Louis Uchitelle's "The Disposable American: Layoffs and Their Consequences"

I review it:

'The Disposable American: Layoffs and Their Consequences,' by Louis Uchitelle - The New York Times Book Review - New York Times: Uchitelle's diagnosis... is convincing. But for this card-carrying economist, his desired prescription is not. I see no examples anywhere in the world of economies that have taken steps in the direction he desires without severe side-effects. In Western Europe, unions bargained fiercely for job security, and governments enacted "no firing without cause" laws, giving workers individually and collectively quasi-property rights in their jobs. Yet this did not lead to a happy labor market. Instead, high overall unemployment, extra-high long-term unemployment and extra-extra-high youth unemployment appear to be the consequences of attempts to ensure that managers and workers are in the same boat. Companies that know they cannot lay off groups of workers if demand goes sour are very likely to be companies that hesitate to hire groups of workers even when demand is strong.

Indeed, Uchitelle does not want to forbid all mass layoffs. "Some," he writes, "are inevitable as American companies adjust to the growing competition from abroad." His real wish is for managers to treat their workers as partners and fellow human beings, rather than as potentially obsolete and disposable parts in the corporate money-making machine. But when demand and industrial structure are shifting rapidly, there is a great deal of money to be made by treating workers as disposable parts rather than as partners.

Uchitelle wants the government to help. But the government's powers and competence are limited: it can do much more at cleaning up the mess afterward -- in the form of unemployment compensation, education support and job search assistance -- than it can at getting managers, directors and shareholders to "play nice" when the financial stakes are high.

Comments

[Steve Peterson]

While I think everybody ought to treats others as real persons, and not as tools, I don't think that trying to base a legal or economic system on that is going to be very useful.

Instead, better to empower employees so that they can treat the companies that employ them like cogs in the machine of the employee's own life -- through better mobility so that one can easily switch to a preferable job.

[otto]

The obvious solution is to tax the rich to pay for more compensation for the displaced workers. The difficulty in political economy terms is that a more disrupted working class is less likely, not more likely, to have the political power to tax the rich in this way.

[sd]

It seems to me that a lot of the problem can be mitigated by better informing managers about the inadvisability of laying off workers in some situations.

When a company lays off workers due to long term structural changes in its business, then its usually a wise move. When markets decline, or consumer preferences turn against a company, or when new competitive threat emerge, then jobs are going away sooner or later and its often good for business and good for remaining employees to shed excess workers.

But when a company lays off workers in response to short term dips in demand (recessions, etc.), then its usually an unwise move. There are significant costs associated with laying off workers due to short term business pressures: transaction costs of termination, lower morale among remaining employees leading to increased unwanted attrition, and massive search and hiring costs once the economy rebounds. But few low level managers understand these things. Instead, they know that firing people in lean times will juice their P&L in the short term, and that being an aggressive cost cutter is a "tough, responsible" course of action.

[ogmb]

"Instead, high overall unemployment, extra-high long-term unemployment and extra-extra-high youth unemployment appear to be the consequences of attempts to ensure that managers and workers are in the same boat."

How much of this is due to the reluctance of hiring and how much due to better social networks?

[anne]

http://www.calvorn.com/gallery/photo.php?photo=6293&exhibition=7&u=99|18|...

Downy Woodpecker and House Sparrows
New York City--Central Park, The Ramble.

Nicely and importantly done, Brad :)

[anne]

http://www.nytimes.com/2006/03/29/books/29geog.html?ex=1301288400&en=0b0e23d13db2419a&ei=5090&partner=rssuserland&emc=rss

March 29, 2006

How Pink Slips Hurt More Than Workers
By THOMAS GEOGHEGAN

Is the layoff the great American wound? In Louis Uchitelle's account, it seems a wound in triplicate. It hollows out companies so they can't compete. It hollows out the country by removing middle-class jobs. It hollows out the middle-class employees who are laid off and then too often drop permanently to a demeaning, low-wage way of life. To Mr. Uchitelle, who reports on economics for The New York Times, corporate America's addiction to the layoff has gone past the point of economic rationality. In this fascinating book he tries to tell the history of the United States in our time as the unchecked rise of layoffs.

"The Disposable American" is a history in which odd characters like Pat Buchanan, the former chief executives Jack Welch and Albert J. Dunlap (known as Chainsaw Al), the economist Alfred Kahn and others loom large — but so do Jimmy Carter, Bill Clinton and Robert E. Rubin, former secretary of the treasury. But Mr. Uchitelle is just as interested in ordinary people and in the way that layoffs keep tormenting those who have been let go. As he writes, "I did not think in the early stages of the reporting for this book that I would be drawn so persistently into the psychiatric aspect of layoffs."

The layoff, Mr. Uchitelle argues, has transformed the nation. At least 30 million full-time American employees have gotten pink slips since the Labor Department belatedly started to count them in 1984. But add in the early retirees, the "quits" who saw the layoffs coming, and the number is much higher — a whole ghost nation trekking into what for most will be lower-wage work. This is the Dust Bowl in our Golden Bowl, and to Mr. Uchitelle, layoffs in one way are worse than the unemployment of the 1930's. At least then, most of the jobless came back to better-paid, more secure jobs. Those laid off in our time almost never will.

Mr. Uchitelle effectively wrecks the claim that all this downsizing makes the country more productive, more competitive, more flexible. He is willing to admit that downsizing can be necessary. "The global economy is not to be denied," he writes. But to lay off is now like a business school tic, whether it makes any sense or not. With fewer employees, many companies begin to crumble. Innovation also suffers. "Rather than try to outstrip foreign competitors in innovation, a costly and risky process, we gave up in product after product," Mr. Uchitelle writes. As he points out, many of the business stars now are companies, like Southwest Airlines, that have refused to downsize at all. A growing number of economists argue that layoffs cause more problems than they solve.

The heart of Mr. Uchitelle's book is his detailed, wide-ranging reporting. He is present, taking notes, while airline mechanics are being counseled into job training that will take them into lower-wage work. If they were not so painful, these moments would have a certain droll comedy. One mechanic ends up running a water taxi for tourists. Another goes into maintenance. Others find jobs "throwing boxes" at Federal Express. As one of the ex-mechanics tells Mr. Uchitelle years later: "It is hard to look in your son's eyes and explain to him that you are making $12 an hour and know his high school friends are making that much on the side."

In one of his shrewder moves, Mr. Uchitelle goes right into the enemy camp, as it were, and looks in on a reunion of Harvard graduates, the class of '68. But even Harvard grads are among the wounded now — some have received pink slips. Mr. Uchitelle makes a strong case that the whole middle class is at risk. During the Clinton era, the claim was that the United States was expanding high-wage, high-skilled jobs, and that the laid off could simply jump into jobs as good or better. But Mr. Uchitelle takes apart this argument....

[Rich C]

There are a number of European countries - Sweden, the Netherlands, Denmark, Austria, and Norway at least - that have sucessfully retained a much greater degree of job security than at-will employment in the US provides, but without the various unemployment side affects Brad mentions. Active labor market policies that are generously funded (~3% of GDP) are a key part of each countries success. On the other hand, you could always just gurantee a job to anyone who wants one ...

[Slocum]

"His real wish is for managers to treat their workers as partners and fellow human beings, rather than as potentially obsolete and disposable parts in the corporate money-making machine. But when demand and industrial structure are shifting rapidly, there is a great deal of money to be made by treating workers as disposable parts rather than as partners."

That last sentece is rather weaselly. Mass layoffs almost never result from managers at highly profitable firms chasing after even bigger gains but rather from managers at struggling firms trying to prevent or reverse losses. Managers like the role of beneficent patriarch (handing out raises and Thanksgiving turkeys) *MUCH* more than the role of grim reaper handing out pink slips.

This tendency helps account for the straits of Delphi and GM, for example. The managers never should have let their labor costs get so far out of whack. But when times are good (or good enough), they just go along to get along.

