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I'll take the Double Dip to go
July 16, 2011 6:24 AM   Subscribe

There may be $2 trillion sitting on the balance sheets of American corporations globally, but firms show no signs of wanting to spend it in order to hire workers at home, however much Washington might hope they will.

Time magazine outlines five common destructive myths about how to stimulate U.S. Growth.
posted by AndrewKemendo (42 comments total) 14 users marked this as a favorite

 
One thing our corporations will never outsource is the CEO position. We could probably save a lot of jobs if the CEO position was held by a foreigner for whom a 50,000 dollar salary would be a godsend instead of the bloated high-6 or 7 (or 8!) figure reward for continued failure given to some no-talent American executive.
posted by Renoroc at 6:40 AM on July 16, 2011 [20 favorites]


The Federal Reserve and the US Government made a fatal flaw in early 2008 when they took the attitude that this was a normal slowdown and took the usual steps to intervene. They assumed this was a run of the mill production/consumption slowdown and felt that added liquidity would fix everything as it had in the past.

They were so 'effing wrong in that base assumption that we are now, and for many years to come, suffering for it. The immediate crisis that started at the end of 2007 was caused by malinvestment yes, but basically due to excessive debt, not liquidity.

The measures taken so far have been in a vain attempt to paper over the losses at large financial institutions and buy them time for the economy to improve and things to pick up. But guess what? That hasn't happened because we never took our medicine and wrote down/off those bad debts and investments. They're still on the books and/or they've been transferred from the private sector to the public sector (privatized profits, socialized risks - the WORST outcome imaginable).

In general Americans have come to realize that we're drowning under debt, we've got too much "stuff" and until that debt burden comes down we're going to be stuck in this type of malaise. The Feds have pumped trillions, literally trillions into the economy with nothing to show but propping up zombie institutions.

I cannot express how infuriated I was with Obama's statement the other day that "businesses aren't hiring because of the uncertainty in Washington." Bullshit. Businesses aren't hiring because there isn't any demand to hire and fully 95% or better of the population isn't paying attention to the theatrics going on in DC. If politicians want to continue with these sorry ass excuses for failing to face down our demons, be my guest, but it will simply prolong this damned depression until the malinvestment and debt is paid off or written down.
posted by tgrundke at 6:43 AM on July 16, 2011 [13 favorites]


Might I recommend: Balance Sheet Recession: Japan's Struggle with Uncharted Economics and its Global Implications by Richard Koo

Combined with all the automation advances in the last three decades, companies can get by just fine with less employees. The CEO's aren't going to take on more debt or employees unless there is a driving economic need or the government forces them.
posted by KaizenSoze at 6:56 AM on July 16, 2011 [2 favorites]


Triple-A debt wasn’t a huge part of the bond market back in the early 90s, but for the past decade it has invariably accounted for somewhere between 50% and 60% of total global fixed income issuance. That’s possibly the most horrifying bit of all: it simply defies credulity for anybody to be asked to believe that more than half the bonds issued in any given year are essentially free of any credit risk.
-- Felix Salmon
posted by Skorgu at 6:57 AM on July 16, 2011 [1 favorite]


Time Magazine presents: X things that Y!

Hack journalists gonna hack.
posted by indubitable at 6:59 AM on July 16, 2011 [1 favorite]


Thanks for the post. It's an excellent article of the sort which one doesn't often see from Time anymore. It summarizes nicely a lot of things which need to be part of the popular conversation about our current morass and which isn't.

I'm still pissed that the mortgage bailout was all about the banks and not about the homeowners. I wonder how much better a position we'd be in if the toxic debt problem had been solved by providing direct assistance to those who had taken on the mortgages rather than keeping the mortgages in place and just removing the risk from the banks which created them in the first place.

But all that aside, this popped out at me:
A bigger issue is that the available skills in the labor pool don't line up well with the available jobs. Case in point: there are 3 million job openings today. "There's a tremendous mismatch in the jobs market right now," says McKinsey partner James Manyika, co-author of a new study titled An Economy That Works: Job Creation and America's Future. "It runs across skill set, gender, class and geography."
The decline of blue collar training in our high schools and non-Bachelor-degree institutions has led to this problem. Vocational training used to be a big part of the American educational system. But at some point a few decades ago, it all turned into pushing people into college. As a result, we've lost the critical knowledge in our population which is needed to fill those 3 million job openings.

