Monday, April 25, 2011
The Pathetic Dismal Science (2): The Jobs Myth
In the last blog (Dismal Science (1)) we examined the pathetic dismal science in terms of its failure to learn and make accurate predictions, particularly in terms of the 2008 credit meltdown and financial crisis. We also saw that a large part of this arose from dubious contributions of published academic economists (such as Glen Hubbard and Martin Feldstein, among others)who touted a specific paradigm (neo-liberal, free market domination predicated on low taxation) which was never fully tested, say on the level of claims made in physics. Because of this incestuous and closed-world of macro-economics, nothing was learned from the recent credit collapse, and indeed we are on our way to a new one if more stringent demands aren’t made on these purveyors of bunkum.
The latest disheartening take which is growing ever louder and more strident, is the meme that elderly people ought to easily be able to work to 70 and beyond. The same macro-economic propagandists that gave us the Ryan plan (or at least its basis) are now howling that people need to work much longer before receiving any benefits or as they like to put it, “entitlements”. Even the normally sober, and centrist Economist magazine has succumbed to this kool aid as they insisted in a recent (April 9) Editorial (’70 or Bust!’):
“Too many people see longer working lives as a worry rather than an opportunity- and not just because they are going to be chained to their desks. Some fret there will not be enough jobs to go around. This apprehension, known to economists as the “lump of labor fallacy”, was once used to argue that women should stay home and leave all jobs to breadwinning males. Now lump of laborites claim that keeping the old at work would deprive the young of employment. The idea that society can become more prosperous by paying more of its citizens to be idle is clearly nonsensical”
Now, where to begin with this farrago of butt-brained gibberish and codswallop? One is left to wonder if the Economist’s nattering nabobs even follow the employment news lately, or the chief job indicators including what the putative creators of jobs are doing with their capital. (Hint: They are sitting on nearly $2 TRILLION, and haven't created one damned job using it!) In fact, this clueless stream of foolishness shows more than anything else the extent to which modern economists (especially in the media, but also in academia) are incapable of realistic thought and argument.
First, the “lump of labor” argument may well have been a fallacy 60 or 70 years ago when the global population was half what it is now and Western citizens didn’t have to compete for jobs with 700 million Chinese, or 900 million Indians. But all that’s now gone by the backboards. We no longer live in that world (though the Economist’s editors appear to!), but one in which no country can keep up with population growth in terms of job production. Thus, we behold unemployment rates (and these are not gamed like the Bureau of Labor Statistics does in the U.S.) such as 31% in Trinidad, 44% in Guyana, 24% in Barbados, and 67% in the Ivory Coast and Guinea –Bisseau, Africa.
In all of those nations (and those are barely one twentieth of the total) the jobs production lags far behind the resident population's re-production, thereby creating vast pools of unassimilated labor supply or glut. We call this “surplus population” since it can’t be put toward any productive capacity because the nations involved haven’t devised the outlets for such capacity. Worse, the surplus population drags down remuneration because of the vast supply pool, and those under a certain age in Africa, often form the primary contingents of rebel and insurgent groups that destabilize governments, thus making job creation more difficult!
This is no less true in many European nations (including the Economist’s UK) and the U.S. For example, merely to keep up with population infusion in the U.S. requires the addition of 129,000 jobs each and every month. To date, the increase has never been more than about 260,000/month or about 130,000 above the monthly population growth rate. Even this isn’t much of a benefit since the credit meltdown and financial collapse saw more than 15 million jobs lost over 2007-2009. Over a year and allowing for +/- 25,000 variation per month (with more in the negative because of spiking oil prices) that translates to about 1.5 million jobs added above the population growth rate. This means it will take TEN YEARS at that rate of job addition to get back to where the U.S. jobs market was before 2007. Even if we put a happy face spin on it, and double the jobs addition rate, that is five years to get back to the pre-2007 status quo. That still leaves more than 9 million of the under-employed (including over 7 million in the 20-29 age range and many seniors) still looking for full time work.