Good review overall, though (DeLong is nowhere near as far left as most of his commentariat or as his 'Impeach them now!' rhetoric would suggest).

[save_the_rustbelt]

This reminds of a friend, he is a 54 year old electrical engineer, and quite a respected expert in engineering fire alarm systems.

For the past five years or so he has worked as a consultant for his former employer, with much of his time spent double-checking the work of Chinese engineers he trained on behalf of his former employer.

I haven't asked but I can guarantee his income and retirement security have taken a major hit.

Headed for the bookstore, have to read Uchitelle's book.

[ken melvin]

There will never again be enough jobs. There needs be another solutiion.

[Reteif]

Otto is right. This isn't a question of getting the bosses to "play nice." It is a question of getting them to think long term, at least beyond the end of the current quarter.

[still working it out]

I'm not sure I buy the concept that Western Europe is suffering from high unemployment. I am not an economist and so have no expertise to judge these matters, but again and again I run into good reasons to doubt that the employment rates for countries such as US, Australia and UK are really lower than Western Europe.

http://www.dailykos.com/story/2006/3/28/8519/74116
is just another example of this. I don't know if the above is accurate, but its enough to have me asking lots of questions.

And even taking the (to me) questionable employment measures seriously there are still countries that are doing fine. Countries like Sweden, the Netherlands, Denmark, Austria, and Norway as noted above not to mention Japan, which has very low unemployment.

If the conventional wisdom that Western Europe has a moribound labour market is not solid, then the whole basis of the labour market reforms we kept getting pushed on us becomes questionable.

[Charles]

Um.

What happens to Mr. Uchitelle's argument if it is noted that the high unemployment in Europe is, at least in some measure, the effect of cutthroat downsizing and offshoring in the US-- which led European countries to create jobs abroad?

What happens to Mr. Uchitelle's argument if we say that their unemployment statistics are honest and that those of the US have been cooked, such that if consistent methodology were used, the figures would be equuivalent?

Readers of this board certainly get Friedmanian utility maximization arguments. But there is no evidence that utility has been maximized. Even the corporations are hurt by shortsighted practices intended to force employees to their knees.

Meanwhile, there is huge amounts of necessary work that does not get done in caring for and mentoring children, in rehabilitating prisoners, in counseling the mentally ill, in remediating the environment, in building human relationships in family, neighborhood, and community.... the list goes on.

The right solution is to raise wages to the point that people do not have to work all the time and that those at the margins are therefore valued more.

Henry Fordism: the new visionary economics for a backward America.

[Esq.]

Slocum wrote "Mass layoffs almost never result from managers at highly profitable firms chasing after even bigger gains but rather from managers at struggling firms trying to prevent or reverse losses."

Your statement is flatly contradicted by the lionization Jack Welch receives in some circles for taking a profitable industrial enterprise and converting it into a bank.

[anne]

http://www.nytimes.com/2006/03/29/books/29geog.html?ex=1301288400&en=0b0e23d13db2419a&ei=5090&partner=rssuserland&emc=rss

THOMAS GEOGHEGAN:

It nettles Mr. Uchitelle that even the center-left politicians have said so little about this trend — or have done so little to stop layoffs. In fact, layoffs rose faster in the first half of the 1990's than they did in the first half of the 80's. Mr. Uchitelle particularly blames Mr. Clinton. One of his chapters is titled "A Green Light From Clinton." Mr. Uchitelle writes: "As much as anyone, he disconnected the Democratic party from its past, specifically its New Deal concern for job security and full employment." Indeed, it is Mr. Uchitelle's point that it took government action to bring about the reign of layoffs.

He is also clear that this began long before the Clinton presidency. Mr. Uchitelle puts special emphasis on the deregulation of many industries, the dilution of the Humphrey-Hawkins Full Employment Act of 1978 and what he regards as other political wrong turns. Still, in a brief concluding chapter, it is unclear whether Mr. Uchitelle sees any good solutions now — including a solution that he attributes to this reviewer.

In this retelling of American history, Mr. Uchitelle is baffled by the collapse of any serious resistance to these mass layoffs. Even the protestors who began to sound off in the 90's generally believed that companies did have to downsize or die. It bothers Mr. Uchitelle that the mechanics and others he covers in this book and gets to know personally often blame themselves. "Whenever I insisted that layoffs were a phenomenon in America beyond their control, they agreed perfunctorily and then went right back to describing ... why it was somehow their fault or their particular bad luck."

Many readers know Mr. Uchitelle as a business journalist with an acute analytic bent. That is in this book, but there is a surprising passion as well. He urges — demands — that Americans speak up: not to give empty speeches about how more of us should go to college, or "skill up," but to stop the layoffs from ravaging us all.

[anne]

Possibly then we have to look closely to the demonstrations through France, which, if I understand properly, are a response to a fear of loosening young worker's rights while not offering compensating protections to workers whose jobs are lost. What is readily allowed for young workers could possibly be suggested and allowed for others, and there is concern.

[Ninjaplease]

Rustbelt:
"This reminds of a friend, he is a 54 year old electrical engineer, and quite a respected expert in engineering fire alarm systems."

Funny, I'm an electrical engineer who works at a newly boughtout fire alarm system company. I'm guessing your friend works for either: Tyco or Siemens.

They bought Honeywell who bought Gamewell, who bought FCI. They fired every single employee from Gamewell after the jobs were moved to China.

What I find absolutely shocking is that when people say blanket statements like "Everything other than free trade has been tried and has largely failed," well, the market didn't decline there, so...

THE JOBS WENT TO CHINA & INDIA & THE NEW EU MEMBERS FROM EASTERN EUROPE.

Also, don't blame the unions for the rediculously poor business decisions that management made at both Ford & GM. At the same time, Chrysler gained like 8% market share and was profitable, and has WAW workers in the US. Just because the guy's name is Bill Ford, doesn't make him an expert CEO of the auto market. This is WITH NAFTA with a lotta cars produced in Windsor, Canada & assembled in Mexico.

You don't wake up one morning and owe 7 billion dollars. It's lost over the course of time because sales are continuously low and market share drops. My god what kind of world do we live in where workers are villified and CEO's wages are justified?

In the early 80s US car companies were producing some of the worst designs ever. The cars from Japan forced the US companies to rethink what they were putting out on the market, that was global competition for the good of the consumer. It had nothing to do with unions. The cars being designed and marketed were TERRIBLE.

Gas prices doubled in the past few years, since about 2003. Where is GM's 2004 hybrid? Where is Ford's 2004 hybrid?

Where were their 2005 hybrids? Where is there 2006 hybrid? I think ford's is finally getting off the ground, its an SUV, but it's a start.

Instead of pointing to free market theory as the cure for all, why don't you think that through from start to finish and explain how exactly our current trade arrangements will benefit more winners than losers and identify what exactly happens to the losers? How much economic pain do they feel?

[Jim S]

Whenever I hear of how mass firings (Let's call them what they are.) are so necessary for companies that are doing badly I remember listening on the radio a while back to the announcement that Abbott Labs announced record profit growth on the same day they announce firing 7000 people. How many times do you hear about profitable companies firing people because while they made money it was below Wall Street expectations? Fairly often, actually.

And Ken Melvin might have a point. Those who love to say that it isn't the fault of offshoring that we lose so many jobs, but the fault of technology never seem to mention any viable solution to that cause of job losses. We're well past the point where jobs in the new industries can make up for the ones lost in the old sectors.

[Fred Hapgood]

> Possibly then we have to look closely to the demonstrations through France, which, if I understand properly, are a response to a fear of loosening young worker's rights while not offering compensating protections to workers whose jobs are lost.

There's another interpretation, which is that the demonstrations in France are not the denial of simple economic reality that they seem from afar -- the French can count as well as anyone -- but a reaction to the high-headed, autocratic, ram-it-down-their throat style of goverance that has characterized French politics for so long.

