Consequently, if we are going to have such an 'unwritten' but widely promoted policy, surely we are therefore compelled to ensure that the fundementals of existence are made socially available to that 8-12 percent of the population that is unemployed and under employed simply because of government and corporate policy.

~~

quote:

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S1m0n: The job market is a game of musical chairs, with not enough seats designed in as a matter of policy.

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Here's the wiki. article that referes to the theory.. http://en.wikipedia.org/wiki/NAIRU

In the past I've actually had a lot of fun wowing people with my 'expertise' of things economic. When there is a big news announcement that the unemployment rate has gone down I 'predict' that within a few weeks there will be an announcment that interest rates are being raised. The 'presto chango' there is! The I get to say, "See told yah" and they say "gosh how did you know?" Then I say, "Well geez, don't be silly it's not like 'they' are actually going to let the rate fall that much." More time then not this leads to confusion because in most peoples minds getting unemployment down as low as possible is one of the main goals we're all after. After this pretty major assumption is challenged it's easy to go on and have a convo about this specific economic theory and the wild and whacky world of economic thinking in general.

Fun fun. Thanks NAIRU.

[ 02 April 2006: Message edited by: ElizaQ ]

quote:

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Originally posted by ElizaQ:
I'm not sure how much this concept is really common knowledge to most people. Even business people I talk to don't understand that it is an actual conscious policy decision, though they do get the supposed mechanism it is refering too.

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Ah. The reason for this disconnect is the 'fair world' fallacy.

This is a moral fallacy which has been with us since at least Calvinism. It says that because God (or 'the market') is just and all-powerful, then any failure to proser is in reality a moral failing. If you don't do well, it's because God's punishing you for being bad.

That's not at all the truth; the world is most emphatically NOT fair. Some people prosper through no virtue of their own, and others fail through no fault they've committed.

~~

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God (or 'the market') is just and all-powerful, then any failure to proser is in reality a moral failing. If you don't do well, it's because God's punishing you for being bad.

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And therein lies the problem. There is a hell of a lot more to human existence than 'the market'. At least there is in my life, and some of the people i know and surely God is hip to this too.

The only reason so many people are squandering the best years of their lives 'in the marketplace' is because it is promoted as the only worthy game in town.

Parenting, volunteerism, 'barn raising' events, pickup games in the local park, and a thousand other things that embody social stabilty and individual well-being are relegated to 'niceness' scoffed and diminished as less than worthy endeavours because they are not 'profitable'.

In the modern day marketplace everybody and everything is nothing more than a commodity to be identified, exploited and abandoned when its market value is gone.

But guess what? The markeplace was a nice replacement of the vagaries of hunting and gathering for a living. But there are far more important things we need to move with now.

quote:

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Originally posted by S1m0n:
That's not at all the truth; the world is most emphatically NOT fair. Some people prosper through no virtue of their own, and others fail through no fault they've committed.

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Are you saying that there is no (or a weak) correlation between hard work and economic success?

[ 03 April 2006: Message edited by: Sven ]

quote:

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Originally posted by Sven:
Are you saying that there is no (or a weak) correlation between hard work and economic success?

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quote:

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Originally posted by Sven:

Are you saying that there is no (or a weak) correlation between hard work and economic success?

[ 03 April 2006: Message edited by: Sven ]

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We have over a dozen billionaire families in Canada who made their first million dollars illegally in prohibition times or as log thieves. But there may well have been hard work involved somewhere along the way, for sure.

ETA: In fact, this is capitalism's M.O. since the last century. The IMF has essentially created numerous multi-millionaires and billionaires around the third world with the premise that the market requires wealthy people to steer fledgling market economies by investing wisely and causing wealth to trickle down to workers by some magic of free markets. A militant variation of this approach to establish free markets was observed in Afghanistan with the CIA-Dept of Agriculture funelling several billion dollars to the most cunning opportunists, like Gulbudden Hekmatyar in the 1980's.

And taxpayer-funded Keynesian militarism in the U.S. produced a cornucopia of high technological developments which were handed-off to a few wealthy families and corporations in America and now referred to as "the free market" or private enterprise.

[ 03 April 2006: Message edited by: Fidel ]

quote:

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quote:
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Originally posted by S1m0n:
That's not at all the truth; the world is most emphatically NOT fair. Some people prosper through no virtue of their own, and others fail through no fault they've committed.
--------------------------------------------------------------------------------

Are you saying that there is no (or a weak) correlation between hard work and economic success?

