College Education, Good Jobs: Why Degrees Are Overrated - TIME

College Education, Good Jobs: Why Degrees Are Overrated - TIME

President Obama echoed the words of countless high school guidance counselors around the country: "In this economy, a high school diploma no longer guarantees a good job." Virginia Governor Bob McDonnell, who gave the Republican response, concurred: "All Americans agree that a young person needs a world-class education to compete in the global economy."

The statistics seem to bear him out. People with college degrees make a lot more than people without them, and that difference has been growing. But does that mean that we should help more kids go to college — or that we should make it easier for people who didn't go to college to make a living? (See the 10 best college presidents.)

We may be close to maxing out on the first strategy. Our high college drop-out rate — 40% of kids who enroll in college don't get a degree within six years — may be a sign that we're trying to push too many people who aren't suited for college to enroll. It has been estimated that, in 2007, most people in their 20s who had college degrees were not in jobs that required them: another sign that we are pushing kids into college who will not get much out of it but debt.

The benefits of putting more people in college are also oversold. Part of the college wage premium is an illusion. People who go to college are, on average, smarter than people who don't. In an economy that increasingly rewards intelligence, you'd expect college grads to pull ahead of the pack even if their diplomas signified nothing but their smarts. College must make many students more productive workers. But at least some of the apparent value of a college degree, and maybe a lot of it, reflects the fact that employers can use it as a rough measure of job applicants' intelligence and willingness to work hard.

We could probably increase the number of high school seniors who are ready to go to college — and likely to make it to graduation — if we made the K-12 system more academically rigorous. But let's face it: college isn't for everyone, especially if it takes the form of four years of going to classes on a campus. (See pictures of the college dorm's evolution.)

It is absurd that people have to get college degrees to be considered for good jobs in hotel management or accounting — or journalism. It is inefficient, both because it wastes a lot of money and because it locks people who would have done good work out of some jobs. The tight connection between college degrees and economic success may be a nearly unquestioned part of our social order. Future generations may look back and shudder at the cruelty of it.

Read more: http://www.time.com/time/nation/article/0,8599,1967580,00.html?xid=huffpo-direct#ixzz0heMWxNKI

Les Leopold: Why are We Afraid to Create the Jobs We Need?

Les Leopold: Why are We Afraid to Create the Jobs We Need?

...

Our government has all the money and power (and yes, borrowing capacity) it needs to hire these workers directly or fund contractors and state governments to hire them. Either way, workers would get the jobs, and we would get safer bridges and roads, a greener environment, better schools, and a brighter future all around. So what are we waiting for?

Here's what I've heard:

1. The private sector will create enough jobs, if the government gets out of the way.Possibly, but when? Right now more than 2.7 percent of our entire population has been unemployed for more than 26 weeks -- an all time-record since the government began compiling that data in 1948. No one is predicting that the private sector is about to go on a hiring spree. In fact, many analysts think it'll take more than a decade for the labor market to fully recover. You can't tell the unemployed to wait ten years.

Counting on a private sector market miracle is an exercise in faith-based economics. There simply is no evidence that the private sector can create on its own the colossal number of jobs we need. If we wanted to go down to a real unemployment rate of 5% ("full employment"), we'd have to create about 22.4 million jobs. (See Leo Hindery's excellent accounting.) We'd need over 100,000 new jobs every month just to keep up with population growth. It's not fair to the unemployed to pray for private sector jobs that might never come through.

2. We can't afford it. Funding public sector jobs will explode the deficit and the country will go broke: This argument always makes intuitive sense because most of us think of the federal budget as a giant version of our household budget - we've got to balance the books, right?

I'd suggest we leave that analogy behind. Governments just don't work the same way as families do. We have to look at the hard realities of unemployment, taxes and deficits.

...

3. Private sector jobs are better that public sector jobs.
Why is that? There is a widely shared perception that having a public job is like being on the dole, while having a private sector job is righteous. Maybe people sense that in the private sector you are competing to sell your goods and services in the rough and tumble of the marketplace--and so you must be producing items that buyers want and need. Government jobs are shielded from market forces.

But think about some of our greatest public employment efforts. Was there anything wrong with the government workers at NASA who landed us on the moon? Or with the public sector workers in the Manhattan project charged with winning World War II? Are teachers at public universities somehow less worthy than those in private universities? Let's be honest: a good job is one that contributes to the well-being of society and that provides a fair wage and benefits. During an employment crisis, those jobs might best come directly from federal employment or indirectly through federal contracts and grants to state governments.

This myth also includes the notion that the private sector is more efficient than the public sector. Sometimes it is, but mostly it isn't. Take health care, which accounts for nearly 17 percent of our entire economy. Medicare is a relative model of efficiency, with much lower administrative costs than private health insurers. The average private insurance company worker is far less productive and efficient than an equivalent federal employee working for Medicare. (See study by Himmelstein, Woolhandler and Wolfe)

4. Big government suffocates our freedom. The smaller the central government, the better -- period, the end. This is the hardest argument to refute because it is about ideology not facts. Simply put, many Americans believe that the federal government is bad by definition. Some don't like any government at all. Others think power should reside mostly with state governments. This idea goes all the way back to the anti-federalists led by Thomas Jefferson, who feared that yeomen farmers would be ruled (and feasted upon) by far-away economic elites who controlled the nation's money and wealth.

...

Unfortunately, none of our political leaders have the nerve to declare an employment emergency and get busy creating millions of new jobs. Maybe it's because so many of them got elected with money from the financial industry, and Wall Street doesn't give a damn about jobs. The bankers are happy to continue their taxpayer-financed gambling spree, secure in the knowledge that they are still too big to fail. The Tea Party, instead of focusing its ire on these rapacious bankers, prefers to skewer big government and taxes, giving politicians one more reason to sit on their hands instead of creating jobs now.

