David Leonhart has a good column in the New York Times discussing how the economic recovery in the United States compares to that taking place in other countries. Other countries’ recovery tends to feature corporate profits that are still lagging but with much less unemployment. By contrast, here corporate profits have improved 12% over 2007 level but we remain mired in high unemployment.
There is a good argument to be made that critics of government policy are right – Obama and the Democrats have not been sufficiently focused on jobs; but it’s not because they’re unfriendly to business, but because they’re too friendly to corporate interests.
The gross domestic product here — the total value of all goods and services — has recovered from the recession better than in Britain, Germany, Japan or Russia. Yet a greatly shrunken group of American workers, working harder and more efficiently, is producing these goods and services.
The unemployment rate is higher in this country than in Britain or Russia and much higher than in Germany or Japan, according to a study of worldwide job markets that Gallup will release on Wednesday. The American jobless rate is also higher than China’s, Gallup found. The European countries with worse unemployment than the United States tend to be those still mired in crisis, like Greece, Ireland and Spain.
The column makes passing mention of the nation’s disability system. It’s one of those things in which I’ve taken an interest without doing much research. My knowledge of the Social Security Disability program comes from questioning debtors about their income and assets. A non-trivial number of them tell me they’re in the process of applying for disability. Obviously, I’m not privy to their medical records, but a fair number of these look able bodied and sound enough of mind to me. And the process takes an extremely long time. The backlog is measured in terms of years, I’m told. Leonhart has this to say:
Reforming the disability insurance system so it does not encourage long-term joblessness would help. “Once people enter the system,” as Mr. Katz of Harvard says, “they basically never come back.”
A disability check doesn’t mean riches, but it’s a steady check and, for a lot of folks, it beats working. The system needs to be quicker to discard the deadbeats, quicker to care for those clearly in need, and better at following up to determine if continued support is necessary. Whether that’s at all feasible, I don’t know.
Not just disability, but that unemployment check needs to be pulled a lot quicker, too. All this extending of unemployment benefits is not helping to encourage people to go out there and get jobs. There seems to be a mismatch, with employers saying that they can’t find qualified workers for job openings and the unemployment rate stubbornly refusing to fall to more normal levels.
I got an “Economist” magazine last week, and they’ve got economic statistics on the back page. Maybe I have not been paying attention, but it was a bit shocking to see large European countries with lower unemployment rates than the US. For over a generation, we have taken for granted that the US always has unemployment rates that are many points lower than Europe. Not now.
Regarding the hypothesis that we’re too easy on corporations, I would discount this as a factor simply because we have not gone easier on corporations, in fact with Obamacare and new regulations, quite the opposite.
“Easier” is a relative term I guess; I was referring to the U.S. approach versus that of other countries. Hyperbole about the Obama menace notwithstanding, I figure he’d be seen as a right-center, very business friendly politician in most European countries.
The other thing to remember about Europe is they tend to have a group of people that are permanent unemployable and thus not counted and they have a much lower level of productivity.
And I am not saying that the US works harder or their workers are lazy. They have a shorter work week, more vacation and a shorter work day. They simply employ more people because people tend to work less.
“a fair number of these look able bodied and sound enough of mind to me.”
If you saw me sitting, then walking into an office, you would assume that I am perfectly ablebodied. Because I don’t leave the house when I am having high pain days. And because five steps don’t reveal the foot damage; only an attempt to stand for more than five minutes does. I do a lot of work to look normal. In return, no one believes that I deal with a high level of disability on a daily basis.
The problem for me is that I can do anything for thirty minutes. I just can’t do it reliably over the course of a week or a month. Employers want reliable. Ergo, I am unemployable.
What you are missing, Doug, is that over the course of the last several years, Europe has become a little more business friendly. Obama could be seen as business friendly compared to your average Social Democrat politician… but the Social Democrats have not been in power in most countries. France, Germany, and England, for example, are not currently controlled by socialist parties.
It’s like Europe is 15 years ahead of us in terms of paring back the welfare state. We’re expanding entitlements, and they’re trying to cut them back.