[Ninjaplease]

"Oh they tried laws to protect workers, but they made things worse."

NO THEY DID NOT. What made things worse was no tariffs to prevent the low cost of production in other countries from killing the jobs.

Problem: High youth unemployment in a formerly industrialized and successful country.

Proposed solution: Allow workers to fire young workers for any reason at all for the first 2 years of employment.

Perhaps that industrialized nation should find out where the hell their jobs went and why. If the cause was companies taking advantage of the lower costs of production in the foreign country vs the industrialized nation, the industrialized nation ought to pass tariffs to help level the playing field for domestic workers. This would take away the incentive for the companies to migrate jobs off shore. THIS would save jobs and increase the local economy, not some innovation bullshit theory that will never amount to anything, since the place where your jobs went doesn't respect copyright or patent law either.

[masaccio]

Lets see: money vs. people. Who's gonna win that contest?

Thank heaven we live in a land where money is so respected.

Professor Bainbridge wrote an article and a post on the subject of shareholder wealth maximization here:
http://tinyurl.com/zfhhh
and followed it with some other posts on the subject. He says that the point of running corporations is to make money, and that moral issues are irrelevant in making decisions.

This is the justification for Shell in Nigeria, and Union Carbide in India, and all the other exploitation that happens under capitalism.

And it is the justification for the massive layoffs. And it is the reason that nothing will get better.

I see all this discussion on this site about what is to be done, and the solutions are all either impossible politically, or just plain useless. The plain fact is that workers are plentiful, and capital is in control. Nothing will happen to make any of this any better.

[Fred Hapgood]

> We're well past the point where jobs in
> the new industries can make up for the
> ones lost in the old sectors.

Say what you like about our unemployment rate, it's certainly not higher than it was in the 60's or 70's or 80's. So this statement can't be right, at least not taken literally. And while wages have been stagnating, stagnating is not the same as decreasing, so at the worst you can say is that industrial changes over the past few years have been a wash. So far.

Which is what you would expect, really. Cultural change has destroyed huge numbers of jobs in every generation going back for at least 150 years. Technology is responsible for just a fraction of this destruction, much of which has to do with changing tastes and values. Yet somehow the employment rate has fluctuated around pretty much the same values during all this time, with few exceptions and those temporary.

It almost looks as though job creation happens automatically, doesn't it? Can anyone think of a reason why that might be?
Hint: money does you no good unless you give it to another human being.

[George Colpitts]

Brad, you write: 'Uchitelle's diagnosis that mass layoffs are a serious national problem is convincing. But for this card-carrying economist, his desired prescription is not....Uchitelle wants the government to help. But the government's powers and competence are limited: it can do much more at cleaning up the mess afterward — in the form of unemployment compensation, education support and job search assistance — than it can at getting managers, directors and shareholders to "play nice" when the financial stakes are high.'

So your prescription is better unemployment compensationm education support and job search assistance ? Is that all we can do ? How much will that help the "White-collar middle managers in their early 50's [who] have next to no chance of finding remotely equivalent jobs" How much better would the uneployment compensation have to be to help these people ?

[dale]

Part of Uchitelle's story is a ridiculing of the notion that retraining and counciling are effective solutions to mass firings. Yet those are Brad's solutions to the problem.

Uchitelle is saying we need something much stronger than unemployment insurance and retraining/counciling. He is saying that corporations are short sighted in terms of even their own self interest. And pathological in terms of human need.

[jim-brady]

I think that the answer definitely is somewhere between the extremes of let the employer do what he wants, and give workers property rights on jobs. Security matters, just think of what it takes to bring up a child and it is clear. It has a price, but companies also should have the right to retain some value from investment in people so there is also a payback. A loyal and happy workforce can also be a productive workforce.

I explain the absurd salaries paid to the managerial priesthood as class warfare. Make sure the managers live apart, and think apart, from their employees so they feel no loyalty to them. If that doesn't work, bring someone in from outside who has no committment to previous agreements.

I really think we need to be talking micro-economic reform here. In case of downturns encourage unpaid leave, shorter working etc rather than just sacking people. Sacking people should be an option, but not necessarily the easiest one.

Shorten working weeks to reduce the supply of labour, and increase the availability of social support. Disallow unpaid overtime. Everything that is free will be wasted.

Also we need much more active anti-trust policy - break down monopoly and monopsony to spread the gains in productivity more widely. If winner take all markets are the consequence of communication technology then me must actively counter the tendency to monopoly. Shorten patents and copyrights, but subsidise research. Measures to stop leveraged hostile takeovers would be a help. (I'm not convinced by the arguments supporting these takeovers . Management should be empowered to follow a variety of strategies - if it doesn't work they go bankrupt - and in the meantime there is more competition.)

These are lots of little things. The big change would be a reform of the international financial system. Hot money flows should be recognised for the poison they are. The East Asian Mercantilism recognised as the cracking dam holding back a massive flood that it is. The system is broken (mainly by the fall of communism) and it needs to be fixed. Exchange rates need to respond more appropriately to relative costs. More pressure needs to be exerted on surplus countries to either stimulate domestic demand or allow their currency to appreciate so adjustment to imbalances comes from both surplus and deficit countries, the system is currently too asymetrical.

[Jim]

Individual companies are but actors in a game and they're just following its natural logic. And that logic makes it necessary to find the cheapest labor and to have everyone compete in a desperate contest for living standards. But is it really necessary for the game to be structured in this manner? Surely we can do better. Why can't you economists step outside the box for once and put some morality into your equations? Re-reading Keynes would be a good starting point. Do we really want to be ruled by profit and capital? I like your web site, Brad, but your review shows how similar democrats and republicans are when it comes down to the most important political issue of our times.

[Ralph]

This may be controversial but I believe the commodification of jobs and employment which is implied by the "easy to hire and easy to fire" laws of Anglo-Saxon capitalism is mistaken. Britain under Thatcher and Blair has been moving closer to the American model and further away from the European social model. This sadly encourages people to not take their work seriously enough when work is after all one of the most serious commitments that adults can become engaged in. It all comes down to who is boss as Humpty Dumpty said to Alice though he was talking about the meaning of words in Lewis Carroll's novel of a world turned upside down. But who is boss, the employers or the working class in the political arena, is classically what the
French revolution has been about in the 20th century.

[Ralph]

An interesting take on the controversy over mass layoffs versus a more measured approach to economic downturns is the takeover of Nissan Motors by Renault, the French auto maker. Carlos Ghosn, the Renault executive sent to Japan to rescue Nissan refused to merge the two companies completely, insisting that they remain distinct if not completely independent because of their different cultures and product lines. He did implement some plant closings at Nissan and large layoffs which would have been harder for Nissan's Japanese bosses to risk doing but kept from making the changes so drastic that morale would plummet. As a result Ghosn got the cooperation of management and workers to make drastic internal changes to rigid organizational practices based on seniority. He turned the debt ridden company around in record time. Ghosn has since moved up to the presidency of Renault while retaining the presidency of Nissan. I wonder if his experience as a top manager in France (Michelin and Renault) had anything to do with his cultural sensitivity and insights?

[Bob McBob]

There were some great comments above!

All the countries with high standards (labor standards, environmental standards, and who don't manipulate their currency and follow other laws like patents), need to band together to not allow other countries to drag us down.

People who say tariffs don't work are right. If the US has a tariff against India and Germany doesn't have the same tariff, that makes the US less competitive and German companies more competitive. The work will still leave the US to India, but it will go through Germany.

It's discouraging when people say, "tariffs are bad", like there's no other option. There is a problem, and the situation in France, and the under-employment in the US and Europe are signs of that problem, so let's please not ignore it.

WE NEED WORLD STANDARDS AND A WAY TO ENCOURAGE THOSE STANDARDS.