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Originally posted by Sven:

Are you saying that there is no (or a weak) correlation between hard work and economic success?

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Originally posted by Mr. Magoo:
What would be the point, if success is random?

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Originally posted by Pogo:
I didn't read that. Hard work does not necessarily produce economic success, therefore there are many examples of people working hard and getting little for their troubles. More to the point I would say is that hard work in itself is a minor factor.

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Talk of getting ahead by hard work reminds me of a former BC Premier. When Mini-WAC (Bill Bennett) was originally running he was billed as a self made millionaire. I always wondered if I had knocked on the same doors in Kelowna with the same business schemes I would have the same success or whether maybe just maybe his daddy being Premier opened a few extra doors and also provided insentive to do good business with the Premiers son.

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And if anyone thinks that slaving away at some minimum wage 'job' is going to do anything but cause them to slip further into obscurity and potential homelessness they are probably doing a bit too much of those illicit drugs.

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I know people who foolishly didn't take your advice, and instead used their minimum wage job to gain work experience and references that allowed them to get non-minimum-wage jobs.

Also, you can toil for years for some company climbing their 'career' ladders. But the minute dumping you into the ranks of the unemployed looks more profitable on the quarterly earnings sheet than keeping you, well, don't let the door smack ya in the ass on the way out.

This is the 21st century but you wouldn't know it by the way we organize our workplaces. And an artifically maintained unemployment rate tells us that employment itself is a paper tiger.

I have lived in a number of retirement areas for decades and can not count the number of people i met who made their fortune, retired between the ages of 40-55 to the islands to enjoy the benefits of their labours and, within 5-10 years were full blown drunks and/or dead because they did not know what to do with themselves because they had no 'job' to go to.

quote:

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Originally posted by Mr. Magoo:

I know people who foolishly didn't take your advice, and instead used their minimum wage job to gain work experience and references that allowed them to get non-minimum-wage jobs.

That, I think, is what most people are referring to when they talk of "getting ahead". Not spending one's life trudging away at the same entry level job, but using the experience and skills from that job to get a better one, which will allow them to get a still better one.

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That's all fine in theory, but the reality is that millions of Canadian's never break free of low wage philanthropy.

Over three million full-time payroll jobs were created in Canada in the 13.25 years before FTA.

In the 13.25 years after FTA and leading up to 2001, about 1, 380, 000 full time payroll jobs were created. Pathetic! Industry Canada said that in an aggregate comparison of 35 developed nation's economies from 1987 to 2001, ours performed about the worst.

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Foreign firms operating in Canada, on average, import three times as many parts, components, and services as similar-sized Canadian companies. In 1993, an OECD study showed that the ratio of foreign parts and components in manufacturing in the U.S. was 13 per cent. In Japan it was seven per cent. In Canada it was over 50 per cent, and it is probably much higher today. This exceptionally high foreign content is one of the key reasons why Canada’s unemployment rate has persistently been so much higher that it should have been - Mel Hurtig on increasing foreign ownership(mostly American) of Canada's economy, The Vanishing Country

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Originally posted by Mr. Magoo:
What would be the point, if success is random?

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It's really about the numbers, isn't it?.

[ 05 April 2006: Message edited by: Fidel ]

quote:

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Originally posted by Mr. Magoo:
I know people who foolishly didn't take your advice, and instead used their minimum wage job to gain work experience and references that allowed them to get non-minimum-wage jobs.

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some people who work minimum wage/low-paying jobs have little prospects of finding a "better" job (for a variety of reasons).

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Originally posted by Mr. Magoo:
No, not as an incentive. I would hope the incentive came from the job itself. Like, it's cool to bag groceries when you're 17, but I'd hope you have other, better plans for your twenties, thirties and forties.

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What's that supposed to mean? Why is it "cool" to bag groceries at 17, but when you get older you should have "better" plans? Is there something wrong with bagging groceries? Are people who bag groceries somehow "less worthy" than people who do other things? If that's not what you meant, what did you mean by "better plans?"

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Originally posted by Mr. Magoo:
What reasons? Reasons that cannot change?

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Is there something wrong with bagging groceries?

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No. No more than there's something wrong with delivering newspapers on your bicycle, or babysitting the neighbour's kids.

