Wednesday, March 30, 2011

Economics Week: Unemployment and Economic Recovery 2009-Present

In the book I am writing, I address the issue of where have all the jobs gone? As well as where will there be jobs in the United States in the future? The answers are not particularly complicated, but they are also not particularly easy to swallow.

First, a simple observation that has huge implications. With advances in technology less people are needed to produce the same amount of product or provide the same amount of service. Although technology thus far has not accelerated the ability to reduce staff in the service industry nearly as fast as in the product industry. In other words, working at Target, McDonalds or Starbucks is a more stable long term career choice than working in the manufacturing industry for Ford or Catepillar despite less than half of the starting pay, based on the past several decades in the United States. Of course, that is my opinion and it is based on non-management, non-salaried, hourly wage employees. If you have a education, such as engineering, manufacturing on the other hand provides far greater opportunities for job security. Lest anyone get an ego too inflated, no job is secure. Even Tiger Woods the first athlete billionaire is certainly not making as much money post-scandal as he once was.

What does the above paragraph mean? It means that working at American Eagle folding clothes and selling me jeans is likely more stable than painting car panels at Pontiac, wait Chrysler, wait... Toyota is still around I think. In the service industry (like at a nursing home, mortuary, Starbucks, or American Eagle) you are less likely to be susceptible to mechanization and automation that is taking over everything from farming to manufacturing, and soon enough, driving.

In other words, if 20% of the workforce is laid-off because of advances in manufacturing technology and outsourcing, consumer spending might only decrease 12% because those people who are laid-off will receive unemployment benefits. Additionally, it is possible that those left working will receive raises and spend more money. (I only have one example to prove that statement and it involves manual labor and working more hours. Not the ideal situation for the population as a whole.)

Second, lay-offs typically have a slightly positive affect. Despite our capitalist society, we typically pay people based on their initial formal education and their years of experience with less regard given to performance. Due to a variety of factors some employees are not as profitable to the company as others. Some are possibly even unprofitable. Lay-offs are a way to reduce the number of under-performers. That being said I do not blame the laid-off at all.  I would imagine if given the chance to work for 2/3 of the money or even half of the money to keep their jobs, most would gladly accept rather than be unemployed for several years. It is not an employee's fault that he or she was gradually paid more every year at a faster rate than that particular employee's productivity increased.

Additionally, some people are in the wrong industry. Plain and simple I've met a number of them doing something because they have a degree or the money is good that they are really not cut out for. I do not know, but I feel if this type of person was laid-off hopefully they would find more suitable employment.

Third, after lay-offs and after automation the people that you are left with are the high performers. When given the chance to work 60 hours instead of 40 they jump at the opportunity. These people might fall into the work-work-life-work balance but that is what the US economy typically rewards. That is actually a subject that I take great pains in my book to deal with, because work is one small aspect of our lives. We need to value more than work and our jobs. Easy to say, but it took me months of anguish to really understand that.

Currently, many companies are offering their employees overtime instead of hiring new employees despite business drastically picking up within the last year. The theory is that employees cost money for health insurance and training and other expenses while simply giving employees overtime reduces the training, healthcare, hiring process, 401K and other expenses that employers have to pay. All of this means...

Fourth, employers have a greater choice of employees and are able to pay less and not give out benefits to find people. One person I know referred to the new trend in lower wages and no benefits as "indentured servitude". I would probably not go that far because working 65 hours a week still leaves over 100 hours a week to do whatever. The point being my first three jobs after college did not include any kind of health insurance, vacation, sick days, or retirement planning.

It is more competitive now to get any job than it was pre-2008 and to be honest I do not see that trend changing much for several years. To those of you currently racking up college debt, stick with it even though you are going to fight for lower wages. With a degree you will probably still make more money, and hopefully enjoy a job that does not degrade your health. The road ahead is hard, but you can make it. If the basket case of pent of emotions and egotistical grandeur that is me made it than you can certainly make it. Plus I'm writing a book that will hopefully help you.

Fifth, and finally, it is to everyone's advantage that you succeed in life. While the multimillionaires on Wall Street will be selling short (making money on stock that goes down in price) on your 401K as your 401K gets cut in half they still need you, otherwise they are out of a job. They need your commissions. If Warren Buffett did not have thousands of people working in companies that he owned, he would not have as much money as he does. If you did not buy Microsoft products Bill Gates would not have the fortune that he does.

Every society in history that has created a lop sided wealth structure has eventually gone through a revolution to change that. France in the 1790s, Russia in 1917, and it appears most of the Middle East in 2011 are a few of the rather significant ones. The point being, it is in everyone's best interest if everyone is making some money. Of course the opportunity to make more money typically encourages people to work harder. That is where capitalism works.

The point is, you can make it. You will get a job and it will be good. It may take far longer than you would like, but it will happen. It is in everyone's best interest that you succeed. Wether anyone admits it or not your success will help everyone from the places you spend your money to your employer who you make money for. The economy will recovery, but it will be different.

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