Countries who's governments are so terrible that they cannot meet those standards cannot be allowed to drag the rest of us down with them. It's a world economy now. We must work together.

[Slocum]

"Also, don't blame the unions for the rediculously poor business decisions that management made at both Ford & GM. At the same time, Chrysler gained like 8% market share and was profitable, and has WAW workers in the US."

Chrysler took a big gamble (on high-powered, highly-styled, rear-wheel drive cars -- the Chrylser 300 and derivatives). But this success is vulnerable to changing tastes and increasing fuel prices (the big, 'hemi' push-rod engines in the cars produce mediocre fuel economy numbers). At this point Chrysler has the highest level of incentives (rebates and the like) in the industry--not the healthiest of signs.

There is a strong interaction between having higher costs than competitors and apparently stupid management decisions. Because of their higher costs (and worse reputations for quality), the domestics simply cannot succeed when trying to compete head-to-head with Toyota and Honda with 'me-too' vehicles. If GM produced a Camry clone, it would cost GM a couple thousand more to produce than the Toyota (because of higher labor and legacy costs) and GM would have to charge a couple thousand less (because of reputation). That is a straightforward recipe for failure. So GM, Ford, and Chrysler have looked for niches where the Japanese were relatively weak--big pickups and SUVs, particularly (but also Chrysler's rear-wheel-drive/hemi strategy). And pursuing the SUV niche *was* a successful strategy until fuel prices killed it -- certainly better than losing their shirts trying to beat the Camry head on. If you don't take the cost disadvantage into account the SUV strategy looks like a monmuental management miscalculation. If you take the cost differential into accont, it made sense--in fact it was an easy call.

Ford has recently come out with a new mainstream sedan, the 'Fusion'. It is, by all accounts, a 'pretty good' vehicle. But Toyota just came out with a new Camry that, by most accounts, is a killer--better styling, much more refined, a new engine with much more power AND better fuel economy. How does the 'pretty good' new Ford stack up against the new Camry:

http://www.edmunds.com/apps/vdpcontainers/do/vdp/articleId=109710/pageNumber=1

You probably don't even need to read the article to guess the Camry came in first and the Ford last.

[Barry]

Fred: "Say what you like about our unemployment rate, it's certainly not higher than it was in the 60's or 70's or 80's. "

Brad has published graphs of % of certain demogaphic slices of the US who are working (I can't recall the technical term). We're very low on that figure, but since 'unemployment' doesn't count those people, your comment is technically correct.
Wrong in all implications, but technically correct.

Also, looking at the real media wage over the past three decades will disabuse anybody that we're in a low unemployment regime.

[Steve LaBonne]

Slocum- and let's also remember that Camrys are assembled in Kentucky while Fusions are assembled in Mexico! So buying the Ford would make no sense even to those of us who would prefer to buy domestic.

[james]

"But the government's powers and competence are limited: it can do much more at cleaning up the mess afterward -- in the form of unemployment compensation, education support and job search assistance -- than it can at getting managers, directors and shareholders to "play nice" when the financial stakes are high."

you ignore government's role in abetting managers, directors and shareholder in creating conditions where a small number gain alot and many lose alot

[anon]

This is depressing to me. This what I would consider to deal with it:

1. life skills education and training - at the undergrad or high school level, well in advance of needing it. Skills include intentional development of 'transferable skills', listening, building networks, not blaming victims

2. flexibility in education and retraining

3. taxes - some sort of modest, one-time tax break for someone "downsized" (eg, a tax credit or something - to be used for education, moving, or simply getting by without bankruptcy)

4. Legal - dishonest managers, employers and misleading educational institutions should be held accountable.

5. better corporate governance - some of these corporations appear to be run by an "insiders" club. There needs to be more investor involvement: at the instituional and individual level. See Bogle's book.

6. families - do things to prepare and strengthen families for this sort of thing. do somethign to help families stay together during stressful times. "tax credits" or "life skills educatin" (earlier points) might be part of this.

7. social organizations - non-work groups of people need to work on looking out for their own. This includes non-education groups such as churches or houses of worship, non-profits, special interest groups (eg, quail hunters of america), etc.

other notes:
formal "job search" assistance offered by an unsuccessful employer often is not that helpful. it can be patronizing and condescending. it can be stigmatizing. it is somewhat like herding everyone into the Louisiana Superdome. The people in the process may not be as effective as can be found in strong families, non-profits, and educational institutions.

[anon]

one more

families should consider diversification of employment or income: by industry, geography, age and gender of worker, etc.

[me]

"

Slocum wrote "Mass layoffs almost never result from managers at highly profitable firms chasing after even bigger gains but rather from managers at struggling firms trying to prevent or reverse losses."

Your statement is flatly contradicted by the lionization Jack Welch receives in some circles for taking a profitable industrial enterprise and converting it into a bank."

To believe that, you have to belive it is just coincidence that IBM fires 14,000 US and Brits and at the same time hires 14,000 Indians.

[Concerned]

The "cleaning up the mess afterward" argument is getting less and less convincing. No one seems to be able to offer blue collar workers a serious solution at the moment. Better to help out much sooner:

http://www.chass.utoronto.ca/~trefler/Children_Final_With_Figures.pdf

See also the discussion at the 44:50 mark of this Summers-Mankiw-Sperling exchange at KSG's IOP Forum:

http://ksgaccman.harvard.edu/iop/events_forum_video.asp?ID=2966

Mankiw's honest when he says "move". But that's not going to sell politically.

[save_the_rustbelt]

20% off at Barnes and Noble.

Don't buy this book in the evening if you need sleep, hard to put it down.

None of this is necessarily new but the author packages this into a devastating case.

I'm glad Clinton finally got the whupping he somewhat deserves.

(Mea culpa - I bought into NAFTA, largely because I could see what was about to happen to the rustbelt and thought forcing change was the only way to go - blew that one).

So can we fix this, or is it beyond fixing and we all need to develop survival strategies?

[save_the_rustbelt]

Proctor and Gamble has outsourced much of its routine accounting work to Costa Rica, which is apparently making a big effort to be a center of outsourced accounting.

[me]

As for the "low" US unemployment rate compared to Europe, I wonder if they are counted the same way. In the US a tech doing his old job for half the pay and no benefits is "an entrepreneur".

And I must add my usual question that no one ever answers, retrain for what? What are the jobs you want me to retrain for? From IT to waiting tables? What?

[James Wimberley]

Since when have the UK and Ireland not been part of Western Europe?

Since there are several - actually most - European countries with better labour markets than France, Italy, and Germany, it's a mistake to pander to the self-importance of their claims to represent the continent. As the maverick French politician Nicolas Sarkozy said of the "French social model", if it's a model, why is no-one copying it?
A worker can lose her job very easily in Denmark. But the safety net bears no comparison to the USA. Guaranteed and excellent health care, generous retraining, child care, efficient job placement, housing benefits ... no wonder Danes feel relaxed about the risks.

[anne]

James Wimberley

A worker can lose her job very easily in Denmark. But the safety net bears no comparison to the USA. Guaranteed and excellent health care, generous retraining, child care, efficient job placement, housing benefits ... no wonder Danes feel relaxed about the risks.

Similarly in various guises in Finland, Sweden, Norway, the Netherlands, Ireland.... But, from Australia to Canada, even from France or Japan, there are guides for us towards a more benign labor market. The question however is forming a consensus that American social structure change is necessary.

[Karlsfini]

Anne, it's hard to "argue" with house sparrows, there are so many of them.

As you know, they're really "European House Sparrows" and came to the U.S. without papers. In the photo we can see them taking away the livilihood of a native bird.

Anon, there is much wisdom in what you say.

Most of the world, including "developed" countries like Japan and much of Europe never broke the family connections the way we have.

Now thinking about my extended family and how life would be if I had to take care of them or depend on most of them to take care of me ... well, now you've made me depressed.