It's sad that we've crippled our own economic recovery for the sake of the four-year degree and the diploma mills, which are now pricing themselves beyond the reach of most students thanks to the proliferation of MBA-types taking over university administration.
posted by hippybear at 7:20 AM on July 16, 2011 [5 favorites]


I didn't think much of the article, I was interested in a a link cited by Krugman this morning furthering his argument that "what we’re seeing is a wide refocusing of the mechanisms of our society towards the crucial obsession of oligarchs: wealth and income defense. "

here's Mike Konczal's post that Krugman refers to, and here's Corey Robin's post that Konczal is himself commenting on (both are worth the read).
posted by Auden at 7:23 AM on July 16, 2011 [2 favorites]


Time Magazine presents: X things that Y!

I thought that was Cracked.com's formula?
posted by blue_beetle at 7:29 AM on July 16, 2011 [1 favorite]


The big balance sheets are a direct result of the Fed's quantitative easing. Whereby they buy assets (bonds, debt, etc.) with money conjured up out of nowhere.

(The idea being that when the economy fires back up, the Fed can sell these assets off and cancel out some of that excess money.)

This is a good idea and a bad idea. It is a good idea because: when demand returns, companies will have the ready cash to hire and gear up for the new demand. A bad idea because: it isn't really helping to stimulate demand. It is a good idea, but I think they were expecting too much from it.

Yes, debt is the reason demand hasn't resurfaced. People aren't willing to take on more debt, so when prices go up, they cut their spending elsewhere.

And it is all the fault of petro-energy. The global economy is growing. Demand for oil is growing. In 2008 when the economy was roaring its last roars, gas prices (and in turn ALL prices) were getting dangerously high. When it popped, prices dropped. People said "ah, thank goodness, prices are back to normal". Except that prices were NOT back to normal, they were below normal. Then, in 2010 when the economy was getting back to normal and demand returned, gas prices jumped back up. Not above normal, but back to the new normal that people hadn't really internalized. The economy sputtered because of that. People hadn't figured out how to operate with oil at that high price/demand level.

I think we are learning that now, and growth will re-fire soon. Especially as businesses realize that high energy prices are the new normal, and refactor appropriately.
posted by gjc at 7:32 AM on July 16, 2011


the industry I'm employed in has been hit badly by the slump. We sell hearth products (wood and gas stoves and fireplaces.) It is a high overhead, low markup business with a sales season that runs only part of the year. When the slump hit, we saw a lot of people cancel purchases and delay services. It now takes people a long time to decide to buy. The industry as a whole saw an abnormally high number of business failures.

The Economic Recovery Act had an energy tax credit of 30% for wood stoves (among a lot of other energy related products). It visibly boosted sales during 2009 and 2010.

It appears, however, that the industry as a whole is drawing the wrong lessons from sales patterns since the slump hit. Initially, sales fell off more at the low end rather than the high end, probably because people with more income and higher liquidity didn't drop out of the market as the slump occurred.

Many manufacturers responded by starting an arms race of sales features on high end products and discontinuing low end products. It turns out the imagined high end demand was a transitory thing and now most demand is low end. So many manufacturers are now sideways with supply and demand, producing more of what people want less and less of what people want more. That, coincident with the ending of the tax credit, has further depressed the industry.

Discounted prices (i.e. deflationary pressure) has kept sales moving in some lines, but the move to try and corral the high-end market has backfired. The high end demand is not there. since it takes the industry about two years to respond to market pressures, we will probably be stuck here for a while.

It's not a happy thing.
posted by warbaby at 7:42 AM on July 16, 2011 [1 favorite]


"There's a tremendous mismatch in the jobs market right now"

If the problem is a skills mismatch, as economists like Dean Baker have pointed out, then some sectors of the economy should be experiencing skyrocketing wages. This is not happening.
posted by Ralston McTodd at 7:47 AM on July 16, 2011 [10 favorites]


I'm still pissed that the mortgage bailout was all about the banks and not about the homeowners. I wonder how much better a position we'd be in if the toxic debt problem had been solved by providing direct assistance to those who had taken on the mortgages rather than keeping the mortgages in place and just removing the risk from the banks which created them in the first place.

