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Who took our jobs?
September 14, 2011 7:27 PM   Subscribe

The Economist reports on 40% youth unemployment in Spain. While Europe's bankrupt countries are making the headlines, Der Spiegel claims that the real problem is a lack of entry-level jobs across the continent which is giving rise to violent protests. The Guardian points to reemphasis on manufacturing as a way to save Europe's (and America's) economy. But will this work in the long term?
posted by shii (30 comments total) 15 users marked this as a favorite

Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.
Getting rid of generous vacations and early retirements would actually make unemployment worse, rather then better.
posted by delmoi at 8:10 PM on September 14, 2011 [21 favorites]

What's new? Now that we have even more efficient leveraging of capital worldwide concentrations of wealth (via High Net worth Individuals, or HNWIs) will soon be on the rise.

Yes, as soon as capital, ever on the wire, and ever self-interested - is better able to squeeze more "efficiency" (e.g. reduced pensions; less health care; later retirement age; etc.) from our social systems things will start to go very well for those who are pulling all the strings, and buying policy, no matter the country.

After all, it's far more efficient to concentrate the wealth of the banking sector, and protect banking as a private institution, rather than socialize the collective savings and investments of national populations in ways that guarantee long-term returns.

My mantra these days is to "follow the money". I don't see conspiracy in any of this, but there has been a slow accretion of monied influence that has ossified entire populations, and commercial cultures.

What continues to astound me is how every single one of these cultures, including ours - slowly turning to backwaters - is in retrograde because banking institutions and other financiers refuse to let credit fly.

Yes, the world is complex, and there is no one cause or answer to any of this, but it's rather obvious to this observer that getting back some of the collective wealth that is tied up in financial institutions would be a good way to start an development renaissance in so-called 1st world nations, not to mention those nations that are struggling to become "just like us".

We see labor costs constantly migrated to the lowest common cost denominator; this includes highly skilled labor, not just factory drones. Look at the salaries commanded by incredibly capable Indian engineers and technologists, compared to ours. Same with China. Same with Russia, and so on.

Investment moves to those places because it can buy labor on the cheap, thus leaving dependent developed nations in the lurch. Banks don't care where their investment money goes, as long as they can maximize returns. Same with most corporations.

How do 1st world populations take their economies and their long-term fate back from HNWI's without having to resort to violence or mass stupor that turns into social crisis? This is the elephant in the room. We've got to figure out how to see it, and deal with it - and at the same time find a way to maintain transparent flows of wealth and political action.

I don't know what the answer is, other than starting with making policy more transparent. the best way to do that is to make sure policy is responsive to the needs of the majority, and not just those with the power to buy policy. This is one tall order, and I grieve for our youth.

In all of this, there may be a blessing in disguise. Who knows? As I, and Douglas Rushkoff, have pointed out (with Rushkoff being far smarter and better known than I), we may be looking to a time when we simply don't need that many workers. Thus, a new social problem.

If the latter is the case, we are in for a serious re-ordering of values re: work and success in life. Maybe THAT's the next revolution? Who knows.
posted by Vibrissae at 8:58 PM on September 14, 2011 [10 favorites]

I've spent a considerable amount of time at work developing tools to make entry level positions obsolete because, you know, automation gives us more time for leisure. I make plenty more money doing that than I did in my old entry level job that I just made obsolete. And I'm keeping that money rather than redistributing it to the unemployed because I earned it, and they're all lazing around enjoying their leisure time.
posted by doublehappy at 9:02 PM on September 14, 2011 [1 favorite]

Getting rid of generous vacations and early retirements would actually make unemployment worse, rather then better.

posted by ZenMasterThis at 9:20 PM on September 14, 2011

This is just one of the articles worth reading in this week's Economist, which is chock full of articles on the subject of "jobs".
posted by Runes at 9:41 PM on September 14, 2011 [1 favorite]

Also from the Economist recently:

“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,” says Mr Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar.

posted by sien at 9:57 PM on September 14, 2011

I think Jeremy Rifkin pointed out the problem in 1995 in his book "The End of Work." The only thing he got wrong is that it took a little longer to get to this point than he thought, but we are there.
posted by charlesminus at 10:09 PM on September 14, 2011 [1 favorite]

And yet, at the same time, there's a huge political hassle here in the NL about raising the pension age by a year within the next decade, and more later, because there won't be enough workers to pay the state pension otherwise.