But I would hope most adults strive for something a little more challenging than this for their job. Really, it doesn't require a whole lot of skill or intelligence to put cans of soup into a bag for someone. I wouldn't suggest that an adult, bagging groceries, is "unworthy" in a "voted off the island" sense, but honestly I can't imagine them being "worthy" of anything but a pretty modest wage. I suppose that standing at the edge of a cornfield and shouting "Shoo! shoo!" to the birds might require even less skill or experience, but it's a close one.

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I'm sure there are other potential reasons that I've missed.

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Well, the ones you've listed would certainly prevent many people from taking a year or four off from work to devote to full-time study. But that's not the only way to get ahead.

Recently, when shopping at the Dominion I used to frequent regularly, I noticed one cashier who I recognized, who was now the Head Cashier. Presumably a certain amount of initiative and responsibility on her part resulted in a promotion. Once she's been Head Cashier for a while, perhaps she'll apply to be a buyer, or work in the back office. Maybe she'll take a few accounting courses in the evenings and try to work at head office. Who knows. But even without doing a four year degree, she has some amount of upward mobility. By no means is she trapped ringing in groceries as a junior cashier until she's 65.

The same holds true for every business on the planet. For every career 'advancement' opening there are always far more applicants than openings. Just consider the hundreds of eager applicants [thousands sometimes] that show up for new jobs when only a handful are needed.

And, as a previous poster has already identified, full time employment is a thing of the past. Not becuase the jobs are not there. But simply because employers no longer want to support the benefit packages that were fought for so long and hard by organized labour many decades ago.

A interesting side note to all this is the labour shortage currently being experienced in many parts of Alberta and the rush by employers to offer a multitude of perks, advantages, benefits and options just to get people - anyone - to come and work in the grocery and retail stores that serve the exploding workforce.

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Foreign firms operating in Canada, on average, import three times as many parts, components, and services as similar-sized Canadian companies. In 1993, an OECD study showed that the ratio of foreign parts and components in manufacturing in the U.S. was 13 per cent. In Japan it was seven per cent. In Canada it was over 50 per cent, and it is probably much higher today.

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What's it like in a perfect world?

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Uh, Dominion is a perfect world?

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The system works! Just ask your pastor, or the policeman on the corner, or your local member of provincial parliament, or the head cashier at your local grocery store!

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Do you have some kind of personal stake in pretending it doesn't??

Nothing worse than hearing that someone's made it, eh? I'm forever surprised by just how much anger and resentment results from any kind of success story. I'm not talking about someone winning a lottery here, or having the good luck to be born rich. I'm talking about a cashier getting a promotion. Why is that so entirely impossible for you to wrap your head around without turning into Captain Cynical and pretending that this cashier is some kind of special case?

My hunch is that success stories prove that the so-called "impossible" is really not impossible at all, and I'm guessing that has repercussions or something.

Have you ever been promoted or got a better job based on experience? If so, what on earth are you going on about? And if not, sorry to hear it... you must get tired of asking "paper or plastic".

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And, as a previous poster has already identified, full time employment is a thing of the past.

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Exactly. And since you'll be changing jobs at least a few times in your life anyway, why not try to move "up"? Good lord, it's not like initiative and responsibility are the domain of the wealthy or the priveleged. Do you think employers don't look at your resume to see if you add value, or just fill a seat?

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Dominion is a perfect world?

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Originally posted by Mr. Magoo:
it's not "the man keeping you down".

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Originally posted by Mr. Magoo:
Nothing worse than hearing that someone's made it, eh? I'm forever surprised by just how much anger and resentment results from any kind of success story. I'm not talking about someone winning a lottery here, or having the good luck to be born rich. I'm talking about a cashier getting a promotion. Why is that so entirely impossible for you to wrap your head around without turning into Captain Cynical and pretending that this cashier is some kind of special case?

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Do you have some kind of personal stake in pretending it doesn't??

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Uh, earth to magoo, the system doesn't work.

I'm not doubting that you really, really, really did see someone move from cashier to head cashier.

But have you actually bothered to look at what thread you're posting in? It's about people being left unemployed, or forced into unemployment, as a matter of deliberate policy.

Here's an article about the NAIRU by CLC economist Andrew Jackson.

something else

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The Department of Finance, in its important October 1994 document, A New Framework for Economic Policy estimated that the NAIRU was “at least 8%.” This is pretty high! Also, this estimate was pretty close to the existing rate of unemployment at the time. Thus, for critics, NAIRU seemed to provide a justification for doing nothing about fighting unemployment.

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But you missed the point where others have correctly stated that such "advancement" positions are limited in their numbers.