I agree that there was probably a better way to solve that problem. However, one of the root problems is that housing prices had bubbled. Any fix has to figure out how to let the prices shift back down to a sustainable level.

The current price stagnancy (and still dropping in some areas) is that happening. The ratio of income to housing price is slowly returning to normal. That sucks for people who can't hold on, but it is an acceptable solution to maintain some stability for the vast majority of people who can hold on.

One of the root causes was the idea that a regular normal person could leapfrog over the course of a few years from a modest condo to a 5 bedroom, 8 bath mansion, on relatively the same income. You can't just refinance forever.
posted by gjc at 7:48 AM on July 16, 2011 [2 favorites]


If the problem is a skills mismatch, as economists like Dean Baker have pointed out, then some sectors of the economy should be experiencing skyrocketing wages. This is not happening.
posted by Ralston McTodd at 7:47 AM on July 16 [+] [!]


The problem with this is that hiring someone with existing skills for ever higher prices isn't the only way to obtain employees. Companies can train and "hire" from within, taking the guy whose skills are less useful and training with new skills.

The other problem with that is that if the supply of workers with these new skills grows at the the same pace as the demand for their services, prices will remain relatively flat.

The skills mismatch is occurring, but rather than helping the wages of those people with the skills, it is hurting the workers without the skills. The motivation is not "get new skills and double my pay" but "get new skills because my job is going away and I need to get a different job." This is, on balance, a good thing. The workforce (as a whole) is getting better at adjusting to new market conditions. This is preventing employment bubbles like what happened after the tech boom of the late 90's.
posted by gjc at 7:59 AM on July 16, 2011 [1 favorite]


In my stove example above, it occurs to me that the demand at the low end is inelastic 9because people are trying to stay warm) while the high end demand is elastic (because people are remodeling or redecorating.) Elastic demand can be delayed and the inelastic demand cannot.

What we have seen in our business is the buyers being more and more motivate by inelastic demand while the manufacturers are chasing the elastic demand. It's a disconnect.

The larger point to be made here is that catering to the upper end of the economy is a luxury and the low end is a necessity. that was what was fucked up about the health care disaster and it's what's fucked up about the whole economic debate.
posted by warbaby at 8:02 AM on July 16, 2011 [1 favorite]


Time Magazine presents: X things that Y!

I thought that was Cracked.com's formula?


I'd be more likely to believe seanbaby about why the economy is tanking these days. He would be as objectively correct as anyone else, but at least I could laugh through the tears.
posted by Etrigan at 8:06 AM on July 16, 2011 [1 favorite]


A bigger issue is that the available skills in the labor pool don't line up well with the available jobs.

And no one knows how to train anyone! It's a lost art! The idea of hiring someone who doesn't know exactly what you need right now but could learn to do it reasonably quickly—it just doesn't make sense!
posted by kenko at 8:09 AM on July 16, 2011 [4 favorites]


The idea of hiring someone who doesn't know exactly what you need right now but could learn to do it reasonably quickly

I think you may be mistaken when you say they could learn the skills reasonably quickly. A lot of the positions which are lacking workers aren't just "two weeks OTJ and you've got it" kind of jobs. We're talking machine shop, industrial operator kind of positions. The kind of things which people used to go to school 2-3 years to learn.
posted by hippybear at 8:15 AM on July 16, 2011


The problem with this is that hiring someone with existing skills for ever higher prices isn't the only way to obtain employees. Companies can train and "hire" from within, taking the guy whose skills are less useful and training with new skills.

The argument isn't just that there is a "skills mismatch", but that this mismatch is the cause of high unemployment. If that's true, then that implies that there is a huge unmet need for workers with certain skills. Then not only would people with the right skills likely be paid more, we would also expect them to be working more hours to compensate for the unfilled positions. However, we are not seeing a phenomenon of employers having their existing employees work more hours. If this is happening in any individual sector of the economy, I'd be interested to hear it (although even in that case, what's the motivation for employers to hire more workers instead of maintaining that state of affairs?)
posted by Ralston McTodd at 8:21 AM on July 16, 2011 [3 favorites]


We're talking machine shop, industrial operator kind of positions. The kind of things which people used to go to school 2-3 years to learn.

