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funksands On September - 5 - 2011

“I don’t get it”.  Is a popular refrain we hear far too often these days.  Policymakers, economists, pundits, friends, neighbors all uttering variations of a common theme.

“Why aren’t more businesses hiring?”

“Why isn’t unemployment dropping?”

“Why is the market going up? (until recently) but the rest of the economy is so anemic?”

“Why  isn’t the Congress and the  President doing more?”

“When will this ever end?”

“Is this how is how it is going to  be forever”

“What do we do?”

To  understand how to  solve a problem,  we must first understand what the problem  is.  There is ample evidence that everyone thinks they do.  There  have been many efforts to explain the struggles to escape the ditch we’re in, worthy ones at  that by economists, pundits, authors, and others much smarter than I, but it  feels like we are circling the problem but that a complete understanding of it eludes us.

I’m not an economist but maybe we can use numbers to get a better handle on what really ails us.

According the the Bureau of Labor there are 153.6 million Americans that are employed.

And 14 million unemployed who are still actively seeking employment.

Full employment is defined by many different parties many different ways.  Let’s use the OECD calculation which defines “full employment” as “structural unemployment” (meaning unemployment that results from demand inefficiencies  inside the labor market with a margin for error included in).  For the United States, the OECD estimates “full employment” to be between 4 and 6.4%.

For purposes of ease of math, lets split the difference at 5%.

This means that 6.3 million Americans want but cannot find a job.   Every person in America wants those people to find a job, so why can’t they?

There was a study done by Asha Bangalore at Northern Trust back in 2005.  This study estimates that between 2001 and 2005 36% of ALL private sector jobs were directly tied to the real estate bubble.  That is 836,000 of the 2.3 million jobs created.  This  study was updated  in 2008 to average out to 25%.

What this means is that between 750,000 and 920,000 jobs created that were specifically tied to the hot real estate market are now gone.

Unlike jobs in a typical  economic cycle of expansion and contraction, many of these jobs vaporized, never to return.

During this same period, the University of California Berkeley and Goldman Sachs estimate that 3 million professional service jobs and manufacturing jobs were sent overseas.

Using these estimates, we find 4 million jobs lost to the housing bubble and outsourcing.  This has exposed the smoking crater in the middle of our tax base, decimating state and local government coffers.  This has resulted in 600,0o0 public employees being laid off since 2009, creating another drag  on the economy.

S&P 500 sized companies now find that 45% of their earnings now come from overseas.  Standard & Poor’s 500 companies are expected to earn a record $95.98 per share in 2011, based on Thomson Reuters data. That would exceed the 2006 per-share record of $88.12.

Matthew  Slaughter, a Bush administration  economist from Dartmouth estimates that US multi-nationals created 3.6 million jobs overseas 1991-2005. They created 3.8 million here.  Our tax code since 1961  has essentially PAID US companies to relocate  overseas by allowing them to defer any tax on profits earned overseas as long as it is not brought back into the US.  By one estimate, Pfizer has $80 billion in un-taxed  offshore profits.  This is a  powerful incentive to move jobs overseas.

This seems to indicate that the health of GE may no longer necessarily mean health for the US economy or jobs for its citizens.

What all of this date  very un-scientifically seems to suggest is that while some Americans may indeed be able to find a job as economic conditions improve, many more may find no job to be had.

Is 7% unemployment now the new normal?  Will the creeping normalcy of having hordes  of unemployed infect our public policy making?  I suspect it already has.

Americans themselves seem to have conflicting demands of our representatives:  Create the economic conditions that foster job growth while cutting spending and deficits.  Can this even happen?

In my opinion, all of this boils  down to an unpleasant truth.  Americans will need to re-knit their economy from the bottom up to fill the massive jobs hole that Wall Street, private borrowing, the collapse of the housing market, and outsourcing has created.  This will be a painfully slow and laborious process that will occur  from the ground-up, not top-down.  Our political  actors may not be up to the task.

There are a myriad of solutions that are trotted out daily:  More stimulus, lower taxes, higher taxes, raise wages, lower wages, WPA, infrastructure banks, SBA loans, less government regulation, free  trade, tariffs, etc etc etc etc.  One of the best set of suggestions came from our own AdLib not that long ago: http://planetpov.com/2011/08/08/the-end-of-jobs-in-america/

This has the national effect of all our citizens saying:  “Do Something!!!!” to our elected officials that seem to be currently unequal to the task.

