In Wreckage of Lost Jobs, Lost Power - NYT

[WillyT]

In Wreckage of Lost Jobs, Lost Power
By DAVID LEONHARDT
January 19, 2011

<snip>

Alone among the world’s economic powers, the United States is suffering through a deep jobs slump that can’t be explained by the rest of the economy’s performance.

The gross domestic product here — the total value of all goods and services — has recovered from the recession better than in Britain, Germany, Japan or Russia. Yet a greatly shrunken group of American workers, working harder and more efficiently, is producing these goods and services.

The unemployment rate is higher in this country than in Britain or Russia and much higher than in Germany or Japan, according to a study of worldwide job markets that Gallup will release on Wednesday. The American jobless rate is also higher than China’s, Gallup found. The European countries with worse unemployment than the United States tend to be those still mired in crisis, like Greece, Ireland and Spain.

Economists are now engaged in a spirited debate, much of it conducted on popular blogs like Marginal Revolution, about the causes of the American jobs slump. Lawrence Katz, a Harvard labor economist, calls the full picture “genuinely puzzling.”

That the financial crisis originated here, and was so severe here, surely plays some role. The United States had a bigger housing bubble than most other countries, leaving a large group of idle construction workers who can’t easily switch industries. Many businesses, meanwhile, are reluctant to commit to hiring workers out of a fear that heavily indebted households won’t spend much in coming years.

But beyond these immediate causes, the basic structure of the American economy also seems to be an important factor. This jobless recovery, after all, is the third straight recovery since 1991 to begin with months and months of little job growth.

Why? One obvious possibility is the balance of power between employers and employees.

<snip>

More: http://www.nytimes.com/2011/01/19/business/economy/19leonhardt.html?_r=1&pagewanted=print

:kick:

[marmar]

1. Big K&R......

:kick:

[badtoworse]

2. We are competing in a world market and need to become a lower cost producer

That is why Obama is meeting with business leaders and reviewing regulations that make us less competitive and business friendly.

[WillyT]

3. Well Shit... Sign Me Up... I'm Sure I Can Figure Out A Way To Live On A Dollar A Week...

:wtf:

You're being sarcastic, right???

:shrug:

[badtoworse]

6. I'm not being sarcastic. You can't avoid competition

You either deal with it or it deals with you. It's dealing with us right now.

How would you prevent jobs from being outsourced and increase the manufacturing base in this country?

[leftstreet]

7. Aside from bombing the manufacturing capacity of other countries?

You're pretty much stuck with 'regulating' the offshoring

[badtoworse]

13. How would you regulate it?

Would you outlaw the importation of foreign made products or impose steep tariffs on them? Close the internet and telecommunications with call centers in India?

[leftstreet]

14. How do we manage to keep lead out of paint?

:shrug:

[badtoworse]

15. I don't see the relevance - please explain - nt

[leftstreet]

18. Have you been eating paint?

Just kidding

:hi:

Regulations work...if we make them

[badtoworse]

19. Sounds like you're talking protectionism. See Post 11

[WillyT]

9. Well... First I'd Try The ENFORCED Treaty Way, And If That Didn't Work

I'd probably go pretty damned protectionist.

They don't need our monetary aide???

They don't need our political aide???

They don't need our military aide???

They don't want our customer base???

I have no problem with raising the living standards of others.

But the stated reasons for engaging in such "Free Trade" agreements, much to the objections of Labor, was that it would NOT end up lowering ours.

Fix it, or forget it.

:shrug:

And if THAT doesn't work, let's go back to taxing the wealthy like we used to do.

[badtoworse]

11. Protectionism has failed in the past and would not work now.

Our trading partners (China especially) would certainly retaliate and they are in a position to hurt us. As Andy Borowitz recently put it, we have about as much leverage with the Chinese as someone three months behind in car payments has with the Repo Man. BTW, protectionism was one of the causes of the war with Japan (look up the Smoot Hawley Tariff of 1930).

Taxing the wealthy might temporarily fund some more government spending, but they would stick around for it very long and in the long run, it would do nothing to increase employment.

Obama has the right idea on this and needs to pursue it agressively.

[WillyT]

20. And Letting The Majority Of Americans Descend Into Poverty Ain't Real Swell Either

What other remedies do you have... privatizing Social Security, getting rid of Medicare, do I get to receive my pension that I've paid into for decades???

Seriously, just what are the sacrifices we are being asked to make.