These are also things that companies used to routinely send employees to school to learn. Or, at the very least, reimburse their employees for the schooling. These are also the things that unions would provide via apprenticeship programs.

Good thing we got companies straightened-out and focused solely on profits, eh? And killed-off those evil, worthless unions, to boot.
posted by Thorzdad at 8:48 AM on July 16, 2011 [9 favorites]


I think there is a much, much larger problem looming.

First, automation has increased the production output of many workers dramatically since 1980. Every sort of physical object has dropped in price, not only because we are outsourcing manufacturing to people with a much lower standard of living, but because advances in manufacturing have led to serious output increases per man hour without any matched increase in pay. Quite simply, we don't need as many people as we did thirty years ago to put food on the table and cars in the garage, but the difference in pay has gone into the pockets of corporations instead of the people working for them.

Second, we have witnessed the rise of state-sponsored corporatism. Financial deregulation has turned traditional investment into a casino, built on parlor tricks instead of building businesses that created jobs. Businessmen in the past would take risks over decades to build something that would return a profit, but now they prefer to play games with currencies and markets because the return is immediate, and if it all falls apart, they can coerce the government into paying the bill. Other industries, like pharmaceuticals, the war industry, and massive agricultural conglomerates also wield incredible power over how our country's wealth is taxed and distributed, always to their benefit.

The third piece is that corporations have, again due to deregulation, begun to displace people as the dominant forces in law and government. Corporations now handle prisons, hospitals, wars, and now we're handing over our children, our food supply, and eventually they'll ask for unregulated control of our electricity and water rights. These are not mom and pop establishments where you know the person who opens the door for you and asks you how you're doing. These are the people who will bury studies showing that their product kills your children so they can continue collecting a paycheck a little longer.

Any attempt by democratic action is stifled in so many ways. Media companies aren't going to chase stories that harm advertisers, so nearly every major corporation is safe from serious investigation by default. Corporations can now donate directly to candidates, so they are easily and legally bought off, so what politician is going to pursue action against their biggest source of campaign funds?

You can trace almost every problem we face now back to our government's failure to keep corporate power in check, and instead of correcting poor regulation with effective regulation, corporations are bankrolling libertarian movements so the little bit of sanity that's left in our markets will disappear.

I don't think the future is necessarily bad, but unless people start understanding the power structures that run their lives, they're going to continue addressing surface issues instead of the underlying fundamentals that have been ruining our country for decades. If they are successful in continuing to label local democratic control of our nation's resources as communism, it will probably get much worse before it gets any better.
posted by notion at 9:04 AM on July 16, 2011 [43 favorites]


tl;dr: Concentration of capital is just as dangerous as concentration of state power, since you can often buy one with the other.
posted by notion at 9:13 AM on July 16, 2011 [10 favorites]


the difference in pay has gone into the pockets of corporations

As you point out in the previous sentence, prices have also dropped. So not all benefits of increased productivity flow to the corporation.
posted by ryanrs at 9:40 AM on July 16, 2011


Ah, finally found it. The NPR article about the millions of jobs which are unfilled due to skills mismatch. Transcript.
posted by hippybear at 9:52 AM on July 16, 2011 [2 favorites]


Yes, as the NPR article points out, one of the problems began when the educrats decided to take shop classes out of high school, based on the misguided assumption that they should prepare everyone for a four-year college degree. If you are young, you weren't around when most high schools had an auto shop, a wood/metal shop, and classes in electronics (which would be oriented toward IT work these days). Skilled workers make good money, but concerns about "tracking" minority children, especially, had this unfortunate ripple effect, however high-minded the original ideals were - and are.

This gap in education has resulted in all of those "technical colleges" for which you see ads on daytime television, and the dangerous tendency for youngsters to take out high-interest loans to pay for what seems like the only way to get a job that pays well. Once again, more money for the banks.
posted by kozad at 10:12 AM on July 16, 2011 [6 favorites]


The argument isn't just that there is a "skills mismatch", but that this mismatch is the cause of high unemployment. If that's true, then that implies that there is a huge unmet need for workers with certain skills. Then not only would people with the right skills likely be paid more, we would also expect them to be working more hours to compensate for the unfilled positions. However, we are not seeing a phenomenon of employers having their existing employees work more hours. If this is happening in any individual sector of the economy, I'd be interested to hear it (although even in that case, what's the motivation for employers to hire more workers instead of maintaining that state of affairs?)