I have my own opinion about what will work and not work in the future, I may share those one day.  Until then I  have only one suggestion:  Pick the one thing you think will make a big  difference and run with it.  Call you Congressman, your state rep, your mayor, your city councilpersons, your neighbors, your family and tell them what you want to see happen.  Enough Americans do this, and change will begin to take place.

http://www.bls.gov/news.release/empsit.nr0.htm

http://www.aflcio.org/issues/jobseconomy/exportingamerica/outsourcing_problems.cfm

http://www.bls.gov/news.release/history/empsit_01052001.txt

http://seekingalpha.com/article/184015-as-goes-housing-so-goes-the-economy

http://www.policy-network.net/publications_detail.aspx?ID=4002

http://www.nytimes.com/2005/11/20/business/yourmoney/20view.html

http://emlab.berkeley.edu/users/webfac/cbrown/e153_sp06/USJobs.pdf

http://www.usatoday.com/money/perfi/taxes/2008-03-20-corporate-tax-offshoring_N.htm

Written by funksands

There are known knowns; there are things we know that we know. There are known unknowns; that is to say there are things that, we now know we don't know. But there are also unknown unknowns – there are things we do not know we don't know. Additionally there is bacon.

35 Responses so far.

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  1. escribacat says:

    The government needs to provide incentives and to invest in the development of renewable energy sources. This MUST be our next “boom.” It would create jobs, save the environment by getting us off fossil fuels, and it would preclude us from getting involved in the endless ME wars.

  2. choicelady says:

    I went over to The Obama Diary to watch the President’s Labor Day speech, and I suddenly had this ‘aha’ moment.

    I come from the Rust Belt -- lived and worked all over from Chicago, including the same South Side where US Steel went down and Obama came up, to Lawrence, MA, Buffalo, Pittsburgh, Cleveland, Youngstown, Gary. I am one of the few women to have walked a steel mill, end to end recording it, documenting the work, listening to the people, taking pictures. Not just once but many times, many places. If you ever saw the opening scenes in “The Deer Hunter” -- those hot ovens across the river are in Duquesne, PA. I walked those blast furnaces, inside and out. I ate in the bar where much of the film is set. When I saw the film, I could SMELL it, feel it, touch it, almost taste it. We used to call the rank odor of coking ovens the “perfume” of the steel areas. Those are the gritty realities of deindustrial America. That is the lifeblood of working America thirty-forty years ago.

    I have traveled with the UAW, USW, IAM, Ironworkers, BCTU, OC&AW -- you name it -- in their strikes, work actions, lockouts, whatever happens. Public employee unions, too. I visited home after home of men -- almost always -- laid off, living on under $700 per month which wasn’t much even back in the 80s. And wasn’t going to get much more either. The knowledge they had, the diginity they possess -- amazing. Those are solid families, those union folks. Even in hard times and shutdowns, they knew how to hold together. Salt of the earth. I love them. They are warm, funny, generous to a fault, wise beyond what most of us ever learn. I love them.

    I KNOW the Rust Belt’s travails. And I have watched with amazement as Obama has begun, step by step, to repair a section of this nation that has been not only deindustrialized but IGNORED by the progressives, dismissed by liberals, overlooked by policies for damn near 40 years. It started when Carter had a chance to support Youngstown’s community purchase offer for Youngstown Sheet & Tube, a profitable but abandoned plant. He turned them down. When he DID bail out Chrysler, it was by demanding give backs from the union. The union AGREED on the proviso that Chrysler lower its prices on the cars. Union gave. Chrysler never kept their part of the bargain. Carter did nothing about it. It was the clear first steps against the total disregard for blue collar labor and the people who did it.

    So now I have to wonder if a part of the antagonism against Obama does not come from his attention to the people the progressives not only ignore but sneer at -- blue collar working familes. He is the FIRST American President to DO something for them. Oh, Clinton paid lip service, all Dem candidates do. He has DONE something. His allocations of money put people back to work, saved the auto industry, jump started locomotive production, renewed a part of our basic manufacturing -- and it’s the blue collar folks -- not the trendy innovators in Silicon Valley -- who have seen benefit. I’m watching suddely as businesses start growing in towns that haven’t worked since the 80s.