Meanwhile, the unemployed are still out in the cold. Maybe the new Coffee Party will provide something more than warm drinks to those without jobs. But you heard it here first: We're going to have big trouble in this country if we don't create jobs for the unemployed in a hurry. They need them. They deserve them. We need to build a movement to demand them. ...

Daily Kos: State of the Nation

Daily Kos: State of the Nation | Jobless Report Tends to Confirm Tepid Recovery

by Meteor Blades

Fri Mar 05, 2010 at 06:03:31 AM PST

It was the same story as last month in the lead up to today's release of the Bureau of Labor Statisticsjobs report: A couple of weeks of mixed economic news. The report clocked in this morning with the jobless numbers well below the consensus predicted by experts surveyed by Bloomberg and The Wall Street Journal: a seasonally adjusted loss of 36,000 nonfarm jobs for February. The headline unemployment rate held steady at 9.7%. U6, the alternative measure that counts underemployed workers and a portion of those out of work Americans too discouraged to look for a job, rose to 16.8%.

^{Click for larger version of this now iconic Calculated Risk graphic}

Employment fell in construction, the information industry, transportation and warehousing. Temporary help services, health care and the retail trade added jobs. Severe winter weather may have affected the job statistics, leaving some workers uncounted, but quantifying exactly how many was not possible, the BLS stated. Economists at Macroeconomic Advisers LLC in St. Louis said the bad weather might reduce the payroll count by anywhere from 150,000 to 220,000 workers, according to Bloomberg. That undercount will probably be reversed this month, they said.

Revisions raised lowered the job losses in December from the 150,000 reported last month to 109,000 and boosted the job losses for January from 20,000 to 26,000.

The tally of officially unemployed rose slightly to nearly 14.9 million, with the U6 population of unemployed and underemployed still clocking in at nearly 26 million. The civilian labor force participation rate rose slightly to 64.8 percent in February. The employment-population ratio went from to 58.4 percent in January to 58.5% in February. ...

NUMMI Closing Highlights Need for U.S. Manufacturing Policy | OurFuture.org

NUMMI Closing Highlights Need for U.S. Manufacturing Policy | OurFuture.org

Closing the New United Motors Manufacturing Inc. automotive plant in California will eliminate 25,000 jobs in the state and cost taxpayers $2.3 billion to replace the jobs lost, according to a March 3 report by University of California professor Harley Shaiken. The Daily Labor Report (subscription required) notes:

California and municipalities near the Fremont, Calif., plant will lose nearly a billion dollars of revenue in the decade after the plant closes, according to a blue-ribbon panel formed by state Treasurer Bill Lockyer (D). Using estimates by the President's Council of Economic Advisers, the report found that "just creating 4,700 jobs--the number lost at NUMMI itself--would cost $433 million."

Jobs lost. Lives destroyed. Communities weakened. Billions of dollars down the drain. All because companies can only improve their bottom line by going after the cheaper labor they can find in other countries, right? Not so, writes Ralph Gomory, president emeritus at the Alfred P. Sloan Foundation and former IBM senior vice-president of science and technology (h/t Alliance for American Manufacturing).

Cheap labor abroad is cited as the incurable handicap that explains why the United States cannot compete. But cheap labor doesn't explain the fact that Japan and Germany, both high-wage countries, are successful in the automobile industry. Nor does it explain how semiconductors, a model of a high investment, low-labor content industry, are mainly made in Asia. The premise that the inescapable burden of competing against low wages means failure is simply not correct.

Even more disturbing than this big lie, says Gomory, is the unwillingness of our nation's leaders to address the consequences of not competing.

Today our companies are motivated to take innovations abroad, produce there and import the goods into the United States. Increasingly we can expect services also to go overseas. We must produce here in the U.S.A., to employ the people of this country, and we must keep their activities effective by a steady stream of innovations in design and production. While other countries roll out a welcome mat of tax breaks and subsidies for our companies because their common sense tells them that their people being employed in productive work is the road to being a rich country, we provide no incentive for U.S. companies to produce here.

Good move, then, by Sen. Sherrod Brown (D-Ohio), who led a bipartisan group of 10 senators in sending a letter to President Obama urging the adoption of a national manufacturing policy. The letter states, in part:

The loss of manufacturing plants and jobs has stifled economic opportunity for middle class families and compromised our ability to compete in the 21st century economy. Indeed, for the last several decades, administrations have passed up critical opportunities to formulate a rational and comprehensive manufacturing policy. Continued apathy will undermine our country's ability to achieve energy independence and place our military readiness at risk.

Jobs by Sector Tell a Bleaker Story | OurFuture.org

Jobs by Sector Tell a Bleaker Story | OurFuture.org

The Department of Labor’s employment data released this morning indicates that we are continuing to lose jobs, 36,000 in February alone, although at a much slower pace than this time last year. The danger now is that with the leveling off of unemployment, policymakers and those in Congress will fixate on month-to-month job numbers rather than taking a holistic look at the entire health of the job market.

When looking at the numbers more closely by sector, the picture remains anemic, particularly for the construction and manufacturing industries.

Of the roughly 4.8 million jobs lost since January 2009, the construction and manufacturing sectors combined have shouldered half of all job losses. On the other hand, the retail and leisure/hospitality industries represent about 15 percent of total job losses.

Attention now has turned to the House passage of a $15 billion jobs bill yesterday. Unfortunately, this legislation is woefully inadequate to meet the magnitude of jobs that must be created across any sector, let alone to plug the entire gap of 8.5 million total job losses since the recession began in 2008. This is why a larger jobs bill is needed, and why the U.S. should take on measures such as Germany’s short-time working program that has successfully saved over one million jobs in the country.