The unemployment situation is unlikely to improve very fast. A situation such as now where businesses that have lower number of employees may be relucant to increase until certain of economy. But, another factor is simply that regulations or not, insurance or not, it may be economically feasible for businesses to increase use of technology rather than use employees. Yes, employee regulations likely tend to encourage consideration of technology—plus there is a rapid increase in possibilities of using technology. People without special skills will increasingly have problems getting employment and at incomes they have been used to receiving.
There is a lot of uncertainty in America right now. Dems were in power and added health care entitlements. The great tax reduction of 2001 was scheduled to phase out in 2010. Then, at the last minute in 2010. the tax cut was kept, only to be scheduled back out in 2012.
Meanwhile, I can’t think of many great new mass-market inventions that are adding tons of jobs.
I meant to write that the uncertainty may be adding to the USA’s employer’s lack of interest in adding jobs.
It looks like another factor, though, is that in the European countries where workers have more leverage, more of the value of what’s produced goes to paying employees rather than the company’s profits.
Again, I could accept that as an answer if you could point to something that has happened over the last two years, when this cash hoard was generated, that changed in terms of public policy regarding corporations and how they are treated, either here or there.
What HAS changed is “animal spirits” for lack of a better term. Corporations have lost their mojo, so to speak, and instead of running full speed into investment (like, say, during the dot-com boom), they are sitting on their cash.
In many ways, they are not unlike consumers, who have also increased their savings and decreased their spending, in an attempt to rebuild their balance sheets.
Besides these unending unemployment compensation extensions, we also raised the minimum wage and increased health care costs through these mandates.
Perhaps we simply can’t employ 10% of the working age population productively at the current minimum wage and mandated benefits levels? Europe had a pretty sharp transition to structural unemployment in the 1970s due to the welfare state. Maybe it is our time now?
It might not be a great deal for shareholders, but what happens to production and employment if the corporations are forced (in a hypothetical country with stronger unions and labor laws) to spend those 12% profits on workers?
I guess we can just watch and compare the U.S. over the next several years compared to Germany and Great Britain and the like.
Just another data point for you to consider, job creation is not homogeneous across America. There are areas of job creation and areas of job loss.
Where are jobs being created? Texas. Where are jobs being lost? Michigan, New York, Illinois, and California.
Now, what are the key differences between those states? Right to work and the existence of an income tax.
Milder winters, too.
I don’t think that anyone is going to choose Texas weather over California.
Raise a gas tax to fix the price of gas at 5 or 6 bucks a gallon. A portion of that tax goes into a fund to keep the gas price steady if oil price rises. The other portion goes to entreprenuers and companies working on methods to get us OFF fossil fuel. By having a fixed price to compete against, these companies can more easier secure private investment, which means growth and skilled jobs. Skilled jobs then lead to more unskilled support jobs. And prosperity for all.
Yes, people will throw a fit about gas prices, but this isn’t even close to the TRUE price that the gas costs us, from carbon emissions all the way to threat to national security. plus with fixed prices people can finally budget their fuel expenses.
All it takes is one step…
And how many of those jobs are insecure, low paying retail and service jobs that cater to the retirees moving there and create nothing as opposed to decent paying manufacturing jobs?
Really, who cares if we create a call center in the south where half the people are hb-1 visa holders and they all make $8 per hour? Or open another cheesy mcfunfries or coffee joint, or car wash?
Doug, this article: http://www.nationaljournal.com/magazine/what-happened-to-15-million-u-s-jobs–20110120
addresses the jobs vs. profits issue in an interesting and informative way.
Paddy, being in the energy business, Houston is pretty much our Mecca. I wouldn’t say that growth in Texas is for call centers full of H1-B visa holders. If you need, say, an offshore oil platform fabricated in the US, you’re going to do it in Texas, most likely.
These are not exactly “good jobs” (would you like to be welding out in the hot Texas sun?), but if Texas did not offer a low cost place to do business, I’d guess the work would be done overseas.
Sorry, one more thing. The Times is denser than normal. I just reread that story, and THEY ANSWER THEIR OWN QUESTION! But just like all the articles that question why, if crime is declining, are more people being put into prison (duh!) they’re too dense to see the answer in their own article.
They note that wages for the employed have actually gone up, even as unemployment has increased. They make this out to be a conundrum, but they obviously are directly related.
It could be that union power maintains wages for those that have not been laid off. That is certainly what has happened with teacher unions.