    Who is going to get helped by the health reform? All those people who’ve lost their company plans. A lot of Rust Belt folks are moving into these plans getting coverage for the first time in years. No -- it’s NOT helping white collar yuppies so much. It IS helping working families. So does CHIP, Medicaid -- not for your laid off Silicon Valley execs but for the people the execs previous fired.

    Are the progressives ignoring this seet of accomplishments because they ignore EVERYTHING that has had to do with the Rust Belt, blue collar people? I’ve been sneered at, reviled, dissed, and dismissed for standing true with working families. Is it possible that this class-based and occupationally- based arrogance and assumed superiority is the reason so much of what Obama has done has been ignored?

    I guess since the Rust Belt didn’t matter, neither would helping them even as their slow return to strength actually will help us all.

    Are we that snobbish? Really? Could this be the reason?

    Wow.

    • bito says:

      I’m getting a bit of a chuckle on how some today after Hoffa’s s.o.b. statement and PBO’s speech are now embracing Trade Unionists into the ‘progressive’ fold. As a 4th generation Trade Unionist, it’s a bit comical in my mind. We have been fighting for a fair days pay for a fair days work for generations without ever bothering with labels of liberal, or progressive. Now we are accepted into the fold and labeled?
      I am overjoyed that we are again recognized, but where were ye? On coffee break for 30-40 years? We have always been for the workers and the R’s have been the fighting the workers for generations!
      Sorry, I don’t need no stinking labels.

      I worked in USS Gary works, I have also been in the S.Chicago works and spent time at both blast furnaces and coke plants and it’s admirable you have spent some time at them C’Lady, but “perfume”? LOL We always called coke plants choke plants and have seen the sulfuric acid that is belched from them eat cars and lunch boxes alive if the rats didn’t carry it away first. :-)

      I do need to put a plug in for the apprentice system offered to many young people by the Unions. I was proud that I had a slice of every check taken out of my check for the education of future Trade Union workers and proud to have been a teacher of dozens of young people to take pride in their work and gaining knowledge.

      Callouses are not a point of embarrassment, they are a sign of pride!

      Jobs with Justice!

      • choicelady says:

        Amen, bito!

        I once had the privileged son of a prominent photographer tell me that he sneered at union demands because “these guys work only 4 hours a day but want to be paid for 8!” What he was talking about was hot end work -- 20 on, 20 off -- around the 8-hour shift. BF, hot stove, and coke work STINKS! It’s freaking 130-plus in there, and the “20 off” is so they can drink water, cool down a BIT, and go back IN. And this kid thinks that’s “not working”!!!!!! Calluses are the LEAST of it. My neighbor was a brass caster whose molds were submerged in water pits; with one slip, he could have been blown to kingdom come -- one drop of water in hot metal -- kaboom! Nerves of steel in the men of steel. Wow. I’d like to see any yuppie make something of value and deal with those conditions.

        Glad you spent time there. Noble work. Noble man doing it. Thank YOU for your service!

    • funksands says:

      CLady, I can’t say that your observations about some progressive’s attitudes toward the rust belt, labor, and blue-collar workers are wrong, because I have seen some of this myself.

      I’m not sure that I would classify it as snobbery, but just simple indifference. Just as the attention of many liberals and progressives swung from labor and workers to pollution and the environment in the 70’s, I think the rust belt got left behind. As the pendulum of Democratic political power began to migrate from the rust belt to the Northeast and the West coast, this attitude began to pick up steam.

      Factories pollute, blue collar workers tend to be frighteningly conservative about some issues, and with the American economy the envy of the world, why bother with pedestrian issues such as the fate of a couple hundred pipe-fitters in Gary?

      On a positive note, I have felt (rather than seen) a change in this over the last year. All of sudden once the smoke has cleared from out latest economic crisis, progressives and liberals have realized that perhaps labor and wage issues are far more important than they thought and the standard needs to be taken back up.

      I’m not sure that many people know how to do this. There has been too much time and neglect for anyone 40 or younger to have a template of how to act and react to some of these issues. We need a guide. The President is not that person, IMO, so who could it be?

      • choicelady says:

        funk -- I agree about the indifference, but I spent too much time around academics and yuppies not to know the contempt they had for blue collar people. And no -- they are not frighteningly conservative -- they were desperately looking for someone to CARE about their work, livelihood, conditions. And the Dems abandoned them. Most of them still vote Dem, but they know nobody really cared.