In their great 1997 book, ‘The Judas Economy’, authors William Wolman and Anne Colamosca noted that the minimum unemployment rate among the post -60 population was over 20% and this was likely conservative. Certainly, ever since a 1996 Supreme Court ruling on a case dealing with age discrimination (the SC basically stated the claimant must bring proof and companies in any case were entitled to manage their finances however they saw fit) those numbers have spiked. This was made much worse after a 1996 Fortune 500 ‘white paper’ was leaked indicating that hiring people over 55 was a case of “diminishing returns” since they seldom justified a salary and benefits given their reduced labor capacity and output.
That was even before more than 11 million U.S. jobs were outsourced (since 1999) to Asian economies, via places like Guongdong, China, Mexico and Bangalore, India. Meanwhile, absolutely nothing has been done to discourage this trend! So how in Hades can a normally sage media source like The Economist claim the jobs are there and all seniors need to do is look for them? Moreso, how can they claim with straight faces the young won’t be negatively impacted when they already ARE? Can these editors be that clueless? Or are they under the grip of perverse PR? A first clue is when they cite sources at “the Peterson Institute” in Washington, yet another arm of the many-headed, Peter G. Peterson 'toss the elderly overboard and let 'em sink or swim' Hydra!
At least one column in the same issue did get it right, and warned about employers’ fears of hiring older workers, including “the nightmare that haunts many companies is older workers' rigidity”. This column by Schumpeter at least has the honesty to look at the very real barriers to hiring older workers and why the pie in the sky opinions expressed by the editors may not be all they’re cut out to be. (One must wonder what grog they were drinking when they wrote it!) He even cites a survey by the Sloan Center on Ageing and Work at Boston College which found that more than 40% of employers had a firm perception that older workers would impact their businesses negatively. This so upset former AARP president Bill Novelli that he wrote a book, 'Managing the Older Worker', attempting to rebut it. But the perception remains. Another survey of British employers also cited by Schumpeter found that only 14% were prepared to deal with an ageing workforce.
Thus, even in the selfsame magazine we behold a serious disconnect between the editors’ false notions and at least the realistic perceptions of their columnist. Then there is the case of that special subset known as poor seniors, who most may need work- say just to pay for all the things Medicare doesn’t cover. What’s to become of them? According to a recent Denver Post article (April 18, p. 6A) more than 75,000 poor seniors in all the states have been assisted to find work in their communities under the Department of Labor’s Senior Community Service Employment Program. The recently enacted and GOP-pushed budget bill, however, will slash the money for that program by 45%, meaning as many as 70% of the currently employed seniors will be thrown out of work – and, because of their age and low skill set, be unlikely to find employment elsewhere, even as burger flippers at Mickey D’s.
Finally, let’s examine the Economist editorial’s claim regarding “paying its citizens to be idle”. Well, last time I checked, most Western societies were paying tens of thousands of such citizens to do so, while living the lives of rentiers. These rich parasites – granted huge benefits from the Bush tax cuts for instance have parlayed that into idle (non-regular work) lives based on flash day trading, commodities speculation (driving up oil prices), hedge fund and ETF betting and buying, as well as living off stock dividends or reaping tons from capital gains breaks on their taxes. Yet I don’t see the Economist squallering about these misfits! No, they save their opprobrium for the poor elderly, the least likely to be hired anywhere (based on Schumpeter’s cited sources).
But again, the question must be asked concerning why this selective PR move is used, and places like the Peterson Institute are cited? The reason ought to be evident to anyone who’s followed my blogs: if the argument (however false) can be made that jobs are available but seniors just won’t take them, it is but a short step to claiming that they deserve no benefits at all. That is why we in the liberal-socialist progressive camp have to keep fighting like Tasmanian Devils to expose this tommyrot, and perhaps even soon take to the streets in fierce protests – if raising the debt ceiling is held hostage to Repuke economic terrorism.