Or so they say.

I haven't heard a single explanation how that works with the rising youth unemployment figures.
posted by DreamerFi at 11:15 PM on September 14, 2011


Later retirement means a larger workforce, which means the same number of jobs will go to a smaller percentage of the workforce.

Similarly, workers putting in 10% more hours each means you can get by with 10% fewer workers.
posted by Pruitt-Igoe at 11:41 PM on September 14, 2011 [5 favorites]

Lump of Labour Fallacy
posted by sien at 11:44 PM on September 14, 2011 [2 favorites]

How do 1st world populations take their economies and their long-term fate back from HNWI's without having to resort to violence or mass stupor that turns into social crisis?

You don't. You do not get rights without the credible threat of violence if those rights are not granted.
posted by Grimgrin at 1:19 AM on September 15, 2011 [1 favorite]

How are we meant to believe that lump of labour is a fallacy if the link you provide immediately tells you that a citation is needed?
posted by MrMerlot at 1:50 AM on September 15, 2011 [1 favorite]

The Curse of TINA. The guiding idea at the heart of today's political system is freedom of choice. The belief that if you apply the ideals of the free market to all sorts of areas in society, people will be liberated from the dead hand of government. The wants and desires of individuals then become the primary motor of society.

But this has led to a very peculiar paradox. In politics today we have no choice at all. Quite simply There Is No Alternative.

The ever-excellent Adam Curtis made this blog post earlier in the week, looking into the rise of the think-tank (via a digression into pirate radio) in the UK and the reasons why they perpetually prescribe free market solutions to everything.

The money shot with regards to this post is this:

Faced by the disastrous collapse of manufacturing some of the economists who had been the true believers in the Hayek revolution began to have their doubts. At the end of the film, Sir Alan Budd who was one of the chief architects of Thatcher's policies gave an extraordinarily honest - and revealing interview.

He says that he worried that he and his ideas had been ruthlessly used. That what he calls the "capitalist class" had simply seen in the ideas a way to engineer a crisis of capitalism that led to mass unemployment.

As a result of that unemployment unions were smashed, wages forced down - and the capitalist class managed to make high profits again.

And instead of giving the workers higher wages - the bankers lent them money. Simple really.
(Video link goes direct to YouTube, as I suspect that the blog's iplayer content is not be available outside the UK.)

It puts the jobless recoveries in perspective, especially in the UK, where we have a Conservative austerity plan criticised by many as being based on ideology rather than necessity.
posted by Jakey at 2:33 AM on September 15, 2011 [8 favorites]

That TINA article really deserves an FPP of its own. Awesome stuff.
posted by A Thousand Baited Hooks at 4:53 AM on September 15, 2011

What continues to astound me is how every single one of these cultures, including ours - slowly turning to backwaters - is in retrograde because banking institutions and other financiers refuse to let credit fly.

Banks that refuse to lend should be forced by law to give up their charters and nationalized.
posted by Civil_Disobedient at 5:08 AM on September 15, 2011

Lump of Labour Fallacy

This article smells funny.
"[The lump of labour fallacy] is based on the following reasoning: 1) The number of hours of labour per day that are demanded by the market is constant. [...]
The lump of labour rebuttal argues that (1) is false."