These policies are not just good for the here and now though, they set a good foundation so our industries keep valuable, skilled workers as we look to rebuild our economy with greater investment and a strong industrial policy.

For Older Workers, a Longer Job Search - Economix Blog - NYTimes.com

For Older Workers, a Longer Job Search - Economix Blog - NYTimes.com

By CATHERINE RAMPELL

Older workers are much less likely to be unemployed than younger workers. But when old people do lose their jobs, they’re likely to be out of work for much longer than their spring-chicken counterparts.

We have written before about the extraordinarily high unemployment rates facing America’s teenagers. In February, for example, the jobless rate among 16- to 19-year-olds was a whopping 25 percent on a seasonally adjusted basis, whereas for workers over all it was 9.7 percent. For workers over age 55, it was just 7.1 percent.

...

Here’s a chart showing the average duration of unemployment for jobless workers in seven different age groups. (Note: The Labor Department does not adjust these numbers for seasonality, so I’ve plotted a 12-month moving average for each age group.)

Source: Bureau of Labor Statistics

In the chart you can see that the average unemployed person over age 65 has been out of work about 70 percent longer than the average teenager.

That gap in duration of joblessness has also been growing over the past year:

Source: Bureau of Labor Statistics

Why are older workers spending so much more time unemployed than their younger counterparts?

A few possible reasons:

1) Younger people are more likely to drop out of the labor force entirely if they can’t find work. Perhaps they can rely on parents or other relatives to support them. Whatever the rationale, if they’ve dropped out of the labor force, they no longer count as unemployed, and so they stop racking up weeks of unemployment.

2) Older workers may be more likely to have been laid off from industries that were in permanent (not just cyclical) decline, such as manufacturing or (gulp) journalism. These industries have in recent years been shrinking through attrition — i.e., not replacing their older workers when they retire — so they have been gradually getting grayer. Once the recession hit, some of their relatively older employees got the ax, and there are few similar job opportunities for them to turn to.

3) Related to #2, older workers may be less open to retraining for a new career, or to taking a job below the status and pay of the job they had lost, than younger workers. It’s one thing to be told you have to work your way up from minimum wage when you’re 25. It’s a different thing when you’re 65.

4) Employers might discriminate against older workers, perhaps because they falsely assume that #3 is true or that you can’t teach an old dog new tricks.

5) Younger workers may also be more likely to move to a new place for a job since they are less likely to own their homes. This gives them more flexibility in what jobs they can apply for.

Economist's View: "The Chicago Boys and the Chilean Earthquake"

Economist's View: "The Chicago Boys and the Chilean Earthquake"

Andrew Leonard takes on an op-ed in the WSJ lauding the Chicago Boys:

The Chicago boys and the Chilean earthquake, by Andrew Leonard: The ghost of Milton Friedman, writes Bret Stephens in the Wall Street Journal, "was surely hovering protectively over Chile in the early morning hours of Saturday."

Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.

Stephens' logic is simple. After the U.S.-backed coup in 1973, in which Gen. Pinochet seized power from the democratically elected president Salvador Allende, a group of Chilean economists mentored by Friedman, and known to history as "the Chicago boys," instituted a series of radical free market reforms. Since that point, averaged over the decades, Chile has experienced the strongest sustained economic growth in South America. Rich countries, argues Stephens, are more likely to institute and enforce building codes. Q.E.D. Milton Friedman saved lives.

Some might find it intellectually provocative to cite Milton Friedman's authority in an argument that depends on the foundation of successfully enforced government-mandated building code regulations. The building inspector is not exactly a libertarian hero. Others might wonder if a more important factor in Chile's relatively tough building codes might be the devastating 9.5 earthquake the country endured in 1960. Haiti hadn't experienced an earthquake as bad as the one this January in 240 years. Earthquake resistant building codes tend to be taken more seriously in regions that are accustomed to regular bouts of annihilation.

But the earthquake is just a side show for the opinion page of the Wall Street Journal -- just another opportunity, however shameless, to push free market fundamentalism. One ... pertinent question might be to ask just how much credit really is due Chicago-school economics for Chile's current relative prosperity? Mining alone accounts for 20 percent of Chile's GDP, and it is very much worth noting that the country's crown jewel, the copper industry, is completely dominated by one state-ownedcompany, Codelco. Ponder that, for a second: Latin America's poster child for Chicago school economics features state control of the single most important economic resource. Huh.

Chile also suffers from some of worst income inequality in the world...

The part where the op-ed said that we should be thankful that Milton Friedman caused more regulation, isn't Milton Friedman great for doing that, caught my attention as well. After all, from a Chicago perspective, markets don't need external guidance, they're are almost always self-regulating. Markets create the incentives needed to ensure that nobody would ever build unsafe financial assets cars buildings.

Fantasies of the Chicago Boys - Paul Krugman Blog - NYTimes.com

Fantasies of the Chicago Boys - Paul Krugman Blog - NYTimes.com

Ah, Chile. Remember how, during the Social Security debate, Chile’s retirement system was held up as an ideal — except it turned out that it actually yielded very poor results for many people, and the Chileans themselves hated it? Now we have the usual suspects claiming that Chile’s relatively low death toll in the quake proves that — you guessed it — Milton Friedman was right. You see, the Chicago Boys made Chile rich, and that’s what did it.

...

Actually, as you can see from the chart above, what happened was this: Chile had a huge economic crisis in the early 70s, which was, yes, partly due to Allende and the accompanying turmoil. Then the country experienced a recovery driven in large part by massive capital inflows, which mostly consisted of making up the lost ground. Then there was a huge crisis again in the early 1980s — part of the broader Latin debt crisis, but Chile was hit much worse than other major players. It wasn’t until the late 1980s, by which time the hard-line free-market policies had been considerably softened, that Chile finally moved definitively ahead of where it had been in the early 70s.