I'm not disagreeing. Skills mismatch certainly isn't the only cause of the high unemployment rate.

However, if you look at the unemployment data, there is a lot of churn going on. There are something like 4 million people on the unemployment insurance rolls at any one time. However, there are something like 400,000 new claims every week. That's a 500% turnover rate, yearly.

So there are a lot of people getting new jobs after losing their old ones. There are, of course, other people who run out their benefits, unable to find work.

Further, the average hourly wage has gone up 35 cents in the last year, and hours worked has gone up by a fraction of an hour. Wages aren't skyrocketing, but they are going up.

That's what leads me to conclude that there is *some* skills gap going on. If there wasn't any of that going on, average wages would be more flat, and there wouldn't be so much churn. People with needed skills are finding jobs relatively quickly, people without them aren't. If people were taking jobs they were over-qualified for, wages wouldn't be rising faster than inflation.
posted by gjc at 10:50 AM on July 16, 2011


I'd just add a few different myths, not necessarily with direct efforts of economic stimulation, more ones that deal with the economic impact of other ideas that people and towns continually try to float:

6th myth:
Cutting federal spending won't result in layoffs in federal services and related businesses. If it does, the benefits to the private sector will offset any effect on unemployment.

7th myth:
Cutting federal spending will result in a noticeable decrease in the standard of living of congressional delegates - particularly those 'out of touch with the American People.'

8th myth:
Privatizing municipal services - such as water, ambulance and fire to cut the cost of those services will maintain the pay grade and scale of sewer workers, paramedics and firefighters. And, the cost of those services, once privatized will be a continued controlled cost to communities.

Dunno... I'm pretty sure we could come up with more... so few people seem to understand the short term or long term impact of their propositions - well whichever time frame produces a negative result to their plan...
posted by Nanukthedog at 10:59 AM on July 16, 2011 [2 favorites]


9th Myth:
Anybody really understands this. I mean, seriously, ever since 2008 I have been reading analyses of the crash, and learned scholars, and books, and all I've achieved is growing bewilderment at how this all works. Where did all the money go? Why was everything so great, and now is so bad? Was it always so bad? Or is it now better than we think it is?

And now Germany is the bright shining place we should all emulate. But before that it was, what, Japan? And before that the Soviet Union? I don't know. I think "don't have a big budget deficit" and "have a good education system" and "avoid corruption" are all good. But beyond that I'm completely lost.

Not that this stops me arguing about things, of course...
posted by alasdair at 12:59 PM on July 16, 2011 [2 favorites]


I remember reading books as a kid about the future. In the future, machines would do most of the work and humans would have more time for other pursuits.

Yet here we are, where most people are working more hours than ever and the rest don't work at all (and have no money). I have a feeling this is the real preview of the future.
posted by the jam at 1:13 PM on July 16, 2011 [4 favorites]


gjc, the BLS number I find is a bit higher at 42 cents for nonfarm payrolls from June 2010-2011. This is a rise of 1.8%, right in line with CPI less food and energy. Real wages overall are flat.

But I think you missed the overall point. The point is that if there's a significant skills mismatch, there will be certain individual sectors competing for highly sought-after labor, and so wages should be growing quickly in those sectors. You can't get at this information by looking at average wages across all sectors.

Also, I don't see how you conclude anything from 400,000 new unemployment claims each week (or how you got the 500% turnover rate number), which is historically only somewhat high when considered in relation to the number of covered jobs. Moreover, your claim seems to be that there must be some skills mismatch because people are finding jobs quickly. But if there were a skills mismatch, this is the opposite of what you would expect!