This rebuttal works only against the "fallacy" defined in such ridiculously narrow terms. Of course the amount of labour demanded by the market isn't constant. But it isn't completely decoupled from the other variables either. If you affect one (the number of working hours) the others will change. Among them, the amount of labour that can be squeezed from a given workforce. Perhaps the system will rebalance itself by increasing productivity, perhaps by hiring new workforce, most likely by the combination of both and other means I haven't thought of.
posted by hat_eater at 5:09 AM on September 15, 2011

Lump of Labour Fallacy

I didn't say that there was a fixed amount of labor, what I said was that increasing retirement and decreasing vacation would increase unemployment. Companies wouldn't need to hire replacements for retiring workers, and they would be able to get by with fewer employees to make up for those on vacation. In economic terms, the supply of labor would go up, but there is nothing that would make the demand for labor go up to compensate, so you end up with higher unemployment (at least until wage costs go down, which happens very slowly)

The article on the "Lump of Labour" fallacy doesn't even refute anything I wrote.
posted by delmoi at 6:06 AM on September 15, 2011

The Adam Curtis article is fascinating and well worth pairing with this column by George Monbiot, on the unaccountable financing that lies behind many of these think tank organisations - especially on the right.

Adam Curtis has a tendency to simplify and exaggerate for effect, which I dislike - but he is also a very interesting and striking writer who sometimes looks at things in new ways.

I think it is high time that people started doing that, as the present neoliberal approach appears to be losing its legitimacy.
posted by lucien_reeve at 6:14 AM on September 15, 2011

As an afterthought - because one cannot edit these posts, blast it all - I also note that Curtis makes an interesting case that the Pirate Radio of the sixties was not the wonderful thing that The Boat That Rocked would have us believe...

Radio Caroline was an immediate success. In the media mythology of the 1960s it is seen as part of the rebellious counterculture. In reality it had been deliberately created by the New Right - as a part of their counter-revolution.

Curtis doesn't seem to like hippies very much. But I do find it interesting that the libertarian ethos seems to suit the Boomer generation very well - a generation that had more resources handed to it on a platter than any before or since, and that seems to have largely consumed or squandered those resources - and are leaving a bankrupt, devastated social ruin for their children to fix or to flee.

I am not the only one to have noticed this connection (see this article where the author takes the philosopher Robert Nozick to task for his naive belief in his own specialness and blindness to the systems that provided the opportunities he had taken advantage of...)
posted by lucien_reeve at 6:27 AM on September 15, 2011 [1 favorite]

African American teenage unemployment is over 40% now if I'm not mistaken. It increased 8 points from July to august according to the newest BLS numbers. I want to say 45-46% of blacks 16-19 are looking for work can't find it.
posted by scunning at 6:29 AM on September 15, 2011

I though the general consensus was that Spanish employment data - especially for young people was total garbage? Totally skewed by people avoiding employment taxes and what not.

i.e. unemployment for the cohort is too high, but nothing like 40%
posted by JPD at 6:30 AM on September 15, 2011

45-46% of blacks 16-19 are looking for work can't find it.

That's a very narrow cohort, and the data for all races is pretty terrifying - its 25% - and unlike the Spanish data we don't have a very large underground economy.
posted by JPD at 6:34 AM on September 15, 2011

There is a very broad and deep body of literature on the effect of labor regulations on unemployment. In some cases decreasing the number of hours worked might decrease unemployment (for the obvious reason), and in some cases it may increase unemployment (companies are more willing to replace workers with automation/outsourcing because they become relatively cheaper, and goods become more expensive reducing demand).

If you really believe that increasing vacation decreases unemployment unconditionally, then why just increase vacation days until unemployment drops to zero? Yet no country in the world does this. As in many things, the "right" labor conditions are a balance of many competing factors.

The Lump of Labor Fallacy is a common term for this in economics classes, although I admit the wikipedia article is lacking.
posted by miyabo at 6:49 AM on September 15, 2011

At the end of the film, Sir Alan Budd . . . says that he worried that he and his ideas had been ruthlessly used.