:shrug:

[badtoworse]

22. It's not going to be pretty

I don't know if those things are going to happen, but one thing is pretty certain to me: We aren't producing enough goods and services to sustain our standard of living and keep all the promises (entitlements) we've made. The only way to fix that is to produce and sell more. You do that by making your goods and services more attractive to your customers - that is true whether you are a mom and pop store, a General Motors or an entire country.

I don't see any magic bullets here. Do you?

[brentspeak]

23. Protectionism has failed...where?

Has protectionism failed in China? They seem to be doing quite well with their protectionism, thus invalidating your antiquated view of international trade.

FYI, China is not our trading "partner", and there's very little they can do to us trade-wise which they aren't already doing -- they have tariff borders erected around itself as high as Mt. Everest, an artificially manipulated currency, and state-sponsored government subsidization of all its major industries. Your post is Economics 101 Globalist Kool Aid B.S.

[badtoworse]

24. What would you do about China?

The fundamental problem with China is that they are funding our overspending and if they dump our debt on the market, it's going to hurt big time (Yeah, it'll hurt them too, but they're in better shape than we are). If it wasn't for that we would have told them to go to hell a long time ago.

[brentspeak]

26. What should we do about China? Revoke their MFN status. n/t

[badtoworse]

28. What do you think would happen with our debt?

Do you think they would continue to buy our debt? Do you think they would start dumping what they have on the market? That would substantially increase our borrowing costs and put us in even worse shape.

[Statistical]

32. We could balance the budget. Future interest rates are only important IF

you continue to borrow at trillions a year.

It is like having a credit card. How high the interest goes only matter if you choose to spend more than you have.

All our existing debt is fixed interest rates and won't change.

[badtoworse]

34. That would work and I would like to see it done

As a practical and a political matter, it will be very difficult and will likely mean higher taxes on everyone and sharply reduced spending at all levels of government.

On edit: Even with a balanced budget, they could flood the market with our debt and drive rates up. A balanced budget would be a big help in minimizing the impact of that.

[jtuck004]

39. China is in no position to hurt us without hurting themselves at least as badly. n/t

[marmar]

4. Global race to the bottom.

nt

[BOG PERSON]

5. that is the elephant in the room

american labor is priced at more than its worth, and cutting wages would open such a huge can of worms. it would be the mother of all cans of worms.

[marmar]

12. WTF? ..... When did this become Free Market Koolaid Underground?

nt

[JVS]

21. 2009

[brentspeak]

25. Tell us precisely which regulations make us less competitive n/t

[badtoworse]

27. The biggest ones I can think of have to do with the cost of energy.

In many cases, we are mandating the use of renewable energy that costs substantially more than conventionally produced energy. China burns coal with minimal pollution control - big advantage for them. We spend way more on environmental protection than China and developing countries do. It's a pure cost to us that makes our products more expensive.

Energy costs are a big factor in the cost of finished goods. I suppose we could impose tariffs to level the playing field, but then everything at Walmart would go up in price and those countries would likely retaliate. How would you levelize the playing field?

[hatrack]

29. I see! The eventual goal - Chinese-style wages here, plus toxic air quality!

Sounds super - let's start eliminating those pesky air and water laws TODAY!!!!

Thanks, Invisible Hand!!!!

:rofl:

[badtoworse]

30. I think it stinks, but do you disagree it's happening?

You mostly hang out in the EE Forum and I'd say you're better informed about this than I am. Do you agree the Chinese produce cheap electricity by disregarding the environment? How would you address the issue?

[hatrack]

31. And because it is happening in China, we must embrace it here, huh?

After all, it's all about staying competitive, right?

That is the essence of your argument, which is that we must do as they do - by making energy cheaper, and to do so by removing environmental laws and mandates. That's the guts of it - the easiest path to making energy cheaper is by allowing energy to be dirtier.



Let's go fly a kite in Tiannmen Square - looks like fun, doesn't it?

[badtoworse]

33. I'm not advocating that, but the question was what regulations are making us less competitive.

Whether the regulations have merit or are necessary is a separate issue. The fact remains that China enjoys a competitive advantage with lower energy costs and our producers have to compete against that. How do you level the playing field?

[lumberjack_jeff]

35. Explain Germany.

http://en.wikipedia.org/wiki/Economy_of_Germany

Our GDP is climbing, so this isn't an issue of global competitiveness, it's simply an issue of businesses concentrate their efforts on sectors that require minimal headcount, and the people who do get hired are expected to do the work of two.

http://en.wikipedia.org/wiki/Working_time#United_States

We work more hours, pay lower energy costs and have fewer regulations than Germany, yet we suffer chronic unemployment.