Regarding the Time article, there are a few partially-correct observations but it's mostly a mix of completely wrongheaded, irrelevant, and unjustified conclusions. Myth 2 is completely wrong, for one. But what's really strange to me is that the final remarks in the article are completely out of the blue. What the hell does the U.S. today have in common with Germany in 2000? "...the Germans were facing an economic rebalancing not unlike what the U.S. is experiencing." How? This tells me nothing. (And why on earth would anybody look to compare the U.S. to Germany in 2000 before comparing it to Japan since the 1990s?) From all I can tell, his entire comparison is based on his claim of a huge skills mismatch, which is backed up only by the statistic that there are 3 million job openings today. Well, in 2006, there were about 4.5 million openings at any given time. How is a drop in job openings evidence that employers are looking for workers and suddenly can't find them? (More job openings level data here.)
posted by dsword at 1:15 PM on July 16, 2011 [2 favorites]


The current price stagnancy (and still dropping in some areas) is that happening. The ratio of income to housing price is slowly returning to normal. That sucks for people who can't hold on, but it is an acceptable solution to maintain some stability for the vast majority of people who can hold on.

If there hadn't been a huge pushback on cramdowns this could have been less awful. Lenders didn't want it, of course, though the end result is largely the same - prices will inevitably come down to what the market will bear, whether that's via a bankruptcy cramdown or the eventual foreclosure and sale.

The difference would have been that people could have kept their houses and we'd have a number of other positive impacts on society - fewer desolate areas with unkempt houses that attract crime and drive down surrounding property values, less family destabilization, less uncertainty as banks keep houses on their balance sheets and try to trickle them out to minimize the plummet, etc.
posted by phearlez at 1:31 PM on July 16, 2011


I think I was using the non-supervisory numbers, and bad estimating. 35 cents seems like more than 1.8% of $19. That's what I get for not checking my math.

Regardless, if there wasn't a skills mismatch, I am imagining that the churn would go down, and with 9% unemployment, real wages would be dropping. But again, I'm not saying that the skills mismatch is the cause of high unemployment. Just that it can be happening without wages going up.
posted by gjc at 1:43 PM on July 16, 2011


If there hadn't been a huge pushback on cramdowns this could have been less awful. Lenders didn't want it, of course, though the end result is largely the same - prices will inevitably come down to what the market will bear, whether that's via a bankruptcy cramdown or the eventual foreclosure and sale.

The difference would have been that people could have kept their houses and we'd have a number of other positive impacts on society


How does someone lose a house that they thought they could afford when they signed the paperwork? People aren't getting foreclosed on because their houses are suddenly worth less.
posted by gjc at 1:58 PM on July 16, 2011


There may or may not be a widescale skills issue, but there are some specific industries where this is happening, and there _is_ a war for talent. Specifically for programmers. We're hiring thousands of engineers and have trouble filling the positions. Facebook/Google/Zynga/Apple/etc are all competing for the same talent and bidding against each other.

That said, it's a specific market segment -- skilled programmers at tech-centric companies. There's almost certainly not enough demand to help the unemployment issue overall even if the skills issue was resolved.

But there are various niches like this where it still happens. The problem is that these niches tend to be for very high-skill/high-education jobs, and it's unlikely to be the solution for the kind of unemployment we see in the country overall.
posted by wildcrdj at 2:00 PM on July 16, 2011


How does someone lose a house that they thought they could afford when they signed the paperwork?

1) They bought the house and were planning on flipping it when the balloon payment in the loan came due.

or

2) They were lied to about the nature of the loan or being able to afford it when they signed the papers (which happened not infrequently during the peak of the mortgage bubble)

or

3) They have lost their job in the years between them signing the loan and the present

These probably aren't the only ways which people have lost houses they thought they could afford, but they all come immediately to mind without having to ponder the situation too much.
posted by hippybear at 2:03 PM on July 16, 2011


The problem is that these niches tend to be for very high-skill/high-education jobs

No, not universally.

Here's a .pdf from 2006 outlining the kind of industry labor which, even back then, were seen to be in short supply. Look at page 12 -- it lists a great number of types of jobs which are not "very high skill/high education" jobs but which are in demand in modern industrial workplaces. Pages 15-17 outline the kind of education and qualifications employers were (and likely still are) looking for in this kind of labor pool.