So: free-market policies are applied, and presto! prosperity follows — fifteen years later.

But remember, Obamanomics has definitely failed after 13 months.

Economist's View: "A New Age of Monopolies"

Economist's View: "A New Age of Monopolies"

Monopoly power was a much bigger concern in the past than it is today. Why aren't people more concerned about this?:

A New Age of Monopolies, by Thomas frank, Commentary, WSJ: ...Barry C. Lynn's recent book ... arises directly from the old antitrust tradition, and it presents us with an amazing catalogue of present-day monopolies, oligopolies and economic combinations. Its subjects are, by definition, some of the largest and most powerful organizations in the world. And yet almost none of it was familiar to me.

Mr. Lynn tells us, for example, about the power of single companies or small groups of companies over such disparate fields as eyeglasses, certain categories of pet food, washer-dryer sales, auto parts, many aspects of food processing, surfboards, medical syringes...

Nor had I ever heard about what Mr. Lynn calls "the vitamin cartel," or the "nearly complete roll-up" of advertising agencies, or that the "key industrial legacy" of now-imprisoned business executive Dennis Kozlowski was a company "that specialized in forging monopolies over U.S. marketplaces for everything from catheters to fire sprinklers to clothes hangers," or that a recent management book encourages readers to see monopoly power as the main goal of business strategy.

Mr. Lynn is a senior fellow at the New America Foundation in Washington; he first came to my attention with a memorable 2006 essay in Harper's Magazine in which he described the power Wal-Mart exerted over its suppliers...

Mr. Lynn ... describes companies that swallow their rivals and then, with competitive pressure diminished, set about "destroying product variety and diversity." ... We learn of entire industries where competitors have grown so close to one another that a collapse at one company would probably bring down many of the others as well.

This is, we are often reminded, a populist age, with fresh flare-ups of fury every time Wall Street bonuses hit the headlines. ...Mr. Lynn's anger at the Wall Street bailout, his fondness for small business, and his frequent homages to the nation's founders may seem superficially similar to the attitudes of the tea party protesters. But Mr. Lynn also takes pains to demonstrate that the economic "freedom" so beloved by the snake-flag set has actually yielded the opposite of freedom: a "neofeudal" system of "private corporate governments" answerable to no one. ...

Baffler -�Let Them Eat Dogma

Baffler -�Let Them Eat Dogma

...

... The Republicans ruled the policy world as “the party of ideas,” President George W. Bush famously pronounced, and all sorts of his erstwhile enthusiasts on the right, from tax-cutting think tank impresario Grover Norquist to Weekly StandardWarmonger-in-Chief William Kristol, lustily seconded the notion.

But then a funny thing happened: The conservative utopia of shrinking government, financial deregulation and upward income distribution became a hulking disaster. Major investment banks teetered on the brink of oblivion in the catastrophic Panic of 2008; pension funds spiraled into free-fall; the auto industry went on federal life support; and home foreclosure after home foreclosure has rendered many onetime boomtowns virtual diorama showcases for the wreckage bequeathed by alchemical works of market triumphalism, such as credit default swaps, mortgage-backed securities and the efficient market hypothesis.

And just like that, the idea-intoxicated American right vanished. As the federal government stirred out of its decades-long regulatory slumber and started to meet the financial calamity with urgently needed deficit spending, conservatives of the Gingrich vintage, who had long advertised their fealty to the high-tech, low-tax future, morphed seemingly overnight into the intellectual equivalent of historical re-enactors. Much as the Mormon faithful trek annually to the upstate New York festival in Palmyra to see their faith’s creation myth in a lavishly produced pageant, so have the conservative faithful repaired en masse back to the musty site of their modern genesis, the 1930s New Deal.

But this pageant of faith is a disorienting spectacle indeed. Instead of reckoning with a starkly transformed global economy, or the crucial ways in which their core precepts have been rudely upended, conservative thinkers are reviving 70-odd-year-old talking points from the Liberty League—the network of rock-ribbed Roosevelt haters who clustered in corporate boardrooms and Chamber of Commerce lobbies during the Thirties—thereby, one supposes, to finish the job their ancestors started: discrediting the New Deal and its legacy once and for all.

...

Letting the free market administer its mystic remedies—reallocating capital and labor in more efficient fashion—is the de facto position of all right-wing Thirties revisionists, from the impressionistic Shlaes to the various von Mises hardliners. But nothing like that outcome would ensue in a laissez-faire approach—then or now—for the simple reason that laissez-faire conditions are what eroded demand and pumped up speculation in the first place. It’s very much like trying to cure pneumonia by standing out in the rain.

Free market shibboleth remains serenely oblivious to such considerations, however. After all, Shlaes counsels, “the market had its own natural laws.” And it’s the law, evidently, that business interests should never be molested—for they, and they alone, dictate the course of the common good. Hence the 1937-38 recession—which most students of the era attribute to Treasury Secretary Henry Morgenthau’s abrupt call to slash federal spending as demand still faltered—was actually caused, in Shlaes’ judgment, by artificially high wages, frightening investors (of course) and driving up unemployment. Which means the FDR-empowered labor movement was a principal culprit.