I think we're already seeing this. More grandparents in the house, more kids coming home after college. Also, the economic need for extended families, or clans, as seen in the phenomenal growth of mega-churches. (this may have less to do with religion than survival.)

[Karlsfini]

"So can we fix this, or is it beyond fixing and we all need to develop survival strategies?"

Rust Belt, I vote for developing survival strategies while trying to fix things -- just in case.

Sailors say trust in God but set two anchors.

[anne]

Karlsfini

'Anne, it's hard to "argue" with house sparrows, there are so many of them.

'As you know, they're really "European House Sparrows" and came to the U.S. without papers. In the photo we can see them taking away the livelihood of a native bird.'

Cleverly related, for we are such creatures as house sparrows :)

[me]

"The U.S. Department of Labor claims we have an unemployment rate of 4.9% According to "the Economist," however, the true unemployment rate in the U.S. is over 8%, or 12.6 million Americans. The difference is due to the fact that the U.S. Government doesn't count people as unemployed after six months without a job"

http://www.huffingtonpost.com/dr-peter-rost/the-new-robber-barons_b_18133.html

If you want a fascinating read, read the rest of this.

My point is that unemployement is not so low hereanymore than inflation is low.

Br. Peter Rost got canned by Pfizer and while a strata or two above me, he isn't any happier than I am about getting dumped by IBM.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=6328&exhibition=7&u=99|6|...

Fox Sparrow Singing
New York City--Central Park, The Ramble.

Ah, spring :)

[anon]

http://en.wikipedia.org/wiki/Phoenix_(bird)

[anon]

From watching television and following hte news and talkin to people, I've gathered that Pfizer must be a mess.

Listerine is an example. Mouthwath is moving to non-alcohol based (better for gums in your mouth - health research). Listerine is alcohol-based and obsolete with educated and desirable customers due to formula (alcohol). So Pfizer decides to sell the consumer products division (Listerine).

Given Pfizer is a mess, you can consider loading-up on stock in other pharmas (non-Pfizer). Look for Viagra to lose market share to Cialis and others.

[Matt]

Save for the professor's post, in all this rambling the word "property" can be found only once and the word "owner" can be found nowhere. Why is it such an issue that an employer be able to hire and fire at will at his/her/their OWN business? Should workers not have the right to accept and terminate their OWN employment? Why would you advocate stealing free will? Reading the reams of bullshit here it seems that idealistic-wanna-be intellectuals have diregarded completely basic human freedoms and replaced them with thoughts needed to fix the world of any problems we may be having this week.

[save_the_rustbelt]

For the past three months Ohio has had net job losses.

But - for the past two months the unemployment rate has dropped.

For the past two months the press release that accompanies the numbers has quoted an Ohio official as doubting the validity of the unemployment numbers.

Like duh.

[Cranky Observer]

Could one of you economics geniuses tell me exactly what it is that the United States DOES? Or perhaps more to the point, what do you expect it will do in 2020?

In the 1700-1850 period we exploited our vast reserves of land, plus some natural resources.

From 1850-1950 we exploited our vast reserves of natural resources, aided by the many immigrants who wanted to come here for land, opportunity, or to escape death.

From 1950-1980 we exploited the lead in manufacturing and technology that we had built up during the WWII period, plus more displaced persons.

And perhaps from 1970-1990 we exploited our manufacturing wealth to get a high tech sector running.

I'll be damned if I can figure out what we have been doing since 1990. Land - basically gone. Resources - mostly exploited. Manufacturing wealth - sent overseas. High tech - some left, leadership questionable, outsourcing in progress. Immigrants - do the world's best want to come to the US anymore? I have my doubts.

The only thing I have really seen going on since 1990 is an explosion of cornfield subdivisions and McMansions. We are borrowing from the PRC to build each other houses, then telling each other that our wealth is increasing. Plus a few Enrons here and there.

OK, I must be wrong. What DO we do? What will we do better than anyone else in 2020? What would you advise your teenage children to study/do (this is not a theoretical question for me)? Thanks.

Cranky

[anon]

"Save for the professor's post, in all this rambling the word "property" can be found only once and the word "owner" can be found nowhere. Why is it such an issue that an employer be able to hire and fire at will at his/her/their OWN business? Should workers not have the right to accept and terminate their OWN employment? Why would you advocate stealing free will? Reading the reams of bullshit here it seems that idealistic-wanna-be intellectuals have diregarded completely basic human freedoms and replaced them with thoughts needed to fix the world of any problems we may be having this week."

Point #5 in possible "reams of bullshit" included "See Bogle's book." Bogle talks about "owners" and "managers". So if you bother to get this book and read it, this might at least partially satiate your need for "owners".

At legacy organizations (read: Pfizer, IBM, and others), a lot of the people that do the terminating and eliminating do not own the companies. Companies are owned by pensions, life insurance companies, trusts, wealthy individuals, retirement money, and others. They (large companies) are not usually owned by managers, although managers often are given stock as rewards for meeting goals and to align incentives of managers and owners.

So when you say "OWN" business, you must realize that the people (managers) at large legacy organizations that do the terminating often do not even come close to owning the majority of the business, and may in some instances be terminating people who "own" more of the business than they do (some people have high salaries and no equity. Some people have tons of equity and no job).

I know and have spent substantial time with people that own their own small business. They are usually very reluctant to hire other people because they do not want to go through all the difficulties of managing people. So good advice to big companies might be to invest more in the up-front hiring and screening process so as to eliminate the need for terminations and downsizing. Employees will be happier as well because they will get matched with the right job more quickly.

[Karlsfini]

Rust Belt, as for fixing things, I came across this comment at: informationclearinghouse.info

Cyboman is commenting on a video link, an interview with a pesimistic David Walker, "America's Auditor-in-Chief."

"The best ways to plan for a survivable American future will always elude socially-well-placed Washington insiders like him. A few of those ways are

(1) Get the U.S. off the self-destructive, wasteful regimen of a bloated military -- of a war-obsessed economic base inherited from the second world war;

(2) Redistribute U.S. wealth by a wealth tax (suggested over and over by a conservative, Kevin Phillips) and, to boot, by drastically increased income taxes on folks with incomes over $500,000 a year;

(3) Invest in our future by sensible, but comprehensive investments in our renewing our cities and other human settlements and community facilities, especially better schools, and most of all, by guaranteeing every American child the best education and developmental experiences our national wealth can buy from the time that child is born; and lastly

(4)Raise, not lower the pathetically inadequate social security benefit for the disabled and elderly --funding that increase out of general tax revenues if necessary, not just the social security trust fund -- all of this amounting to planning for a more humane -- and therefore, more survivable U.S. -- rather than the self-destructing U.S. of A. we have now - a U.S. of A. that, understandably, has David Walker on its federal payroll."

cyboman | 03.29.06 - 10:50 pm | #

Karlsfini

[anon]

Corporate governance may be so screwed up and backward that some organizations may be overly controlled by managers who suck the resources out of the ocmpany for the managers at the expense of the owners (shareholders).

Matt: what do you think of this? I am tired of my large cap equity going no where. I am sick from all the possible dilution of my equity that resulted by issuing huge numbers of stock shares during recent years.

[Doctor Jay]

The obvious solution is to tax the rich to pay for more compensation for the displaced workers. The difficulty in political economy terms is that a more disrupted working class is less likely, not more likely, to have the political power to tax the rich in this way.

I'd prefer to say, "tax the beneficiaries of this policy" than "tax the rich". That is, eliminate the break on capital gains and dividends. Use the money to structure programs to cushion displaced workers. Universal health care seems really big here.

I think that would play pretty well, wouldn't it? Think win-win.

And by the way, it seems to me that an employee in his (or her) fifties would do well to look into starting a small business, rather than finding a new job, since it's grim. I'm talking about a micro-business.

What policies would help in this direction.

[Cranky Observer]

> What policies would help in this direction.

