Jump to content


Photo
- - - - -

Why Employment is Dead in the Water (and why easy credit isn't helping anyone but the banks)


  • Please log in to reply
8 replies to this topic

#1 Jase

Jase

    Kuechold Fantasies

  • Administrators
  • 17,490 posts
  • LocationMatthews, NC

Posted 28 January 2013 - 09:01 AM

http://charleshughsm...d-in-water.html

...

In sum: the population and GDP have both expanded smartly since 2000, but full-time employment has barely edged above levels reached 13 years ago.

Academic economists and political progressives would have us believe that the only thing restraining employers from hiring millions more people is lack of access to cheap credit.


The explicit assumption here is that cheap credit is all employers need to expand their workforce. This is so out of touch with reality that it beggars description.Progressives and academic economists generally claim the Federal Reserve's zero-interest policy (ZIRP) and its other policies of flooding the economy with liquidity "are working," i.e. boosting the economy.

Here is what the Fed's policies are boosting: financial sector profits Please compare this chart with the chart above of full-time employment, and then decide where the Fed's free money/easy credit is flowing.
Posted Image
Here are financial profits per capita:

Posted Image

The only way to understand why employment is dead in the water is to stand in the shoes of a potential employer or entrepreneur. Remarkably, this perspective is unknown to economists and progressive politicians because they have never been an employer (and no, hiring a grad student to grade papers or an illegal nanny to watch your kids does not make you an employer.)

I have described this vast divide between small business employers, entrepreneurs and the self-employed and those working in government or Corporate America as one of the least explored social/economic divisions in the nation.

Those who have spent their careers in government or academia have little idea what it takes to hire more people. Number one is a business with strong demand for one's products or services. In a developed world with too much of everything except energy, that is no small challenge: the world is awash in over-capacity in every field except niche industries such as deepwater oil rigs.

Second, you need a process that generates so much value (specifically surplus value) that you will generate immediate profits by hiring more people.

If the value added by additional labor is low, then you have no reason to hire more employees, even if Ben Bernanke personally knocked on your door begging you to borrow a couple million dollars at low rates of interest.

If an additional unskilled worker will cost $10 an hour and might generate $100 a day in additional gross revenues, that is $20 in gross profit. But the overhead costs of operating a business are rising faster than inflation: junk fees imposed by cities, counties and states, workers compensation and disability premiums, healthcare costs (if you hire full-time workers), energy costs, and so on.

For most businesses, overhead costs 50% to 100% of total employee compensation--wages plus benefits and payroll taxes. So adding another employee to gross 20% more doesn't make it worthwhile--it actually generates a loss once overhead costs are paid.

The only time it makes sense to hire another worker is if that worker will create 100% or more surplus value from their labor. For example, a worker paid $200 a day in total compensation generates $400 more in gross revenues--enough to not only support the added overhead but net the business a profit.

In a global economy, competition constantly lowers the premium most businesses can charge. That places most businesses in the vice of declining gross margins and higher labor/ overhead costs. The only way to stay solvent is to grow revenues and slash costs so declining gross margins are still enough to pay the bills and leave some return on capital/time/risk invested.

Cheap credit doesn't create surplus value, increase gross margins or get rid of over-capacity. It is a financial non-sequitur for all but a relative handful of enterprises. The only firms interested in borrowing money for expansion are those relative few in sectors that are not burdened with overcapacity. That might include oil services, network security and a handful of others.



#2 Kurb

Kurb

    I hit it.

  • Administrators
  • 13,651 posts
  • LocationILM

Posted 28 January 2013 - 10:07 AM

Guns Killing Everyone!!!!! Women in the Military!!!! Shootings!!!!!!

#3 stirs

stirs

    I Reckon So

  • HUDDLER
  • PipPipPipPipPipPipPipPipPip
  • 11,506 posts

Posted 28 January 2013 - 10:27 AM

BALANCED APPROACH = Raise taxes and nothing else.