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In an immediate sense this is true. Where I work, we aren't hiring any employees "above" me, so in that sense I could wait forever for a promotion here. But I'm free to look elsewhere, no? And while my current employer may not need someone with my skills, another employer may be eager for someone with experience.

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They can be used to illustrate a larger point. But they can't be used as counter-factuals in arguments such as this one.

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Fair enough. But I'm not trying to argue that unemployment doesn't exist. I would, however, argue that "who's unemployed" isn't like "who's born with a birthmark". You may be unemployed right now, today, as you look for a job, and someone else may be unemployed a few years from now, when they lose theirs, but it's not like we chose 8% of the population and decided that they'd be the 8% who'd never, ever find work.

quote:

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Originally posted by Mr. Magoo:
Maybe you didn't get a chair today, but there's always tomorrow.

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but it's not like we chose 8% of the population and decided that they'd be the 8% who'd never, ever find work.

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Well, it wasn't the point of the thread that the same 8% are being picked-on.

It's my point that the people in charge put people out of work on purpose. Seen in that light, neo-con calls to "get tough" on people on welfare, demanding that they "get a job" becomes sickeningly cruel.

It's also true that there are people who are more likely to be unemployed than other people. Single mothers for one. First Nations peoples for another. People from low-income backgrounds (more and more lacking the same educational chances as their more privileged counterparts thanks to the policies of Martin and Harris and etc.,). People from depressed regions of the country.

This numbers more than 8 percent. The spectre of enforced unemployment probably regularly haunts about 20-30 percent of us.

This says nothing about involuntary part-time unemployment.

quote:

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Originally posted by Mr. Magoo:
I'm sorry, but if you're in your forties, you've had a long string of jobs, and all of them have been minimum wage, take a good long look in the mirror, or maybe speak to an employment counsellor. At that point it's not "the man keeping you down".

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First you were saying that job opportunities
abound in Canada, and now you seem to be backpedaling and implying that low wages and part-time work abound?. Come on now, which is it?. You can't continue flogging the horse to go in one direction when it wants feeding. We're looking for real answers, but you're not giving us any. Why not ?.

Meanwhile, the price of rent and groceries and cost of living in general never ever goes down, at least not in Canada. But you're implying that part-time work and maybe even self-employment is the answer to Canada's abysmal job creation numbers since FTA, and not to mention our stubborn child poverty. Yep, there it is again. And child poverty seems to be a persistent problem in countries pursuing flexible labour markets.

The numbers speak for themselves , Magoo. You can preach these conservative dogmas here, but they don't hold water as to why Canada's economy has produced a dearth of full-time payroll jobs in direct comparison with other rich nations.. And unemployment is a problem for most market economies. You're neither sympathetic or empathetic of Canada's army of unemployed, under-employed and economically frustrated. But you do persist with the same worn-out arguments that just aren't used anymore by political conservatives who want to be taken seriously. If you must use todays conservative argument, then like them, simply say nothing and stick with the usual conservative issues like crime and punishment. Super-gulags seem to be their answer in the U.S. to slowing post-cold war economies. You must try harder in this thread though.

[ 06 April 2006: Message edited by: Fidel ]

And did the Countenance Divine
Shine forth upon our clouded hills?
And was Jerusalem builded here
Among these dark Satanic mills?

William Blake

[ 06 April 2006: Message edited by: Privateer ]

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Well, it wasn't the point of the thread that the same 8% are being picked-on.

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Fair enough. My original comments were primarily in response to this:

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And if anyone thinks that slaving away at some minimum wage 'job' is going to do anything but cause them to slip further into obscurity and potential homelessness they are probably doing a bit too much of those illicit drugs.

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First you were saying that job opportunities
abound in Canada, and now you seem to be backpedaling and implying that low wages and part-time work abound?

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Originally posted by thwap:

It's my point that the people in charge put people out of work on purpose. Seen in that light, neo-con calls to "get tough" on people on welfare, demanding that they "get a job" becomes sickeningly cruel.

---

However, it's an essential part of the strategy--the reason they put people out of work is to create a pool of desperation sufficient to put downward pressure on salaries. If the 8 percent gives up, then it stops working.

That's the entire point to workfare and otehr programs forcing welfare recipients back onto the job market.

The government doesn't expect that the jobless rate will decrease, because they know that they've deliberately arranged to have not enough jobs to go around. What they want to accomplish is the get the jobless out there stirring things up enough that this creates a drag on salaries for those who *do* have jobs.