By this reasoning, the labor movement itself, like the socialist outlook it recklessly foments, is a thing of perversity, which did not, in the case of the more militant Congress of Industrial Organizations “necessarily, represent the average worker.” What’s more, as unions secured stronger footholds in American workplaces, their success “only seemed to make them more bellicose.” As for the Wagner Act, which legalized collective bargaining, thereby triggering these manifold disasters, it “was continuing to hurt profitability” at U.S. corporations. Even as General Motors, for instance, saw its sales rise in the wake of the historic 1937 sit-down strikes that marked the founding of the United Auto Workers, its earnings declined: “The new wages and the costs of the strikes had made the companies less valuable.” Never mind that by any honest reckoning of the Flint sit-down strikes, GM executives bore at least as much responsibility for their costs as the striking workers—especially since their basic strategy was to starve out the UAW organizers. Never mind, in addition, that those same “new wages” helped make generations of autoworkers—many of them recent African-American transplants from the Jim Crow South—relatively prosperous members of a middle class whose wages stoked broader consumer demand. No, if companies are made less valuable, then any social movement or incremental progress toward industrial democracy reflects perverse “belligerence” and must be judged a miserable failure.

Of course, as Shlaes has admitted elsewhere, blaming wage increases for chronic unemployment through the Depression requires a critical bit of number-fudging: She uses figures that count WPA and other work-relief employees as unemployed, since, you know, everything the government does is by definition illegitimate. This trick allows Shlaes to omit fully a third of American workers drawing government pay from her tallies— and contend that unemployment during the 1937-38 downturn “was again hitting a full two in ten.” ...

A Country of Serfs Ruled By Oligarchs by Paul Craig Roberts on Creators.com - A Syndicate Of Talent

A Country of Serfs Ruled By Oligarchs by Paul Craig Roberts on Creators.com - A Syndicate Of Talent

...

The problems of the American economy are too great to be reached by traditional policies. Large numbers of middle class American jobs have been moved offshore: manufacturing, industrial and professional service jobs. When the jobs are moved offshore, consumer incomes and U.S. GDP go with them. So many jobs have been moved abroad that there has been no growth in U.S. real incomes in the 21st century, except for the incomes of the super rich who collect multi-million dollar bonuses for moving U.S. jobs offshore.

Without growth in consumer incomes, the economy can go nowhere. Washington policymakers substituted debt growth for income growth. Instead of growing richer, consumers grew more indebted. Federal Reserve chairman Alan Greenspan accomplished this with his low interest rate policy, which drove up housing prices, producing home equity that consumers could tap and spend by refinancing their homes.

Unable to maintain their accustomed living standards with income alone, Americans spent their equity in their homes and ran up credit card debts, maxing out credit cards in anticipation that rising asset prices would cover the debts. When the bubble burst, the debts strangled consumer demand, and the economy died.

As I write about the economic hardships created for Americans by Wall Street and corporate greed and by indifferent and bribed political representatives, I get many letters from former middle class families who are being driven into penury. Here is one recently arrived:

"Thank you for your continued truthful commentary on the 'New Economy.' My husband and I could be it's poster children. Nine years ago when we married, we were both working good paying, secure jobs in the semiconductor manufacturing sector. Our combined income topped $100,000 a year. We were living the dream. Then the nightmare began. I lost my job in the great tech bubble of 2003, and decided to leave the labor force to care for our infant son.

...

Policymakers who are banking on stimulus programs are thinking in terms of an economy that no longer exists. Post-war U.S. recessions and recoveries followed Federal Reserve policy. When the economy heated up and inflation became a problem, the Federal Reserve would raise interest rates and reduce the growth of money and credit. Sales would fall. Inventories would build up. Companies would lay off workers.

Inflation cooled, and unemployment became the problem. Then the Federal Reserve would reverse course. Interest rates would fall, and money and credit would expand. As the jobs were still there, the work force would be called back, and the process would continue.

It is a different situation today. Layoffs result from the jobs being moved offshore and from corporations replacing their domestic work forces with foreigners brought in on H-1B, L-1 and other work visas. The U.S. labor force is being separated from the incomes associated with the goods and services that it consumes. With the rise of offshoring, layoffs are not only due to restrictive monetary policy and inventory buildup. They are also the result of the substitution of cheaper foreign labor for U.S. labor by American corporations. Americans cannot be called back to work to jobs that have been moved abroad. In the New Economy, layoffs can continue despite low interest rates and government stimulus programs.

To the extent that monetary and fiscal policy can stimulate U.S. consumer demand, much of the demand flows to the goods and services that are produced offshore for U.S. markets. China, for example, benefits from the stimulation of U.S. consumer demand. The rise in China's GDP is financed by a rise in the U.S. public debt burden.

Another barrier to the success of stimulus programs is the high debt levels of Americans. The banks are being criticized for a failure to lend, but much of the problem is that there are no consumers to whom to lend. Most Americans already have more debt than they can handle.

Hapless Americans, unrepresented and betrayed, are in store for a greater crisis to come. President Bush's war deficits were financed by America's trade deficit. China, Japan, and OPEC, with whom the U.S. runs trade deficits, used their trade surpluses to purchase U.S. Treasury debt, thus financing the U.S. government budget deficit.

The problem now is that the U.S. budget deficits have suddenly grown immensely from wars, bankster bailouts, jobs stimulus programs, and lower tax revenues as a result of the serious recession. Budget deficits are now three times the size of the trade deficit. Thus, the surpluses of China, Japan, and OPEC are insufficient to take the newly issued U.S. government debt off the market. ...

The Myth of the manufacturing recovery | OurFuture.org

The Myth of the manufacturing recovery | OurFuture.org

This post originally appeared at The Huffington Post, Robert Scott is Senior International Economist and Director of International Programs, Economic Policy Institute. It is posted as part of our series, Is Manufacturing Making It?