Universal health care, obviously. After 20 years of thinking I have finally come up with an idea for a small business that I think has a chance of success. I have or could enlist enough capital. I dare not leave my family without group health care; I could allow myself to die rather than bankrupt my children but I could never take the risk of not having them treated for a serious problem due to lack of money.

But - those who control the wealth don't really want those of us who don't to be free and mobile: servility suits them just fine.

Cranky

[Matt]

If you mean John Bogle, he has several books and I'm not sure to which there was reference, but if I recall his work doesn't address the stealing of human rights but rather how corporate decisions are made and the effects of those decisions.

In any case, legacy corporations have owners just as small businesses have owners. Whether or not the power to hire/fire is given by withdrawn owners to non-owner managers doesn't change the fact that the majority of owners (withdrawn or really excited) made the decision (consience or otherwise) to empower managers with this ability.

And so what if small businesses or large businesses or somewhat medium size business are reluctant to hire somebody or reluctant to set themselves on fire? Why is there a discussion about stealing business owner's rights to hire/fire somebody? Do you have the right to ask somebody to leave your home? Should you have that right?

[Karlsfini]

Cranky: "What would you advise your teenage children to study/do (this is not a theoretical question for me)? Thanks."

You've brought this up before and it has caused me a great deal of mental anguish, since it's something I don't like to think about, but keep having to.

I think it was Emerson -- maybe Thoreau -- who noticed an educated person seemed to always have more alternatives than a uneducated one.

From your other postings I believe you, like Brad and me, have kids that soon will be in college. I'm encouraging my daughter to get the best liberal-arts education she can for four years and to put off any "vocational" decision for now.

To concentrate on learing to read, write, listen, speak and think -- as well as to learn how to learn -- seems to be a better preparation for an unpredictable future than focusing on any special training, at least until we can get a clearer picture of how this storm is going to blow out.

In other words, I don't know what to do yet.

[Matt]

And I think you should sell your large cap stocks. Why keep your money there if you're sick from all the possible dilution of your equity that resulted by issuing huge numbers of stock shares during recent years?

[anon]

Matt

"And I think you should sell your large cap stocks. Why keep your money there if you're sick from all the possible dilution of your equity that resulted by issuing huge numbers of stock shares during recent years?"

I exercise my right to not hire you because it looks like I might have to terminate you. I recommend you pursue a job at Pfizer.

[Matt]

Well, I exercise my right not to hire you. So there.

[anon]

Look who feels the pain- OWNERS!

NEW YORK TIMES
March 19, 2006 Sunday
Late Edition - Final

Section 3; Column 1; Money and Business/Financial Desk; Pg. 1

Old Options Produce New Hangover
By GRETCHEN MORGENSON

TECHNOLOGY stocks are supposed to be the vehicle of choice for investors interested in high-powered gains. So why have many of the biggest names been such laggards lately?

It's not that these companies -- Intel, Dell, Texas Instruments and the like -- haven't been making money. In fact, revenues and earnings at these and other bellwether technology companies have been rising nicely. Dell's earnings grew 17.4 percent last year, Intel's rose 15.3 percent, and Texas Instruments' jumped 25 percent.

Their stocks, however, are going in the opposite direction. So far this year, Intel has lost 22 percent of its value, Dell has fallen 3 percent and Texas Instruments is down 5.9 percent.

To some degree, these companies are in the doldrums because the long-anticipated rebound in technology spending by corporations remains frustratingly elusive. In addition, a glut of technology gear -- like computers, disk drives and storage equipment -- is putting pressure on prices.

The Department of Labor said last week that computer prices were down almost 15 percent from a year earlier. That means that even as other companies can increase their profits by raising prices on their products, technology companies cannot.

[...]

But Mr. Hickey points to something else that is weighing on the shares of some technology companies -- the fact that even as these companies have generated billions of dollars in revenues and earnings growth in recent years, the value of what their shareholders actually own has been declining.

[...]

''You're seeing a destruction of book values at some of these companies,'' Mr. Hickey said, referring to the difference between a company's assets and its liabilities. ''There's been a lot of earnings shown, and yet it hasn't gone out in dividends and doesn't show up in the balance sheet. Their shareholders are growing poorer.''

[...]

The book values of technology companies have also been hurt by the expensive acquisitions they made to keep their earnings growth going, Mr. Hickey said. Costly write-downs often follow these optimistic purchases, reducing the company's overall values. ''We know the history of acquisitions have not been good in the tech world,'' he said. ''NCR and AT&T. Compaq and Digital Equipment and Tandem. Intel poured all sorts of money into smaller acquisitions.''

[...]

In better times, technology companies could use their high-flying shares to buy other concerns. Now that the shares are closer to earth, they are borrowing to make acquisitions. Last month, for example, Cisco raised $6.5 billion in bonds, its first debt offering, to help finance its $6.9 billion purchase of Scientific-Atlanta. Borrowing costs will also make a dent in shareholder equity.

[...]

After the wild and crazy stock option party of the 1990's, it should surprise no one that one heck of a hangover might result. But it is unfortunate that while managers and employees were the ones overserved, it is the shareholders who feel the most pain.

[mickslam]

'Greed is to become CEO for a drug company such as Pfizer, be responsible for a stock price drop of 40% over his five year tenure, twice as much as the AMEX Pharmaceutical Index, secure a $80 million retirement package while firing 16,385 Pharmacia and Pfizer employees, and get a 72% pay increase to $16.6 million as his reward.'

yeah brad, there is nothing we can do. Just throw your hands up.

[anon@aol.com]

Hey everyone

Apologies for not being more specific on the Bogle book (how can I expect someone to do their job if I am not specific enough?) See discussion of ownership below (link below takes you to excerpt from Bogle book).

http://simurl.com/ff-oo-pp

On rights: It seems to me like the gatekeepers (boards, managers, etc) are exercising rights that are not their rights. On the other hand, OWNERS need to start exercising their rights more.

So Matt is right: owners do have rights that others do not have.

[Lee A. Arnold]

I think there should be a "suggested boycott" website that lists companies that have laid people off, where and why, also including their management with names, pictures and addresses, and what companies these products make, so you can avoid buying them if you wish. This would, in the best conservative style imaginable, bring consumer pressure to bear on these management decisions, by increasing information in the marketplace.

Things would start to change right away, and at the very least you would see companies making more of an effort to help their displaced workers.

You could also include information on companies that are engaging in regulatory capture and sell substandard goods, or ingredients with questionable test results.

[Lee A. Arnold]

"what PRODUCTS these COMPANIES make"

[psh]

Karlsfini, a sage guy wit lucky kids. Get em educated before they get em trained. The single vital skill is resisting commercial predation and employers' indoctrination to ensure you don't cede too much control over your life. Everything else follows from that.

[anon]

apologies... grammar mistake (please do not terminate me from this board!)

---------------------------------------
(how can I expect someone to do their job if I am not specific enough?)

should read

(how can I expect someone to do his job if I am not specific enough?)

------------------------------------------

[anon]

"yeah brad, there is nothing we can do. Just throw your hands up."

Oh yes there is something we can do. We should report and disclose every donation to a university or college by the Pfizer CEO during hte previous five years and report it on the internet. Universities who received more than a certain amount should be required to devote resources to study the Pfizer situation.

[save_the_rustbelt]

We are saved!

The Bush administration has sent another delegation to get tough with China.

How many delgations is that? I have lost count.

Meanwhile the President of the U.S. is bowing and scraping to the President of Mexico, because his corporate owners told him to.

Is this a great country or what?!

[anne]

Following Anon :)

An important observation has been made that extends from what appears an increasing separation of a sense of responsibility of management to labor, to the separation of management even from a responsibility to owners. Lessening these separations in public and corporate consciousness is essential.

[John Faughnan]

Wow, a very hot topic judging by the comments. How many of us have personal experience in this domain?

