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September 17, 2011

Latest Posts from Economist's View

Latest Posts from Economist's View

"Unusually Severe and Persistent Earnings Losses"

Posted: 17 Sep 2011 03:42 AM PDT

The impact of job loss during recessions:

Recession Job Losers Take Bigger Hit to Future Earnings, by Sara Murray, WSJ: Workers who lose jobs in a recession suffer nearly twice the hit to future earnings compared to those who are displaced in more prosperous times, a new study shows. ...
[A]ccording to a paper ... by Columbia University's Till von Wachter and the University of Chicago's Steven Davis ... "workers who have experienced job displacements events since 2008 are likely to experience unusually severe and persistent earnings losses."
The researchers tracked workers ... between 1980 and 2003. They focused on workers 50 years old and younger. ...
Workers who were laid off in recessions experienced, on average, $112,095 in income losses — three years of pre-layoff earnings. Those laid off in expansionary times experienced a $65,424 loss.
The negative impacts of job losses extended beyond the financial hit, affecting workers' health, mortality outcomes, child achievement levels and happiness.
"The negative consequences of job displacement, and fears of job displacement, are among the main reasons that recessions and high levels of unemployment create so much concern in the general population and among politicians," the paper states.

Concern among politicians? To the extent it's there, it's far short of what's needed. In any case, it certainly hasn't resulted in the kind of action you'd expect when there is a crisis. And our unemployment rate is at crisis levels.

If politicians were truly concerned, they would have done something to try to help already -- a year ago would not have been too early. But all we have at this point is talk of a job creation program, and the unemployed will be lucky if anything meaningful is done.

In the meantime, as I discussed recently (and have discussed many times before), the longer unemployment persists, the larger the permanent impact:

"Many employers shy away from workers who have been unemployed for a considerable period of time. That is, the longer a person is unemployed, the more negatively he or she will be viewed by the job market. In response, many of the long-term unemployed will drop out of the labor force. For example, some workers in their late 50s or early 60s might give up even looking for a job and find a way to hang on until retirement by living with a family member, etc. Others will take any job they can get, perhaps one that is ill-suited to their talents or in the underground labor market, and get stuck in these jobs long-term. Because the jobs do not make the best use of their talents, their output will be less than it might be otherwise."

"This is one source of aggregate losses, and it's not confined to older workers. There's evidence that the first job a person takes has a large influence on their lifetime earnings. When young workers have trouble finding employment and settle for a job that doesn't make the best use of their talents, and then get stuck in those jobs as they buy cars, houses, have families to support, etc., they suffer permanent losses of income."

Lives are being permanently and negatively affected, and what are politicians on the right up to? They are playing deficit games and wasting valuable Congressional time:

House GOP proves Standard & Poor's right, by Ezra Klein: ...The vote ... on Wednesday nigh ... saw 232 members formally disapproving of what was, in effect, a motion not to default on our debt and cause a global financial panic, and 186 members voting to keep current on our bills. The Treasury's new borrowing authority amounts to only $500 billion, so the House and the Senate will have to hold a number of these votes between now and 2013. But no one seems to care. As Rosalind Helderman reported, the vote "had no practical impact but allowed Republicans to once again express their displeasure at government borrowing." ...
Republicans ... weren't exactly a profile in courage. Fully 174 of them voted for the August deal that gave the White House between $2.1 trillion and $2.4 trillion in borrowing authority. But not one among that 174 voted to approve of the White House actually using that authority to avert default -- even in the presence of more than $900 billion in discretionary spending cuts, and a supercommittee charged with finding another $1.5 trillion in deficit reduction. ... It's a meaningless statement of fiscal irresponsibility rather than an actual moment of brinksmanship, but it sets a new precedent for how these votes will occur, and it makes it harder for any of those 178 members to ever vote to raise the debt ceiling again. ...

It also makes it harder to support job creation. If they ever get to it.

"A Jobless Future?"

Posted: 17 Sep 2011 03:33 AM PDT

Dan Little:

A jobless future?, by Daniel Little: Stanley Aronowitz and William DiFazio wrote a pretty gloomy book in 1994 with the striking title, The Jobless Future. Here is a Harvard Educational Review discussion of the book (link). What is most discomforting in reading the book today is the degree to which the factors they identify seem to be today's headlines. What does jobless mean here? In a word, it means that the US and other OECD countries will never recover the number and quality of jobs they need in order to regain the middle class affluence they had in the 1950s and 1960s. The future will involve work -- but not enough jobs to ensure a low unemployment rate. Here is their assessment in 1994:

For there is no doubt that we have yet to feel the long-term effects on American living standards that will result from the elimination of well-paid professional, technical, and production jobs. At the same time, nearly everyone admits that many of these jobs are gone forever. (xi)

The central structural factors they identified in 1994 are still key parts of our economic environment today: technology innovation replacing labor, rising productivity producing persistently flat labor demand, shifts in the structure of the economy towards finance and service sectors, and internationalization of production.