Some bloggers have suggested that manufacturing is doing well, just because output has grown for the past few months. One sets up a straw man in a piece title "No, Virginia, U.S. Manufacturing isn't dead," but no serious economist claims that manufacturing is dead. Manufacturing employed 11.5 million workers in January, 2010, 8.9% of U.S. non-farm employment. However, nearly 6 million manufacturing jobs have disappeared since 1998, and manufacturing's share of GDP has fallen by a similar share in that time. The Bonddag blog and many others claim that productivity growth is responsible for manufacturing job loss, but they've got it wrong. Growing manufacturing trade deficits from 1998 to 2006, and the worst recession since the 1930s are responsible for the vast majority of all manufacturing job loss. We can reclaim a large share of these jobs by shrinking the trade deficit and putting this recession behind us.

I explained the relationship between manufacturing output, productivity growth, trade deficits and job loss in my Snapshot on Manufacturing Job Loss: Productivity is not the culprit. It shows that productivity has always grown rapidly in manufacturing--there was no big upsurge in the past decade. The recent uptick in productivity occurred in other sectors of the economy, which does help explain why job growth economy-wide was so terrible in the Bush era, but that's another story. With manufacturing, the story is simple.

In the past, we had high growth in real output and high output growth in manufacturing leading to stable employment. Then, after 2000, productivity growth continued but output growth flat-lined and manufacturing employment collapsed. The reason: a soaring trade deficit in manufacturing products. People kept buying more manufactured goods; they just bought them from China and other exporters, not from U.S. manufacturers. Josh Bivens reviewed this history in his earlier Snapshot on Trade Deficits and Manufacturing Employment.

In the past, employment and the trade deficit in manufacturing were roughly stable for 30 years from the late 60s through the late 90s.* Then the Asian financial crisis hit in 1998. The value of the dollar soared along with the manufacturing trade deficit. Manufacturing employment fell like a rock, with a lag of about 2 years, as shown in the graph below. The manufacturing trade balance did start to improve in 2007, but the big drop in the deficit came in 2008 and 2009, and was caused by the recession. The recession was also responsible for the loss of about 2 million of the 5.7 million manufacturing jobs lost since 1998.

US Manufacturing -- Losing Out? | OurFuture.org

US Manufacturing -- Losing Out? | OurFuture.org | By Clyde Prestowitz | March 2, 2010 - 2:01pm ET

Clyde Prestowitz is founder and President of the Economic Strategy Institute. It is posted as part of our series, Is Manufacturing Making It?

Since manufacturing is about 11 percent of U.S. GDP, anyone who has been saying it’s dead has obviously been engaging in hyperbole. But few if any serious observers have been saying this. Rather, what they have been saying is that U.S. manufacturing has been declining unnecessarily and at an unnatural rate that is harmful to the American standard of living. Production index statistics that show rising output do not disprove this.

A large portion of U.S. manufacturing output is of non-tradable or not easily tradable goods, things like toilet tissue, ply-wood, soap, catalogues, and the like. This is the core of our manufacturing base and it will always be with us. It’s not dead and it’s not going to die. Indeed, as the overall economy grows, this production of non-tradable or not easily tradable goods will grow along with it. If we did not produce any tradable goods at all, our manufacturing output would still show an increase when the economy grew.

For most of its history, America has also been a major producer of tradable goods – things like steel, airplanes, semiconductors, machinery, appliances, and so forth. Indeed, we still produce some of these things, but far fewer than we used to. As a result, manufacturing as a percent of GDP has been in steady decline from about 25 percent in the early 1980s to today’s roughly 11 percent. This decline has been particularly precipitate in the past decade during which there has been about a 6 percentage point plunge.

To some extent, this decline is natural and inevitable. Manufacturing as a percent of GDP tends naturally to decline in all economies as they develop and mature. This is even happening to China’s economy now despite its having become the workshop of the world. But the decline in the manufacturing share of the U.S. economy has been far more dramatic than in any other industrialized economy. Even in the UK which has long emphasized services as the core of its economy, manufacturing is nearly 13 percent of GDP. For Germany, Japan, France, Italy, and most other OECD countries the shares range from 15 to 25 percent. Since America has roughly the same or better manufacturing oriented resource endowments as these countries, one would expect its manufacturing share of output to be as high or higher. ...

...
This is not at all a pretty or reassuring picture. And it is clearly the result of mercantilist international trade reducing what under normal market conditions would be the expected level of U.S. tradable goods output and of U.S. manufacturing employment.

The Mismeasure of Manufacturing | OurFuture.org

The Mismeasure of Manufacturing | OurFuture.org

This post is part of our series, Is Manufacturing Making It?

Using statistics primarily sourced from the Federal Reserve, we are repeatedly told that manufacturing isn't dead, just manufacturing employment, due to all our productivity gains. I must disagree that it's all about productivity, as did a group of economists who met last November to discuss government productivity measures, Louis Uchitelle of the New York Times reporting (via Curious Cat:

... The fundamental shortcoming is in the way imports are accounted for. A carburetor bought for $50 in China as a component of an American-made car, for example, more often than not shows up in the statistics as if it were the American-made version valued at, say, $100. The failure to distinguish adequately between what is made in America and what is made abroad falsely inflates the gross domestic product, which sums up all value added within the country.

American workers lose their jobs when carburetors they once made are imported instead. The federal data notices the decline in employment but fails to revalue the carburetors or even pinpoint that they are foreign-made. Because it seems as if $100 carburetors are being produced but fewer workers are needed to do so, productivity falsely rises — in the national statistics. ...

This is a problem that even extends, as the article goes on to explain, to the service industry. If your accountant is outsourcing some of their tax processing work to India on the cheap, this also boosts US productivity statistics. Tracking the real impact of that imported carburetor, or any other imported intermediate input (say that three times fast,) in the productivity statistics is presumed to require years of work and congressional funding.