I posted on another LOUIS UCHITELLE article on a related topic:

http://jfaughnan.blogspot.com/2006/03/myth-of-skilled-worker-shortage.html

Here were my 7 recommendations:

1. Universal healthcare in a multi-tiered system. (The universal care is "good enough", not "the best".)
2. Increased taxes on high earners and large asset holders.
3. Reinstate the estate taxes.
4. Universal 401K style savings that can be used both for retirement and for savings. Tax free accumulation on investments, when withdraw you pay taxes at current levels. (Zero if unemployed).
5. Make it easier for people to leave the labor market (see #1).
6. Eliminate any tax features or acccounting rules that in any way encourage outsourcing.
7. Measure what's happening and publish the results.
8. If #1-#7 aren't working, then get radical.

[me]

Following Anon :)

Matt, the true "owners", read sharholders, of Disney voted in the majority to fire Eisner and management didn't do it for two years.

Half of the stockhokders wanted Fiorina fired at HP and that took another couple years.

Unless you are talking a small, very small business, the owners are not necessarily the management. If you look at the stock sales of insiders at IBM I would argue the managers are not the owners at all. All they ever do is sell those shares of options, never buy.

[Charles]

Matt says, "Save for the professor's post, in all this rambling the word "property" can be found only once and the word "owner" can be found nowhere. Why is it such an issue that an employer be able to hire and fire at will at his/her/their OWN business? Should workers not have the right to accept and terminate their OWN employment? Why would you advocate stealing free will? "

While corporate libertarianism tends toward the obtuse, this one deserves some kind of recognition as an intellectual black hole sui generis.

Here's a simple example of the absence of thought in that post: suppose an employee has an employment contract voluntarily entered into by the employer and employee, which forbids the employer to fire the employee. Does the employer have a right to fire at will? (And yet this happens, because employers have so much more economic power than most employees).

Conceding that one obvious exception leads one toward a slightly more sensible point of view: society is based on a *balance* of rights. My right to fire my gun is balanced by your right not to get shot. If you happen to be in my house at 2AM without an invitation, your right not to get shot is balanced by my right to feel secure in my home. And an employer's right to hire and fire is balanced by employees's rights to gain a decent and reliable livelihood, without being forced into criminal acts as a pre-condition.

Rights don't exist in some kind of Randian vacuum. They exist in a social context. No one is talking about "stealing free will." They are talking about enforcing the social contract that corporate America claims in its media outlets exists.

America says that it guarantees the right to life, liberty, and the pursuit of happiness. If one cannot get a job and there is no social safety net, then one has been denied life itself. Nor can liberty be said to exist if people do not have meaningful choices in who they work for. Nor is it possible to pursue happiness if one is placed in a constant state of fear by mass layoffs done under conditions less than in extremis. So, somewhere in between a guaranteed income and absolute laissez faire, is a place of moderation in which human society exists.

I'm sure this is entirely lost on shallow extremists who imagine that business can be secure where labor is gravely oppressed.

But we are in this thing called "America" together.

[anon]

http://nber.com/papers/w5841

Volatility may not be good for investment (private anyways). I am not sure whether this is relevant to this discussion.

[Lord]

If we can get the incentives of executives more closely aligned with owners we can improve the situation. Too often, options, perks, severence, etc, are simply used to loot corporations, bestow favors, and endow largess.

[Cranky Observer]

> And by the way, it seems to me that an
> employee in his (or her) fifties would do
>well to look into starting a small business,
> rather than finding a new job,

Not a bad thought, but keep in mind that Wal-Mart and Home Depot have essentially put the nail in the coffin of the small manufacturing/wholesaling/services business. The minimum investment to sell to them is staggering, and if you identify a market and try to sell to it one or another of the big boxes will pick up your product/service and squeeze you out. There was a theory that medium-level niche services could escape this cycle, but Home Depot and Lowes among others are making acquisitions and building infrstructure in those areas too.

You can try to buy a franchise, but (1) everyone can't be a franchisee (2) you are still beholden in that situation.

Set yourself up as a contractor or consultant? For every one consultant billing $500/hr there are 9,999 competing for $25 bill rates against Indian outsourcers.

> To concentrate on learing to read, write,
> listen, speak and think -- as well as to
> learn how to learn -- seems to be a better
> preparation for an unpredictable future
> than focusing on any special training,

That actually is what I am advising them (a dual degree in engineering and economics or political economy seems like the best bet, along with two non-native languages) but perhaps you haven't been in the post-dotcom job market? Thanks to web sites and automated screening algorithms that kick out your application before any human sees it, you can only get a job for which you either match a very specific set of skills or that you have already been doing for 5 years. You can't be flexible or strike out into a new area, as you will only match 3 of the 19 screening criteria and some guy from Podunk will match 11.

Cranky

[Esq.]

This post, as well as several other recent posts, leave me pondering. Why has a country that historically had high labor costs and used high capital investment to maximize the value of that expensive labor, adopted a management philosophy that seems to emphasize low labor costs over any other input? In other words, why don't American manufacturers invest capital and seek improved productivity to compete with cheap labor, rather than close up shop?

I don't have any evidence that that there has actually been a philosphical change, just an impression. Assuming there has been a change, I can suggest several WAGs why, but again have no evidence. It could be that we really are in a global labor market now, and it is simple substitution of the cheapest factor.

But, I believe the answer to that question has more to do with how to protect the future of American workers, than any government policy to ease the effects.

[wood turtle]

"Instead, high overall unemployment, extra-high long-term unemployment and extra-extra-high youth unemployment appear to be the consequences of attempts to ensure that managers and workers are in the same boat."

What exactly are these Western Europe figures based on? If they have more generous unemployment benefits, they may inflate the figures somewhat as compared to ours, where people get unemployment for only six months.

You had some graphs a while back about the actual number of employed persons in each age group, and that would probably give a better idea about what is actually happening. That way the discouraged unemployed workers would properly be accounted for.

Also, our large prison population may be underestimating the unemployment figure by quite a lot.

[Karlsfini]

Cranky: ".. but perhaps you haven't been in the post-dotcom job market?...algorithms that kick out your application before any human sees it."

You mean people find real jobs that way? I'm always looking for a job, but ah well, I'm probably not geared for any of those anyway -- let the guys from Podunk have them.

Mostly I've found jobs through people I know -- someone at the Audubon Society goes to church with someone who has a niece who works for a company where this guy is looking for someone who can...

One the otherhand I wouldn't recommend my career trajectory to anyone. Some years, about this time of year, I imagine there's a lot of hilarity at the IRS when they see what I've been able to live on.

Chicken one day, feathers the next, as they say.

[Barry]

"Also, our large prison population may be underestimating the unemployment figure by quite a lot."

Posted by: wood turtle

Prison population, military population, military contractor/industry population,...

[Matt]

"[S]uppose an employee has an employment contract voluntarily entered into by the employer and employee, which forbids the employer to fire the employee. Does the employer have a right to fire at will? (And yet this happens, because employers have so much more economic power than most employees)."

Looks to me like a contract violation... If "this" happens than "this" can be dealt with in a court.

I don't understand your gun play analogy. I don't see how refusing to hire or choosing to fire an employess infringes on their individual rights. No one has the right to be employed just because they happen to be alive.

"If one cannot get a job and there is no social safety net, then one has been denied life itself."

That's just dumb.

"Nor can liberty be said to exist if people do not have meaningful choices in who they work for."

That's dumber.

"Nor is it possible to pursue happiness if one is placed in a constant state of fear by mass layoffs done under conditions less than in extremis."

Well, I live in a constant state of fear of elephant-sized spiders and man-eating jello molds... am I being denied my right to happiness?

(At least mine was an intellectual black hole, your's is an asinine hole.)