#4 g5jamz

g5jamz

    Is back

  • HUDDLER
  • PipPipPipPipPipPipPipPipPip
  • 18,770 posts

Posted 28 January 2013 - 10:29 AM

7 out of the 10 richest counties are now surrounding DC...recently surpassing Silicone Valley as the highest % of wealthy.

Government is the 1%ers....

#5 thatlookseasy

thatlookseasy

    Death to pennies

  • HUDDLER
  • PipPipPipPipPipPipPipPipPip
  • 2,950 posts

Posted 28 January 2013 - 11:28 AM

Guns Killing Everyone!!!!! Women in the Military!!!! Shootings!!!!!!

BALANCED APPROACH = Raise taxes and nothing else.


I liked the part where you make fun of liberals for obsessing over irrelevant things by making a completely irrelevant post

#6 Kurb

Kurb

    I hit it.

  • Administrators
  • 13,651 posts
  • LocationILM

Posted 28 January 2013 - 11:32 AM

I liked the part where you make fun of liberals for obsessing over irrelevant things by making a completely irrelevant post



I appreciate your attempts to paint men into a particular political stereotype.

I was more mocking the media in what they decide to cover, when real, serious economic issues remain.

#7 thatlookseasy

thatlookseasy

    Death to pennies

  • HUDDLER
  • PipPipPipPipPipPipPipPipPip
  • 2,950 posts

Posted 28 January 2013 - 11:37 AM

I appreciate your attempts to paint men into a particular political stereotype.

I was more mocking the media in what they decide to cover, when real, serious economic issues remain.


Why blame the media, they are only giving us what we want. Just look at which threads in here have a bunch of replies

Wasnt really trying to stereotype you, its just there are very few good threads in the tinderbox, most on topics that dont have an obvious partisan response (like this one). Unfortunately the only replies so far are completely off topic

#8 Delhommey

Delhommey

    Moderator

  • Moderators
  • 12,585 posts

Posted 28 January 2013 - 01:15 PM

While there's no doubt that the latest war of capital vs labor is over and capital clearly won (and all the government subsidizing glory and generous tax breaks the finance industry enjoys), the more important issue is to recognize that what happened to farming about 100 + years ago is now happening to manufacturing and even the service industries. Productivity is driving out all the jobs. The problem is, there's nothing to replace it off hand.

Both the Right (everyone must work hard!) and the Left (there needs to be more jobs!) completely miss the boat on this one. Fact of the matter is there is less and less work to be done as we move towards automation.

The idea that everyone must pitch in is ringing less and less true nowadays. We don't need everyone to work, and we'll need fewer people in the future. One of the things I've been looking into is a flat tax combined with a basic guaranteed income that would ensure that people would have enough for food and housing (and yes a minority of people would misuse these funds. Get over it).

#9 thefuzz

thefuzz

    coppin a feel

  • ALL-PRO
  • 8,718 posts

Posted 28 January 2013 - 01:32 PM

While there's no doubt that the latest war of capital vs labor is over and capital clearly won (and all the government subsidizing glory and generous tax breaks the finance industry enjoys), the more important issue is to recognize that what happened to farming about 100 + years ago is now happening to manufacturing and even the service industries. Productivity is driving out all the jobs. The problem is, there's nothing to replace it off hand.

Both the Right (everyone must work hard!) and the Left (there needs to be more jobs!) completely miss the boat on this one. Fact of the matter is there is less and less work to be done as we move towards automation.

The idea that everyone must pitch in is ringing less and less true nowadays. We don't need everyone to work, and we'll need fewer people in the future. One of the things I've been looking into is a flat tax combined with a basic guaranteed income that would ensure that people would have enough for food and housing (and yes a minority of people would misuse these funds. Get over it).


I have been thinking on this for a while. I can now do a job that required 3 people 15 years ago. E-mail, cell phones, computers, etc. All make it easier to do more and more.

Tons of jobs just aren't needed as much any more, but we keep on expanding the population.


0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users

Shop at Amazon Contact Us: info@carolinahuddle.com