most of the liquidity provided went into financial markets instead of into consumers’ pockets. There is more consumer price inflation than the official inflation measures report, as the measures are designed to under-report inflation, thereby saving money on COLA adjustments, but the main effect of QE has been unrealistic stock and bond prices."

176 Million Workers Call to Stop TPP Negotiations

America: Clueless, Leaderless and Out of Control

What Do Small Businesses Do?


  1. The Quantity of Labor Demanded is Not Always Equal to the Quantity Supplied (From reader's comments at Mark Thoma's blog)

    "It takes almost no labor to extract oil, and the resulting foreign exchange windfall makes local production of anything but personal services almost impossible, aka Dutch Disease. So, what to do with the windfall? Keep it in the hands of a powerful few? Or redistribute it to people who cannot find work? In many places, like Saudi Arabia and Venezuela, the government redistributes some of the windfall to maintain domestic peace, something that Wall Street, banksters, and their hired economists find appalling."

    "Full employment isnt a natural or even a desired output of the market. It is potentially a condition of the market if the people have the ability to have influence on it via the democratic process."

  2. November 17, 2014 -- Measuring Labor Market Slack: Are the Long-Term Unemployed Different? "The long-term unemployed group has the largest share of prime-age workers."

    (My comment pending) As of October 2014 from the BLS: 6.1 million not counted as "unemployed" and "not in the labor force" and "want a job".

    New York Times: Inequality, Unbelievably, Gets Worse -- "Before the impact of tax and spending policies is taken into account, income inequality in the United States is no worse than in most developed countries ... However, once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap."

    God Bless America -- We are exceptional --- We are #1

  3. Robert Reich (November 2014)

    "People with college degrees continue to earn far more than people without them. And that college “premium” keeps rising. Last year, Americans with four-year college degrees earned on average 98 percent more per hour than people without college degrees. In the early 1980s, graduates earned 64 percent more [but] a college degree no longer guarantees a good job. The main reason it pays better than the job of someone without a degree is the latter’s wages are dropping. In fact, it’s likely that new college graduates will spend some years in jobs for which they’re overqualified. According to the Federal Reserve Bank of New York, 46 percent of recent college graduates are now working in jobs that don’t require college degrees. Employers still choose college grads over non-college grads on the assumption that more education is better than less. As a result, non-grads are being pushed into ever more menial work, if they can get work at all. For years we’ve been told globalization and technological advances increase the demand for well-educated workers. This was correct until around 2000. But since then two things have reversed the trend. First, millions of people in developing nations are now far better educated, and the Internet has given them an easy way to sell their skills in advanced economies like the United States. Hence, more and more complex work is being outsourced to them. Second, advanced software is taking over many tasks that had been done by well-educated professionals. As a result, the demand for well-educated workers in the United States seems to have peaked around 2000 and fallen since. But the supply of well-educated workers has continued to grow. The New York Times calls them "Generation Limbo" --- well-educated young adults “whose careers are stuck in neutral, coping with dead-end jobs and listless prospects.” A record number are living at home. Given all this, a college degree is worth the cost because it at least enables a young person to tread water. Without the degree, young people can easily drown." (MY NOTE: I guess that at this rate, one day they'll need a PhD to mops floors.)

    Timothy Taylor (November 2014)

    "The age group with by far the biggest rise in those saying they don't want a job since 2000 is the 16-24 age group ... We are in the midst of a social change in which 16-24 year-olds are less likely to want jobs. Some of this is related to more students going on to higher education, as well as to a pattern where fewer high school and college student are looking for work. I do worry about this trend. For many folks of my generation, some evenings and summers spent in low-paid service jobs was part of our acculturation to the world of work. As I've noted in the past, I would also favor a more active program of apprenticeships to help young people become connected to the world of work.

  4. UPDATES --- March 29, 2015

    Robert Reich: Why College Isn’t for Everyone (Sunday, March 22, 2015)

    "Not every young person is suited to four years of college. They may be bright and ambitious, but they won’t get much out of it. They’d rather be doing something else, like making money or painting murals.

    They feel compelled to go to college because they’ve been told over and over that a college degree is necessary. Yet if they start college and then drop out, they feel like total failures.

    Even if they get the degree, they’re stuck with a huge bill — and may be paying down their student debt for years. And all too often the jobs they land after graduating don’t pay enough to make the degree worthwhile. Last year, according to the Federal Reserve Bank of New York, 46 percent of recent college graduates were in jobs that don’t even require a college degree.

    The biggest frauds are for-profit colleges that are raking in money even as their students drop out in droves, and whose diplomas are barely worth the ink-jets they’re printed on.

    [After making all his relevent points, he concludes] It’s time to give up the idea that every young person has to go to college, and start offering high-school seniors an alternative route into the middle class.

    When a Summer Job Could Pay the Tuition