        Remember -- every trade and industrial union has a different location with respect to business. The construction trades DO tend to be conservative because corporate expansion fuels their jobs. But even they are fundamentally UNION -- if anyone CARED.

        I do think an amazing manifestation of this change you see is the unyielding loyalty the national industrial unions have shown to public employees who almost entirely refused to care about the industrial workers over the past decades. Most public employee unions are at least semi white collar. And yet when the conservatives pounced on the latter, all the industrial unions came IMMEDIATELY to their aid.

        I’ve walked the lines over and over, and trust me on this -- I’m the ONLY white collar person to do so. Over 20 years I never saw another. Not one. But when public employees needed help, blue collar people responded. That MUST become reciprocal -- no more intra-union workforce snobbery -- and people must come again to respect hard manual labor within factory and foundry and mill settings.

        Then and only then will we get somewhere!

    • bito says:

      Supplement to C’Lady’s great comment.
      President Obama on Labor Day


      • choicelady says:

        He was GREAT and put lie to the idea he does not support unions, working people, and the struggle for human dignity in the workplace.

        I do find it a great laugh that union people are now trendy. Better than being NOT, I suppose!

        bito -- “Mrs. Perkins” wants YOU for the “Union Poster Guy”!!!

  3. SueInCa says:

    FunkSands
    One thing that could happen from the bottom up is co-ops. It could be a co-op around food, crafts, any number of items or ideas that could get people not only going again but working together as a group. I am not sure how to start one but I definitely would be interested in joining one. If the corporations are going to continue along their path, we need to do something that is an alternative to buying their wares. It is probably idealistic but how great would it be to say, “up yours, we don’t need you anymore”?

    • choicelady says:

      Sue -- there already are over 11,000 businesses organized as cooperatives with employee ownership and management. The most famous is Southwest while not 100% employee owned is stable because those who work there have a say.

      The biggest threat to stable business is absentee ownership. Stockholders have no stake in the company, and management comes and goes seeing the firm as enriching them, not the people who work there long term. Taft-Hartley specifically eliminated employees from all policy decision making when it’s they who understand the company best. Through stock ownership they get some of that right back, but it’s better through cooperatives.

      United Steelworkers’Union has made an alliance with Mondragon, the Spanish workers’ cooperative tht employs hundreds of thousands in many different businesses. That IS the “third way” that gives stable control to industry, service, and any other enterprise. Government ownership -- highly touted by some progressives -- just substitutes one form of corporatism for another, but cooperatives provide the same entrepreneurial incentives to working people we so highly prize in individuals. Cooperatively owned businesses -- especially those that are employee managed -- are THE most profitable in America.

      DEFINITELY a positive way to go!

    • funksands says:

      Sue, I couldn’t agree with you more. You have tapped into an interest of mine that I’m looking forward to learning more about. The city of Cleveland has been a vanguard in this area. A combination of city residents, the city itself, and some private financing created the Evergreen co-op laundry which has morphed into the Evergreen Cooperatives which focus on solar, food production, and publishing. All owned by the employees.

      http://www.evergreencoop.com/Laundry/index.html
      http://www.evergreencoop.com/

      • choicelady says:

        NAtional Center on Employee Ownership has a list of the top employee owned companies. They’re in Berkeley while the Employee Ownership CEnter at Kent State has some ties to the Evergreen folks in Cleveland, funk. Gar Alperowitz at U. of MD is one of the great champions of employee ownership. His book, “America Beyond Capitalism” outlines the details, and he is working with both the Cleveland folks and the Kent State people. There is also an alliance between LIFETIME, a group here that advocates for people moving from welfare to work and the Kent State Center.

        Lots of good stuff going on. MOST of it of NO interest to armchair liberals. I do think much of it is snobbery -- these are not the jobs THEY want. So nothing matters if it’s done for blue collar people in rust belt areas.

      • SueInCa says:

        FunkSands
        I shop at an employee owned grocery store, Winco. Their prices are competitive with Walmart and they have BIN Heaven LOL. They sell alot of foods you can buy by the pound such as trail mix, wheat flour, rice, nuts, candy, dried fruits. I love BIN heaven. I think co-ops would be a great thing. I saved your link, thanks.

        • choicelady says:

          That’s right! There are several employee owned supermarket chains including Publix Markets in the South that has over 100,000 employees and Hy-Vee foods in the Midwest.