Imported Intermediate Inputs

Courtesy also of the Curious Cat blog, some of the economists who realize that manufacturing productivity measurements are distorted do work at the Federal Reserve and wrote about it in a paper entitled, "Offshoring Bias: The Effect of Import Price Mismeasurement on Manufacturing Productivity" (pdf), by Susan Houseman (Upjohn Institute), Christopher Kurz (Federal Reserve Board), Paul Lengermann (Federal Reserve Board), and Benjamin Mandel (Federal Reserve Board). Emphasis mine:

... [We document] the rapid rise in both the levels and share of materials used by U.S. manufactures that are sourced from abroad. Over the ten year period from 1997 to 2007, the import share of total materials jumped roughly 50 percent, as the fraction of materials used climbed from 17 to 25 percent.

...

... Although preliminary, our analysis presents evidence that offshoring bias has been substantial in recent years. We find that the growth rate of imported intermediate input prices may have been biased upwards by between 16 to 35 percentage points, which in turn has led the average annual growth rate in manufacturing productivity to be overstated by 0.1 to 0.3 percentage point or by between 9 and 20 percent over the entire period from 1997 - 2007. These numbers are significant, as 0.1 percent average annual growth rate for multifactor productivity is roughly equal to the average annual contribution of capital to manufacturing growth from 1997 to 2007. ...

...

US manufacturing is losing its footing in consumer markets both at home and abroad, and while the losses aren't total, they're serious. This has been ignored because the financial sector that's been funding the offshoring craze was doing well, and because many observers don't consider job losses to be that big a deal. Now that the finance industry isn't doing well and job losses have been revealed to be a very big deal, now that free trade has been revealed as a unilateral disarmament, can we start caring about this again, please?

The Vicious Cycle

As my colleague Dave Johnson recently pointed out, workers who make $70/week can't buy Whirlpool refrigerators. Nor, for that matter, can they buy new Ford cars. They can't afford mortgages or unsecured lines of credit at the mass consumer levels that would support a robust financial services industry. They can't go out to eat at sit-down restaurants, or afford to patronize other businesses that comprise a strong service sector economy.

Who, in other words, are $70/week workers in Mexico going to be making those refrigerators for? Sure as blazes, it isn't going to be for laid off manufacturing workers in the US who've been pushed into bankruptcy and defaulting on their mortgages in the wake of yet another jobless 'recovery'.

Because the big problem with the declining fortunes of US manufacturing employment is that Wall Street profits become the only thing that recovers after recessions, which seem to be coming thick and fast these days. If that's the kind of future we want, we should keep our eyes fixed firmly on outdated productivity statistics. If it isn't, we should start looking at having a sensible industrial strategy that creates a lot of jobs.

Leo Hindery, Jr.: America's Dirty Little Secret: Who's Really Poor in America?

Leo Hindery, Jr.: America's Dirty Little Secret: Who's Really Poor in America?
...

To help make their point, they referred me to poverty activist Marsha Timpson, who describes today's poor as "America's dirty little secret, hidden in the backyards of America's shining homes, the hollows, the reservations, the border towns and the dark ghettos of the city where they are the lie of the American dream."

I agree with my friends, and with Ms. Timpson's view, and everyone else should as well, for right now in America:

• At least 50 million people are ill-fed -- up from 37 million just a year ago -- including 17 million children. Hunger in America is now at an all-time high, and there are currently entire national geographic regions -- the very large 15-state 'South' being one of them -- where more than half of all public school students are poor and ill-fed.

Although I myself grew up in a fairly hardscrabble environment, as the father of a daughter who was in fact able to create a successful life from the opportunities her mother and I could give her, it is hard for me to imagine what it must be like to have your child needy and hungry. Yet all of us need to 'imagine' this, because each night in America millions of children do in fact go to bed hungry and under-nourished, while also lacking proper housing, needed clothing, and the basic education required to develop and ultimately find gainful employment. And while I wholeheartedly support the First Lady's new "Let's Move" effort to improve the nutrition of America's children, we must first react to basic hunger rather than to food quality.

• 30% of the nation's 50 million homeowners own a home whose value is below its mortgage balance, and this number could rise to an almost unbelievable 50% by year-end 2011. It would cost about $745 billion, more than the size of the original 2008 bank bailout, to restore these borrowers to the point where they were breaking even, which there is no obvious political will to find right now.

• Despite the truly dismal 'real unemployment' figures with which most everyone now agrees -- a staggering 30 million workers and 19% of the labor force -- very little attention is being paid to the particularly adverse effects the recession is having on people of color, recent immigrants, and out-of school youth. And almost no one is acknowledging the sad reality that even the nation's 130 million full-time workers have had an average economic loss of 15% just since December 2007 -- an average effective work week of 34 hours rather than 40 -- which means that the number of unemployed workers, measured economically, is actually as high as 50 million.

The overwhelming problem today for most workers isn't this recession, as horrible as it is -- it's the fact that for every earned income level except the top 10%, average household income hasn't changed a bit for 10 years, and that for the bottom 60% of wage earners it hasn't changed for more than 20 years. Through economic expansions and recessions -- and bull and bear markets -- alike, 90% of workers in America have been standing still earnings-wise.

• And 100 million people, fully one-third of the entire U.S. population, are at or below "200% of the federal poverty line of $21,834 for a family of four", which is a needs-measure made lame by the fact that no family of four can actually comfortably live on such a low annual income.

********** ...

Recession has more moms entering workforce - washingtonpost.com

Recession has more moms entering workforce - washingtonpost.com

At the start of the Great Recession, Lisa Blaker was a stay-at-home mom. Less than a year later, she wasn't. Instead, she became one of hundreds of thousands of women across the country who joined the workforce -- or added hours, or became a sole breadwinner -- amid the nation's most severe economic downturn in generations.