The problem is too little regulation, not too much. Overtime should be paid at double-time, businesses should be compelled to train US workers before hiring H1B's, or better yet, the salary of each H1B should be matched by taxes to support technical education and the workweek should be reduced to 36 hours.

[badtoworse]

36. I don't know Germany very well, but they are clearly doing something right.

I would say they compete on quality, not price (e.g. BMW, Daimler, etc.), live within their means and don't act as the world's police department. What do you think?

[lumberjack_jeff]

37. What they're doing right is regulating their economy.

They understand that the purpose of the economy is to support the people who live within it.

BTW, I edited the post above.

[badtoworse]

38. Sounds good, but it's a very different business model and would involve a transition

In our economy, we compete on price. Using their model, anything we make would likely be more expensive. I don't see a clear path from where we are now to where they are. How would you transition it?

[lumberjack_jeff]

40. Germany

• has a shorter work week
  
• has less unemployment
  
• has higher energy costs
  
• has a stricter regulatory system
  
• taxes at 41% of gdp (the US is about 25%)
  
• has a top tax rate of 45% (the US is 35%)
  

They compete on price too. The difference is what happens to the profits. In Germany, tax codes discourage very high incomes by the CEO and stockholders. In the US, the opposite is true - our social security taxes ONLY affect the working class. If big profits generate big taxes, the way to avoid those taxes is by reinvesting in the business, which includes hiring and training people.

The rightwing solution for economic problems is more of the disease. Sadly, those big profits ALSO enable the wealthy to purchase elected officials.

[dixiegrrrrl]

8. Does the fact that the economy reports are BS explain anything?

"The gross domestic product here — the total value of all goods and services — has recovered from the recession"

Yeah, when the cooked bank books are thrown in.And the war spending.

Who on earth is gullible enough to believe the government figures anymore?
The same government that tells us people who fell off unemployment limits are not "unemployed"
The same government who tells us there is no inflation, despite what every one of us sees on every trip to the grocery store and gas pump.
the same government that tells us we can have a recovery...without jobs.

Anybody here still that gullible????????????

[Statistical]

16. The govt made none of those claims.

"The same government that tells us people who fell off unemployment limits are not "unemployed""
Benefits has nothing to do with U-3 rate. 99er are included in unemployment stats. Govt never made that claim.

"The same government who tells us there is no inflation, despite what every one of us sees on every trip to the grocery store and gas pump."
CPI-W showed inflation for 2010. The govt never made the claim there is no inflation.

"the same government that tells us we can have a recovery...without jobs."
The economy is recovering however nobody in the govt (not even republicans) is saying it is ok to not have jobs. Govt never made that claim.

[purrFect]

10. those damn unions!

they, and us dumb americans, are always at fault... according to the man :argh:

not a word against our masters, though....

[catnhatnh]

17. Weasel Words....

"For employed persons, wages have risen faster than inflation since 2007, which is unusual in a downturn...."...What this doesn't address is that inflation itself was low during this relatively brief period and ignores decades of real dollar declines in wages for over two decades during high inflation and productivity gains, even in the selected years that vastly outstripped inflation. In short your wages MAY have risen 2 or less percent in the given timeframe but Massa has whipped you harder AND reduced benefits (which are totally left out of the discussion-if you made $20.00 an hour and gained 2% in wages you gained $8.00 for a forty hour week. Do you know ANYONE lucky enough to work a full time job with insurance paying only $8.00 per week more than they did 3 years ago??). While I applaud the article for touching on some real problems in the article and will k&r for discussion it is actually one more screed against workers in general. The main positives our it recognizes the value of having unions, but fails by suggesting working shorter hours for reduced pay. A fairer proposal would be a 10% cut in hours WITHOUT a reduction in wages to offset decades of unrewarded increases in productivity. Or let us force overtime to triple pay and stop the ridiculous spectacle of the unemployed living next door to someone with a "good" job forced to work 60 or more hours a week because it's cheaper than extending benefits to another worker.

The best way to limit forced overtime of course would be single payer insurance or "government run healthcare". The first would remove the onus from perspective employers, freeing them from overstressing their best assets and the latter completely negates the "insurance"/healthcare question. Catastrophic coverage-who needs it???

But I digress....The article brings out a few good points but distorts a few bad ones. But the discussion could be fun...