[ 06 April 2006: Message edited by: S1m0n ]

- The February 2006 unemployment rate was 6.4%. The last time StatsCan reported an unemployment rate above 8% was in April, 1999.

- Thirty years ago, there were 9.6m people employed in Canada. Today, that number is 16.3m. If employment had stayed at 9.6m, we'd have an unemployment rate of 44.7%. Why don't we?

How much did the Fraser Institute pay you to ask those "questions", hmmm Stephen???

quote:

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Originally posted by Stephen Gordon:
Some numbers, and a couple of questions.

- The February 2006 unemployment rate was 6.4%. The last time StatsCan reported an unemployment rate above 8% was in April, 1999.

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That number is still too high. In the 1950s and 1960s, a government that permitted 6.4% unemployment would be blasted for incompetence (as happened to Diefenbaker) instead of praised for their brilliance (as Martin's Liberals were).

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- Thirty years ago, there were 9.6m people employed in Canada. Today, that number is 16.3m. If employment had stayed at 9.6m, we'd have an unemployment rate of 44.7%. Why don't we?

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Because as passive as the Canadian electorate and media have become when faced with insane economic policies, 44.7% unemployment would be intolerable. Plus, the economy tends to grow when the population grows. (This is especially when new Canadians and their parents are possessed of enough effective demand to obtain the necessities of life.)

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- Suppose instead that employers and the govt allowed employment to grow with the population (again, why would they do that?). The average growth rate of the working-age population over the past 30 years has been 1,4% a year, so applying that rate of growth to employment would mean that we'd have 14.8m people employed now - and the unemployment rate would be 15.2%. Why isn't it?

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Well Steven, it seems to me that while the financial sector is powerful enough to have gotten two strong doses of monetarism, to which other sectors obviously had some agreement, there is a point after which consistently high levels of unemployment (and the deficits and recessions that accompany them) are not tolerated.

quote:

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Originally posted by Stephen Gordon:
Some numbers, and a couple of questions.

- The February 2006 unemployment rate was 6.4%. The last time StatsCan reported an unemployment rate above 8% was in April, 1999.

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What kind of jobs have we gained though?. Once again from the top - how many full-time payroll jobs has Canada not only lost since FTA, but what percentage of FTPJ's are we simply not producing anymore in direct comparison with numbers previously realized before FTA?. I mean, FTA/NAFTA was supposed to produce prosperity in Canada. Remember Mulroney saying, "Jobs, jobs jobs!"?. Our numbers for export of natural resources to the U.S. and GDP
are up nicely. But why hasn't shipping our stuff off to that country at a frenzied pace created some decent numbers wrt prosperous full-time jobs in Canada ?.

quote:

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- Thirty years ago, there were 9.6m people employed in Canada. Today, that number is 16.3m. If employment had stayed at 9.6m, we'd have an unemployment rate of 44.7%. Why don't we?

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Come on. What rich country's economy has failed to expand since 1987, Stephen ?. Even Cuba's economy was estimated to gave grown 5.8 percent last year. And Castro admits to their experiencing unemployment issues along with inequality and price issues. Is it really all that rosy in Canada ?. What percentage of the unemployed in Canada qualify for UI-EI-O benefits and are therefor counted in our rosy U statistics ?.

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- Suppose instead that employers and the govt allowed employment to grow with the population (again, why would they do that?). The average growth rate of the working-age population over the past 30 years has been 1,4% a year, so applying that rate of growth to employment would mean that we'd have 14.8m people employed now - and the unemployment rate would be 15.2%. Why isn't it?

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I don't know, Stephen. Is it because Canada doesn't exist in a vacuum?. Canada's below replacement birth rates might have something to do with it. And the feds have managed to convince people from across the third world capitalist democracies to emigrate here over time. But U rates for well-educated and skilled immigrants are estimated to be three times that of non-skilled, lower educated immigrants. Why is that ?. Does it have something to do with Canada's new flexible labour markets and our owning one of the largest low wage workforces among richest nations?.

And what about the United States, that other experiment in flexible labour markets?. American economist John Williams says, "Real unemployment right now, figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression, is running about 12%. Real CPI right now is running at about 8%. And the real GDP probably is in contraction.

I do think they play at shadow statistics there more than here. But do you think we're playing follow the leader up here in Canada as usual, Stephen ?.