These are positions which generally require technical certification or completion of an internship, and they are exactly the kinds of jobs which are going unfilled in today's weak labor market for a variety of factors.
posted by hippybear at 2:09 PM on July 16, 2011


Posted this in the latest debt ceiling thread but:

House Republicans Pass Around Incoherent Blog Post for Inspiration
posted by angrycat at 3:02 PM on July 16, 2011 [1 favorite]


Trickle down, my brothers.
posted by 3.2.3 at 7:51 PM on July 16, 2011


One thing our corporations will never outsource is the CEO position. We could probably save a lot of jobs if the CEO position was held by a foreigner for whom a 50,000 dollar salary would be a godsend instead of the bloated high-6 or 7 (or 8!) figure reward for continued failure given to some no-talent American executive.

Renoroc, you don't really have any idea what a CEO actually does, do you? While they are by no means superhuman with mutant powers, skills like communication, networking, salesmanship, and hands-on leadership skills are essential to their jobs. It's not a position you can easily "outsource".

Well, not effectively, anyway. If you are stuck with incompetent, narcissistic, or just short-sighted CEOs, sure, you can outsource that and save big bucks. But if the goal is effective leadership...
posted by IAmBroom at 10:31 PM on July 16, 2011


Actually I think the bit about not outsourcing the CEO is pretty insightful. There are tons of knowledge workers in China and India who are REALLY good at marketing, communication, networking, salesmanship... Americans have no monopoly on these skills. (Really, we don't. It's surprising how often people think these are uniquely American traits. And many Indians speak and write excellent English.)

But senior management has to come from the same culture as the customers, and those customers are (for now) mostly in the US and Europe. The same goes for employees in the creative class, the ones who are coming up with product ideas and selling the products. The reason we don't see Indian startups selling to Americans is that it's very hard to understand what Americans need without actually being one.

So I'm not too worried about outsourcing, even though I know there are Indians who can do the technical parts of my job for half as much as I charge. But I know that the non-technical skills I have -- being able to guess what customers will want, what types of features will impress shareholders, etc. -- are what keeps me employed.
posted by miyabo at 11:18 PM on July 16, 2011 [1 favorite]


Krugman made a good point a couple of weeks ago in his column about blaming employment problems on the labor side: If there's such a skill imbalance, how is it that unemployment was around 5% three years ago? There's no way that the basic needs of the economy have changed that much in that timespan, no matter how cataclysmic those years have been.

There's ALWAYS an imperfect correlation between the skills of the labor force and the pool of available jobs, and I seriously doubt the current situation is especially anomalous in that regard. The vast, vast, vast majority of the current unemployment situation is because of employers electing to horde cash or invest in areas other than labor, using the poor job market to intimidate their current workers into doing more work for the same amount of money.

That said, can you really blame them? From the perspective of any individual company, they're just doing the sensible thing, and without a force like unions around to fight back against speedup there's nothing to stop them. There's no reason for them to bring their workforces back to their previous size. Which leaves you with a government that has to figure out how to deal with a population that contains 15 million or so more non-working adults than it used to. Eventually some kind of equilibrium will be reached, but it could take decades to resemble anything like the 1940-2007 status quo.
posted by mellow seas at 12:37 AM on July 17, 2011


Well, true. I don't think that anyone is saying that the unfilled positions due to lack of skilled workers is the CAUSE of the unemployment problem. Nobody has said that, not even the talking head in the NPR piece I linked upthread. Those 3 million unfilled jobs have likely been there all along. It's a tad ironic that even in this terrible unemployment situation they remain unfilled, likely for a variety of reasons which include lack of training but also unwillingness to relocate and other factors on behalf of the laborers.

Anyway, nobody is blaming any of the unemployment on the labor side, really. Or if they are, I've missed the blame.

But I do have to say that there has been no equilibrium or status quo in unemployment between 1940 and 2007. Here's a handy chart showing unemployment across those years. As you can see, it's fluctuated wildly between 3% as an outside low and 10% as an outside high across those decades.
posted by hippybear at 6:22 AM on July 17, 2011


As you point out in the previous sentence, prices have also dropped. So not all benefits of increased productivity flow to the corporation.

posted by ryanrs at 12:40 PM on July 16


The data says otherwise.

From the 1990 to 2005:

+290.2% CEO Pay
+106.7% Corporate Profits
+  4.3% Production Worker Pay
-  9.3% Federal Minimum Wage

posted by notion at 9:03 AM on July 17, 2011 [3 favorites]


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