          One caveat -- Enron was ALSO employee owned technically. The real goal is not just directing employee funds into company stock but giving actual ownership power of decision making at all levels of the company to those employees.

          It is what makes Southwest work -- there are not rules from on high but empowered people who can make decisions quickly and effectively for the good of the passengers, safety, etc. The more direct authority people have over their workplace and working conditions, the better the company runs, the more profitable it is, and the more stable it is long term.

        • funksands says:

          Huh. I didn’t know Winco was employee-owned. There is a Winco right down the street from my father-in-laws house.

          Winco is very popular with the Mormons in S. Idaho oddly enough….

        • SueInCa says:

          They are also testing them in Detroit and have been quite successful with produce both growing and selling. The people they service have no other method of geting fresh food, how sad is that?

    • AdLib says:

      Love that idea, Sue. Also, ChoiceLady and and KQ are often promoting the employee-owned company model as an ideal path out of the corporate trap we’re now in.

      • SueInCa says:

        Adlib
        See my reply to FS, I shop at one of those stores every week for my groceries. There are so many things and services or products that could make up any number of co-ops. At first they would be simple but eventually R&D would be funded and more sophisticated producst could be produced. Rome was not built in a day.

  4. kesmarn says:

    10 stars, funk! This article is a treasure chest of valuable research. (I can use huge amounts of this in my email dialogue with Miss Limbaugh, too!)

    Thanks for all the time and effort you put into collecting this really valuable info in one place.

    And thanks (and welcome!) to ClassicalGas for the tip on the Petition Project that the WhiteHouse is about to launch. That was (welcome) news to me!

  5. AdLib says:

    I hope that Obama and the Dems have the vision to make clear to the public that jobs are not going to come back by putting more money on top of the $2.5 trillion corporations are already sitting on.

    The whole Repub argument needs to be exploded, times have changed, those jobs aren’t coming back no matter how much money corps get.

    We need a new dynamic, government taxes the wealthy and corps heavily to put that money into public sector jobs and supporting small businesses and start ups that can provide good paying jobs.

    We can’t go back to the 1990’s by simply making the wealthy richer, we need an economic plan to take us forward and yes, it means redistributing the public’s wealth back to them from the wealthy but in the form of jobs.

    • funksands says:

      Ad, couldn’t agree more. The growth of the future is going to come from the grass-roots of our nation. The problem is the grass is near-dead.

      • AdLib says:

        Which is why only government can build jobs and the economy that 99% of Americans need. This is the new normal for corporations and giving them more money will just give their shareholders more dividends and their top execs more bonuses.

  6. KQuark says:

    Great post funk?! sorry for the typo. 😳

    I don’t know the answers to creating more jobs but I definitely believe we are entering a new normal. Globalization and high tech manufacturing has suppressed the heart of job creating industries and created an era where jobs themselves have simple become less essential. Add the age of mega corporations and overpopulation and the importance of any single worker is getting smaller and smaller.

    • funksands says:

      KQ, good points all. Each of these issues you listed is going to be an issue for years to come. In the meantime, we don’t need to make things even harder by PAYING our corporations to leave our shores. China doesn’t do it, Germany doesn’t, Brazil doesn’t. This is something that even Kennedy railed against in the early 60’s.

      There are going to be plenty of legitimate reasons to outsource. Sweetheart tax deals for MNC’s shouldn’t be one of them.

  7. ClassicalGas says:

    This is about to go active, funksands -- http://www.whitehouse.gov/wethepeople. The effectiveness of the citizen-generated petitions will depend upon the number of signatures it collects.

    Me, I’m knitting like you read about.

    • choicelady says:

      Hi CG -- I hope you’re knitting as in creating something wonderful and NOT as in “Mme. Defarge”!!!

      Thank you for the link -- that is just GREAT! And welcome -- if you’ve been here before I missed you, so from ME anyway, welcome.

      • ClassicalGas says:

        Thanks for the welcome, choicelady.

        I’m glad I could share that link, I’m hopeful that it will be worth the effort.

        Creating away, I haven’t had the urge to knit any names into a creation, yet! 😉

    • funksands says:

      Hey stranger! Great to see you! Thanks for this.

    • AdLib says:

      Hey ClassicalGas, welcome to The Planet!

      I have signed up to be notified when it goes live, I think a number of folks here will be on board with promoting petitions that originate here or elsewhere, it’s a great idea and I hope it proves out to be genuine and some policy results.


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