[Chris R]

Someone above said, "The U.S. Department of Labor claims we have an unemployment rate of 4.9% According to 'the Economist,' however, the true unemployment rate in the U.S. is over 8%, or 12.6 million Americans. The difference is due to the fact that the U.S. Government doesn't count people as unemployed after six months without a job"

Not true. The unemployment rate in the US is calculated from the current population survey, taken on the twelfth of each month. It has nothing to do with unemployment insurance claims, which come from a completely different source. From the BLS web site, verbatim:

"Unemployed persons (Current Population Survey)
Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed."

Says nothing about six months; the unemployment rate is calculated purely based on people's employment status and search behavior. Commenters do make a valid point about including broader measures of unemployment if we're trying to measure search activity; I lean toward something between U-5 and U-6 myself for this reason. If you're going to do this, however, make sure that you're comparing US U-5 against French U-5. These broader measures of unemployment show basically the same time-series behavior since they've been officially published since 1994; it would be interesting if someone out there took the CPS extracts and tried to back out broader measures of unemployment for earlier years.

This is all available right from the BLS web site. They're pretty good about this kind of stuff. But I don't know who came up with the six-months thing; it's just not accurate.

[Tom Womack]

In other words, why don't American manufacturers invest capital and seek improved productivity to compete with cheap labor, rather than close up shop?

Because it's not at all clear that an amount invested in capital equipment in America, staffed by well-trained American workers, will provide better return than that same sum invested in precisely the same capital equipment in Hyderabad or Harbin, staffed by graduates of the Indian Institute of Technology or of the Harbin Engineering University.

[Slocum]

"Wow, a very hot topic judging by the comments. How many of us have personal experience in this domain?"

I do. Got laid off in the mid 90's when our employer shut down the local office. Started a business with some of my fellow ex-employees, and we've been at it ever since. We've made a lot more money with better working conditions than we would have in corporate life. Security is both worse and better. Worse because our income does fluxuate occasionally when there's a dry spell, better because there's no risk of us laying off ourselves.

[Kaleberg]

Bring back good old fashioned bankruptcy in which the company is DISSOLVED and liquidated when its business model evaporates and to hell with upper management. They can deal with it.

As for everyone else. We obviously need more public benefits. Where is our national medical plan? Where is our housing department? There is no need for anyone to face starvation just to keep working attractive.

[Charles]

Matt says, regarding the question of whether an employer has the right to hire or fire at will, "Looks to me like a contract violation... If 'this' happens than 'this' can be dealt with in a court."

If the law limits the employer's rights, Matt, then he does *not* have the right to hire and fire at will. Once you concede that something-- *anything*-- makes the employer's rights less than absolute, you edge back into the arena of the sane. Then we are discussing, like real human beings, exactly what *responsibilities* come with rights-- and they are many. We are not engaged in ideological shouting of braindead slogans like "stealing liberty."

Corporations are able to make money because a government provides for a national defense, because there are highways and communications system which the government built because the free market would not take the risk. Corporations make money because a government provides for law courts in which they can sue one another and coerces jurors to sit through the cases. What we hear from corporate libertarians is about their rights and nothing about their responsibilities. Talk about a sense of entitlement!

You call me dumb because I point out that people need food to live, and dumber because I point out that liberty requires reasonable conditions of economic security. So, show me just how dumb I am: go without food for three months. Try living on the street for a year.

Then tell me just how stupid I am.

Matt says, "Well, I live in a constant state of fear of elephant-sized spiders and man-eating jello molds... am I being denied my right to happiness? "

No, but you're clearly being denied certain psychiatric drugs.

Not that that wasn't apparent somewhat earlier.

[anon]

Matt

If volatility gets out-of-control or increases, you may get entropy and private investment may go poof (disappear).

Owners who want to sell private investment will get a lower price or no price (no one will want to investment).

This is not good for owners.

[anne]

A current peculiarity in international asset markets is the decided lack of volatility. Friends have told me there is a tendency for hedge funds to take increased risks in a low volatility market, and this can be a source of danger. Volatility conversely can allow for opportunities.

[Hobo]

Government labor regulations are worthless if we don't address the labor laws in countries we all trade with.

There's no point in even debating what labor regulations we should or shouldn't have without first debating how we will deal with the lack of regulation in our trading partners.

Let's say one country allows extended work hours with no overtime pay, no unions, firing at will, child labor, etc. Let's say another country is allowed to trade and outsource to the first country. This situation will basically force most businesses in the latter country to use the labor in former country to lower costs and increase efficiency. Their competitors will be run out of business. The second country will have to lower their standards (see France) in order to compete.

[orionATL]

on the matter of disposables

thought of a different sort than l.u. writes about

could you and one or two of your well-informed colleagues

light a candle

to lead us - well, actually, me -

out of darkness regarding

the economic costs getting ride of illegal immigrants?

or is it immigrants altogether?

background to this out of the blue request:

i posted this on kevin drum's "political animal" a few minutes ago

"it's jsut a wash"

in a static analysis, that might be true.

in a dynamic analysis, convering several yars,

i wonder if that would not be would be inaccurate,

maybe higly inaccurate.

did these analysts take into account:

what happens when you (us - the government) spends money to seek out, arrest, hold, and deport millions of illegal immigrants?

or the costs if there is criminalization of illegals

or

criminalization of americans citizens who employ illegals?

or

the costs if businessmen operating on a knife's edge of profit

like vegetable and fruit farmers and processors

or

chicken farmers and processors

or

"small potatos" (is that with an "e" or not?) construction firms?

and tell me kevin

what do these prognosticators say about

any "reverse multiplier effect".

when workers who allow a small company or industry (e.g., carpets) to function (i'm talking about illegals only now)

are no longer available to that company.

so

the company goes out of business?

the incomes of workers are not spent.

the company does not buy machines, vehicles, gasoline, or whatever particular supplies that industry requires (say concrete or chicken feed)?

any ideas?

Posted by: orionATL on March 30, 2006 at 7:31 PM | PERMALINK

and yes

though it is a tiny anachronism to past it here

fire richard cohen!

fire him four years ago.

he maybe be the dumbest contraian ever to write for wapoop.

[Matt]

whatever. you liberty stealer.

[RKKA]

"This post, as well as several other recent posts, leave me pondering. Why has a country that historically had high labor costs and used high capital investment to maximize the value of that expensive labor, adopted a management philosophy that seems to emphasize low labor costs over any other input?"

What you're describing is the model of the industrial Northeast and Midwest. But there's another, equally American model, that of the South. As W.J. Cash described in "The Mind of the South", low taxes on businesses, hostility to unions, and the resulting low wages, were central to the South's strategy for economic development.

And the South has been our politically dominant region for several decades now. Is it any wonder that they brought their economic strategy with them?

[anne]

RKKA:

'As W.J. Cash described in "The Mind of the South", low taxes on businesses, hostility to unions, and the resulting low wages, were central to the South's strategy for economic development.

'And the South has been our politically dominant region for several decades now. Is it any wonder that they brought their economic strategy with them?'

A most important argument, since Louis Uchitelle puzzles over the resignation of American labor.

[anne]

Then we could argue it is not the labor protective models of the Netherlands or Finland that are the problem for such ready moves by management to low cost producers, but the philosophy that accepts there is no other way. But, there are other ways as even Costco shows as opposed to Wal-Mart.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5461&u=185|13|...

Great Egret with Fish
New York City--Central Park, Turtle Pond.

RKKA, an important comment indeed :)

[anon]

Matt

Fastow, Kozlowski, Lay, Skilling and others did not have the moral authority to exercise termination liberties afforded by employment-at-will.

You are not free to shoot an innocent person.

Maybe if you were terminated by some dishonest, incompetent sandbagger you would understand. How old are you anyways, and how much work experience do you have?

10-4

[ken melvin]

'As W.J. Cash described in "The Mind of the South", low taxes on businesses, hostility to unions, and the resulting low wages, were central to the South's strategy for economic development.

And, it's the model for third countries everywhere.

[me]

RKKA

Excellent point. Its as if slavery is rising up again.