The mothers and wives of this recession have bought groceries, paid mortgages, kept away debt collectors -- stepping in as financial necessity has increasingly altered the eternal struggle between work and home.

Blaker went back to her career in information systems after eight years at home in Gaithersburg. In Silver Spring, musician Alison Crockett continues to work three part-time jobs, even though she had hoped to be with her infant daughter. In Takoma Park, Pamela Fields ratcheted up from part-time to full-time hours, forgoing afternoons with her school-age children.

Recent census data and other figures reflect this reordering of family life: As the recession set in, fewer married women stayed home to raise their children. Wives with jobs worked more. More wives were sole wage-earners. These changes came as men took a bigger hit in the employment market, experiencing three-quarters of all job losses in a gender gap that has led some observers to dub this downturn a "mancession." ...

...
The gender gap shows up in the unemployment rate, which is 10 percent for men and 7.9 percent for women. Experts say male-dominated industries such as construction and manufacturing have been severely affected by the recession, but several fields dominated by women, such as health care and education, have actually added jobs. ...

OpEdNews - Article: America's tenth decile, the "sitting around guys."

OpEdNews - Article: America's tenth decile, the "sitting around guys."
..
Hebert's column spoke directly to a problem that has been, and continues to be, one we have either intentionally or unintentionally ignored: The peril to the core of our civil society that this Great Recession has created; a combined total un- and underemployment in Northeastern University's Center for Labor Market Studies lowest decile, those households with annual incomes less than $12,499, of 51.4 percent! (A "tile" or "cile" is a population division under a bell curve. For example, the "normal" bell curve is typically divided into five groups, or quintiles. A bell curve with ten such division is called a decile.)

The unemployment rate within this decile is 30.8 percent. The underemployment rate is 20.6 percent. Underemployment is quite as vicious as unemployment. It includes those who are working part-time, when they'd much prefer/need full-time, but cannot get it, are in jobs they are overqualified for, or have given up looking for work because there simply do not exist a sufficient number of jobs they may be qualified for at rates of pay that warrant continued looking.

Before any of us holier-than-thou jump down the throats of those who have given up the chase on the presumption that "any job is better than none," let me introduce the idea that a very real Fortune 500 business decision is being made by those who have given up. For example, if a single mother has no dependable relatives with whom she can leave a preschool child, while the mother is at work, she will have to find and pay for child care. Then arises the business expense of transportation; getting her child(ren) to the day care facility, and then herself to and from the place of employment. One way or another, those compose expenses that must be significantly lower than the net income (gross wages less all taxes and deductions from pay) derived through the employment. Regardless how any of the rest of us might want to feel, it would be an utterly foolish business proposition for that mother to take a job that did not meet those minimum criteria, and were any CEO to engage a similar business opportunity decision similarly, he or she would be rightfully fired. ...

Econbrowser: What Are These Three Numbers?

Econbrowser: What Are These Three Numbers?

These numbers are expressed in billions of FY2010 dollars.

Figure 1, in billions of FY2010 dollars.

The first bar is the impact on the unified budget balance of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. The second is the impact on the budget balance of the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. The third bar is the CBO estimated impact on the deficit of the Patient Protection and Affordable Care Act proposed in the Senate on November 19, for 2010-2019. ..

The American economy: Almost a lost decade | The Economist

The American economy: Almost a lost decade | The Economist Almost a lost decade

• Mar 1st 2010, 17:45 by S.D. | LONDON

For those of you who missed it: a piece in this week's issue looks at the performance of the American economy in the years 2000-2009 on several dimensions, and compares it to previous decades. It's built around the following charts, which, I think, more or less speak for themselves. Perhaps not quite a lost decade, but the worst, on these measures, since the 1930s (or the 1940s).

...

States may ban credit checks on job applicants - Democratic Underground

States may ban credit checks on job applicants - Democratic Underground

It's hard enough to find a job in this economy, and now some people are facing another hurdle: Potential employers are holding their credit histories against them.

Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.

Employers say such checks give them valuable information about an applicant's honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.

More

How, indeed, can people ever correct their bad credit if they can't get jobs in the first place because of previous bad credit?

The labor movement was the principal force that transformed misery and despair into hope and progress ... captains of industry ... resisted ...

Quote for Today (Smart People Will get the Point) - Democratic Underground

"The labor movement was the principal force that transformed misery and despair into hope and progress. Out of its bold strugges, economic and social reform gave birth to unemployment insurance, old age pensions, government relief for the destitute and above all new wage levels that meant not mere survival, but a tolerable life. The captains of industry did not lead this transformation; they resisted it until they were overcome.

- Dr. Martin Luther King, Jr. 1965

January home sales fall 7.2 percent - washingtonpost.com

January home sales fall 7.2 percent - washingtonpost.com

By Dina ElBoghdady | Washington Post Staff Writer | Friday, February 26, 2010; 12:05 PM

The sales of previously owned homes slumped in January for the second month in a row, raising fresh concerns about the housing market's potential for rebound, according to industry statistics released on Friday.

Sales of existing houses, townhouses, condominiums and cooperatives fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million in January from December, the National Association of Realtors reported.

The sales are 11.5 percent higher than they were a year earlier, but the monthly trend is "not encouraging," the group's chief economist, Lawrence Yun, said in a statement. The group has set its sights on spring, when more people are expected to take advantage of a recently renewed tax credit for first-time buyers and some current homeowners.

The sales figures come just days after the federal government reported that sales of newly built homes fell to their lowest level since 1963, when the government first started tracking those numbers. In both cases, many economists had expected a less-drastic drop in sales activity. January's existing home sales were at their weakest point since June. ...