Tag Archives: jobs

Federal Reserve discovers that paying people not to work equals fewer people working.

In case you didn’t know, the Chicago Fed reports:

A research paper published by the Chicago Fed has concluded that extra jobless benefits — unemployed workers can now get up to 99 weeks of benefits — may be contributing up to 0.8 percentage points to the current unemployment rate, which was 9% in January. The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels. Also on Thursday, Minneapolis Fed President Narayana Kocherlakota said the natural rate of unemployment — basically, the smallest rate of unemployment that won’t lift inflation — ranges between 5.9% and 8.9%.

For those who are not economically literate, let me summarize: If the government pays people not to work, fewer people will work.

I don’t know why the Fed had to do a study to determine that. Maybe they were just trying to figure out not if it had an effect but how large the effect is. Or maybe it was just a study devised to keep a few economics employed during the recession.

What I really don’t understand is this line:

The Chicago Fed paper said the extra benefits may still be worthwhile, given that in their absence workers may be forced to take jobs that represent poor matches for their skill levels.

So the Chicago Fed thinks it is better to have people sitting around doing nothing rather than do a job below their current skill level? These people really do live in ivory towers.

Teachers Unions only care about money

With the massive teachers strikes and protests in Wisconsin, I am very afraid for this country. The Bolshevik Revolution began with protests and union strikes. The Fascists in Italy and Nazis in Germany took over in part to stop the socialist/communist strikes. This country hasn’t seen strikes like these since the 1920s.

The teachers in Wisconsin don’t care about their customers: the students. We hear the cry over and over that “it’s for the children,” but when the teachers’ benefits are called into questions, they abandon the children during the school year to protest about money.

Just so you know, US Airways is protesting today down at Phoenix Sky Harbor over some contract dispute. Airline employees complain they aren’t making enough money. What about your customers? Airfares have gone up and quality of service has declined as we are packed into planes like cattle, and we now are poked, prodded, scanned, and molested to get through airport security. And through taxes and airfares, we pay for the right to do so.

Teachers unions. Airline unions. All other unions. All you care about is money, so stop pretending otherwise. “Fairness.” “Quality education.” “Safety.” You don’t care about any of that. You just want your share, more than your share, of the money.

Why should those struggling to make ends meet subsidize unions. Why can’t union employees compete in the free market like the rest of us? Because they are not worth what they are being paid? When did the land “of the people, by the people, for the people” become the land of “from the people, against the people, at the expense of the people?”

Legal Insurrection: Key Numbers In Unemployment Report Not So Good

Le·gal In·sur·rec·tion analyzes today’s employment report and the results are not good despite the headline decline in unemployment from 9.8% to 9.4%. (Reposted with permission. Original post here.)

Needless to say, administration supporters will be touting that the unemployment rate released by the Bureau of Labor Statistics this morning dropped from 9.8% to 9.4%.  Politically, this is good news for Obama, at least in the short run.

Dig just a bit deeper, and you will see that 0.2% of that drop (or half the total drop) was from a decrease in the “participation rate” from 64.5 to 64.3 of the population.  So half of the good news reflects that people have dropped out of the work force and have given up looking for work.

To put this in context, I ran a chart from the BLS website historical statistics database, showing the participation rate over the past 20 years, which shows that we are at a 20-year low:

The other disheartening statistic is reflected in the chart combining the unemployment, marginal and discouraged workers (in short, everyone who is not working but currently or at one time wanted to work, or who is employed part time because full time work was unavailable).  Combine all those and the total is 16.6% up from 16.3% November not seasonally adjusted (seasonally adjusted it is 16.7% down from 17%).  This is the highest number since 1994 (first year data available):

Here are two other charts showing the depth of the problem.  The first shows the average length of unemployment (in weeks) and the second the median length of unemployment:

While the drop in the unemployment rate from 9.8% to 9.4% is good political news, it’s hard to see any real improvement below the surface.

This gives further evidence that the American economy is still in decline. All that government stimulus accomplished nothing except for putting us further in debt.

No sovereign debt crisis here in the U.S., but we’ve got other problems, namely jobs.

The United States may not be experiencing a sovereign debt crisis like Europe, which I have written about quite often recently, but we have our own problems. In Europe, 20 percent unemployment is making it very difficult to balance budgets. While unemployment is not as bad here, we are experiencing the worst economic recovery since the Great Depression. And today’s ADP report proves it:

Private employers unexpectedly cut 39,000 jobs in September after an upwardly revised gain of 10,000 in August, a report by a payrolls processor showed on Wednesday.

The August figure was originally reported as a loss of 10,000.

The median of estimates from 38 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 24,000 private-sector jobs in September.

Employment fell 63,000 short of expectations, though last month was revised up by 20,000. ADP only measures private employment. The government report due out Friday also includes public sector jobs, which is expected to decline as census workers were recently laid off after the census was completed.

The ADP figures come ahead of the government’s much more comprehensive labor market report on Friday, which includes both public and private sector employment.

That report is expected to show overall nonfarm payrolls were unchanged in September, based on a Reuters poll of analysts, but a rise in private payrolls of 75,000.

Woh! These economists expect 75,000 private sector jobs were created last month when ADP said 39,000 were lost? Seems like somebody is way off the mark here.

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It is time to eliminate minimum wage laws and bring back apprenticeships/internships

Remember the “good old days” when young people would apprentice for a few years earning nothing just for the chance to learn a trade? Well, I don’t either, but that is the way things used to work.

Enter minimum wage laws. All of a sudden, working for no monetary compensation is illegal. In reality, though, the apprentice does receive compensation in return for his labor: the acquisition of a valuable skill. The apprentice receives a valuable skill and the recommendation of his teacher while the employer receives a number of years of labor and the satisfaction of helping a young person succeed.

Today, there is only one way for a young person to gain skills necessary for a career: college. If one studies the situation, one would easily see that this situation is much worse than apprenticeship. Obviously, there are some careers that require college education and many people would benefit and enjoy the broader education college provides. But for somebody who is only interested in learning a skill, apprenticeship is vastly superior than college. Instead of working without compensation a couple of years to learn a skill, the young person is forced to pay a college to learn these skills. Now, the young person has graduated with a debt of tens or hundreds of thousands of dollars. How is that better off than working for nothing? And in fact, the college graduate is often behind where he would have been had he been working in the industry for a number of years learning these skills hands-on instead of in a classroom, making valuable contacts within the industry, and establishing a close relationship with a successful professional in the same field.

The young person today often chooses to skip college and go straight to work after high school. Many have no desire for college and others cannot afford it. Apprenticeships would be great for just such people, but they are now illegal, in almost all cases (political internships and graduate assistants seem to be the most obvious exceptions).

Thus, our young people are stuck in a Faustian choice between going to college and graduating with little or no hands on experience and deep in debt or working at a low skilled job for low pay. And that’s assuming they can get such a job in this environment, where the benefit an employer may receive less output from the employee than the costs of his minimum wage and other costs, such as insurance, payroll taxes, and compliance with government regulation.

As a result, young Americans are not learning the skills they need and thus earning less in later years. To help everybody become more productive and earn a better living, we need to eliminate minimum wage laws and bring back apprenticeships/internships.