Interesting. Here in the U.S., Pat Buchanan is in pretty much the exact same position, but has come out even more strongly opposed to the policies he once championed through Nixon. (You can hear/read Buchanan's views anywhere; here's a critique of the book he wrote about the subject.)
posted by resurrexit at 7:25 AM on September 15, 2011

According to today's report, 15-29 unemployment in Greece is 32.9%. Overall unemployment is up 36.5% year-to-year (16.3%).
posted by ersatz at 7:30 AM on September 15, 2011

Banks that refuse to lend should be forced by law to give up their charters and nationalized.

It's not a black-and-white issue. The banks are lending, it's just a question of what the appropriate standards should be. In my area there is a lot of competition among mortgage banks for prime borrowers, but absolutely no appetite for anyone who smells of subprime. Similarly, established businesses can get LoC extensions just fine, but it's very difficult for new startups.

So the issue would be better described not as a lack of lending, but of sharply decreased risk tolerance and a tightening of lending standards. It's in part a knee-jerk response, but also partly what you'd expect (and probably want) after the mess that shitty lending made just a few years ago.

That's not a trivial issue to fix. Government backing has been the traditional solution in the housing market (via Fannie Mae / Freddie Mac), and you could probably do some sort of similar loan-buyup program for business loans to encourage investment there. However, I don't think there's much in the way of political will to put the taxpayer on the hook for risky loans that the private sector won't touch.

My personal solution would be to 'execute' the for-profit banking sector, probably by instructing the central bank to give preferential interest rates to credit unions and other mutual arrangements (there are mutual companies that own banks without actually being CUs). Of course, that's a non-starter because of regulatory capture, and I'm not necessarily convinced that an all-CU/mutual world would do much to spur lending. But at least you would have some confidence that a huge amount of capital that could go to lending wasn't being siphoned off into rentier profits.
posted by Kadin2048 at 7:40 AM on September 15, 2011

Did no one notice that youth unemployment in 2005 was over 20%? But I guess that wasn't an emergency then, because people still had their comforting illusions about the future. Reality sucks doesn't it.

Also, based solely on that Economist article, I am 100% certain that neither of Ms. Ulldemolins two degrees are in a hard science.

Pop Quiz: How do I know this?
posted by Pastabagel at 7:49 AM on September 15, 2011 [2 favorites]

Another way to describe the fallacy is that it treats the demand for labour as an exogenous variable, when it is not. It may also be called the fallacy of labour scarcity, or the zero-sum fallacy, from its ties to the zero-sum game.

A little off topic, but the phrase "not a zero-sum game" in economics is one of my pet peeves. Of course it's not a zero-sum game. It's not any sum! It's perfectly possible for individual actors to enrich themselves while destroying wealth, or for the pool of available wealth to increase while everyone maintains the same share. All of the interesting questions in economics are about what makes the pool grow or shrink - to my knowledge, no-one would be so foolish as to claim that it's fixed.

If one of your friends eats 50% of the pizza, and then next time you get a large instead of a medium, and now he eats 90% you still get less pie.
posted by heathkit at 1:24 PM on September 15, 2011

Also what miyabo said, it's a complex interaction.

However, to use the Lump of Labour fallacy to argue that decreasing vacation time always increases employment is just to commit the exact same fallacy in reverse. Unfortunately, it's a fallacy that I think is all too common.
posted by heathkit at 1:28 PM on September 15, 2011

Also, based solely on that Economist article, I am 100% certain that neither of Ms. Ulldemolins two degrees are in a hard science.

Pop Quiz: How do I know this?

Your opinion is one of 'science is better than humanities'. Not everyone can be a scientist. Not everyone should be a scientist. The world can't run on science alone, even though you say "the market has chosen to place no value on someone with those two degrees". Maybe - in my opinion - the market and capitalist system are not healthy, and in devaluing humanities we are devaluing society as a whole.
posted by Enki at 4:12 PM on September 15, 2011 [1 favorite]

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