Technological progress and capital accumulation seem to disrupt the social fabric in the United States. A weakened position in the international economy demands that American industry increase its productivity and cut its unit labor cost. As Carl G. Thor, president of the American Productivity Center in Houston, says, "The trick is to get more output without a surge in employment." Technological change and competition in the world market guarantee that increasing numbers of workers will be displaced and that these workers will tend to be rehired in jobs that do not pay comparable wages and salaries. Women and minorities will suffer the most as the result of these changes; the increased participation in an occupational sector by women and minorities is often an indicator of falling wages in that occupation. (3)
The second explanation, more sobering, emphasized the role of huge federal and consumer debt accumulated beween the late 1970s and the early 1990s that has drained public and private investment, inhibiting recovery and growth. (5)
This, in brief, is the context within which a severely reduced job "market" began to take shape, not only for U.S. workers, but potentially for all workers. In this book we argue that the progressive destruction of high-quality, well-paid, permanent jobs is produced by three closely related developments. (8)

The implication they draw is stark: new jobs will never be created at a rate to satisfy rising demand for jobs.

Our first argument—that the Western dream of upward mobility has died and it is time to give it a respectful funeral—may have at long last seeped into the bones of most Americans, even the most optimistic economist. The dream has died because the scientific-technological revolution of our time, which is not confined to new electronic processes but also affects organizational changes in the structure of corporations, has fundamentally altered the forms of work, skill, and occupation. The whole notion of tradition and identity of persons with their work has been radically changed. (15)

They've also got a vision of what the future could look like: satisfying lives with a decent standard of living, based on a combination of paid work and guaranteed social income.

The aim of this work is to suggest political and social solutions that take us in a direction in which it is clear that jobs are no longer the solution, that we must find another way to ensure a just standard of living for all. (xii)
Accordingly, if unwork is fated to be no longer the exception to the rule of nearly full employment, we need an entirely new approach to the social wage and, more generally, "welfare" policy. If there is work to be done, everyone should do some of it; additional remuneration would depend on the kind of work an individual performs. (353)

They are as interested in the "satisfying" part of the question as the "standard of living" part. They want to know what sources of meaning, worth, and value are possible for a whole civilization in which work and career are no longer the primary focus? It is an existential question as much as it is an economic one -- which takes us back to an earlier post on income and wellbeing.

But here is someone else who has a vision of a jobless future: William Gibson. His pictures of the Sprawl (an urban agglomeration extending from Atlanta to Boston) and the Bridge (the improvised "off the grid" community living on the earthquake-damaged Oakland Bridge) offer a grim picture of life for people scraping by in a cyberpunk world. There is talent, technology innovation, wealth, economic competition in Gibson's world -- but there's nothing that looks like a middle class life for ordinary people. (Here are a couple of the novels: Neuromancer, All Tomorrow's Parties.)

It seems inescapable that the rising inequalities of income and wealth we have experienced for thirty years are strongly linked to the jobless state of 15% to 20% of us (counting discouraged workers and underemployed workers) and the fairly stagnant living standards of another 50%. By tolerating this acceleration of inequality, our society is also silently sanctioning the end of social solidarity and the compact that we've had according to which everyone benefits from economic activity. Our graph seems to be pointing more in the direction of Gibson than Aronowitz. But maybe this is the fundamental goal of right wing rhetoric after all: to decisively break the bonds of social solidarity and mutual obligation altogether and to allow privilege to have its way unconstrained by social obligations. Surely we owe each other more than this.

So far the strategies on the table about employment are either about job creation (Democrats) or providing even more tax relief for business and the wealthy (Republican). None of these voices consider the more radical implication: we may need to consider a dramatically new way of thinking about income, work, social distribution, and lifestyle in the future. And that's what Aronowitz and DiFazio proposed almost 20 years ago.

Where Did Gold Come From?

Posted: 17 Sep 2011 03:24 AM PDT

Asteroidal mercantilism:

Where does all the gold come from?, EurekAlert: Ultra high precision analyses of some of the oldest rock samples on Earth by researchers at the University of Bristol provides clear evidence that the planet's accessible reserves of precious metals are the result of a bombardment of meteorites more than 200 million years after the Earth was formed. The research is published today in Nature.
During the formation of the Earth, molten iron sank to its centre to make the core. This took with it the vast majority of the planet's precious metals – such as gold and platinum. In fact, there are enough precious metals in the core to cover the entire surface of the Earth with a four meter thick layer.
The removal of gold to the core should leave the outer portion of the Earth bereft of bling. However, precious metals are tens to thousands of times more abundant in the Earth's silicate mantle than anticipated. It has previously been argued that this serendipitous over-abundance results from a cataclysmic meteorite shower that hit the Earth after the core formed. The full load of meteorite gold was thus added to the mantle alone and not lost to the deep interior. ...
The impacting meteorites were stirred into the Earth's mantle by gigantic convection processes. A tantalising target for future work is to study how long this process took. Subsequently, geological processes formed the continents and concentrated the precious metals (and tungsten) in ore deposits which are mined today.
Dr Willbold continued: "Our work shows that most of the precious metals on which our economies and many key industrial processes are based have been added to our planet by lucky coincidence when the Earth was hit by about 20 billion billion tonnes of asteroidal material."

links for 2011-09-16

Posted: 16 Sep 2011 10:20 PM PDT

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