[ 06 April 2006: Message edited by: Fidel ]

quote:

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The typical duration of a spell of unemployment is around four months. (Table 1 on p 12 of this study.)

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Come on Stephen the study says "average" and not "typical". There is a difference and as an economist you know that very well.

Also that study covers the period 1977-1995 and so is over a decade old. Alot has changed since then. Sure alot of todays labour market trends began then...but today the negative stuff is a whole lot worse. For instance it misses the whole "dot com" boom and bust...and the electronic transfer of many jobs overseas.

And even that "average" is somewhat distorted because it includes folks who are involved in temporary lay-offs.

For those involved in temporary lay-offs the "average" duration of unemployment is 9.0 weeks for men and 7.2 weeks for women...basically a couple of months.

Alot of those folks would be involved in industries with a seasonal downturn, or periods of time where industries are down for awhile to retool...like the auto industry.

But for those involved in permanent lay-offs the "average" is 20.7 weeks for men and 19.8 weeks for women...so five months give or take.

And if we're looking at an "average" that means that there were a whole lot of folks on permanent lay-off that were out of work alot longer than five months!

Also, don't forget that EI coverage in Canada is only for about 9-10 months...so if you're out of work for longer then that you fall into poverty.

And the "national" unemployment rate is grossly distorted by the oil boom in Alberta where high oil prices have created a job boom. Nonetheless it's also caused a severe housing shortage.

If there's a collapse in world oil prices...(even though it "looks" impossible now) the Alberta unemployment rate will skyrocket. Don't forget that back in the 1970's we "assumed" that oil prices would stay high forever...they didn't.

Also there's the whole issue of the "quality" of jobs...folks who are working part-time or in temporary work who'd really like to work in full-time or "permanent" jobs. There's also the issue of stagnating wages etc.

quote:

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Originally posted by thwap:

That number is still too high. In the 1950s and 1960s, a government that permitted 6.4% unemployment would be blasted for incompetence (as happened to Diefenbaker) instead of praised for their brilliance (as Martin's Liberals were).

---

Well, StatsCan only has data going back to 1976 on their website, but the US data go back to 1947. If you look here, the all-time post-war low was set in 1953: 2.5%. Between 1953 and 2004 (the last year for which census data are available), the working-age population (this does include the military and prisoners, BTW) increased by about 1.4% a year. If employment had grown at the same rate, total employment would have been 124.4 million. Actual employment in 2004 - which was by no means a banner year for the US labour market - was 139.2m. (Reported unemployment in 2004 was 8.1m.)

If the theory is that business and government are trying to keep employment down, then an objective observer would be forced to conclude that they're not very good at it: jobs are being created at a faster rate than population growth.

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Just because there has been some mitigagtion in the level of application of things like the NAIRU (which was entirely discredited) doesn't mean that the forces conspiring to maintain insecurity of employment and high unemployment have gone away.

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The basic idea behind the NAIRU model has been by no means discredited, and it's still the framework that guides monetary policy here and elsewhere. But you knew that already.

But this thread is about the 'enforced unemployment' theory, not the NAIRU. In addition to the data-inspired questions above, I have a few others about how this mechanism works:

- What is the government's role in all this? If businesses refuse to employ workers, isn't that the end of the story?

- Whenever the Bank of Canada decides to crank up interest rates, corporate profits tank. So why does the Bank of Canada do it?

[ 06 April 2006: Message edited by: Stephen Gordon ]

quote:

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Originally posted by Mr. Magoo:

Why is that so entirely impossible for you to wrap your head around without turning into Captain Cynical

---

Good lord. Is Mr. Magoo *really* castigating someone for being *cynical*?

quote:

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Originally posted by Stephen Gordon:
Well, StatsCan only has data going back to 1976 on their website, but the US data go back to 1947. If you look here, the all-time post-war low was set in 1953: 2.5%. Between 1953 and 2004 (the last year for which census data are available), the working-age population (this does include the military and prisoners, BTW) increased by about 1.4% a year. If employment had grown at the same rate, total employment would have been 124.4 million. Actual employment in 2004 - which was by no means a banner year for the US labour market - was 139.2m. (Reported unemployment in 2004 was 8.1m.)

If the theory is that business and government are trying to keep employment down, then an objective observer would be forced to conclude that they're not very good at it: jobs are being created at a faster rate than the population.

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No, that's not the theory. The theory is that in recent decades economists and government have been setting a target of 6 to 8 percent as the unemployment rate minimum, acting on the belief that rates lower than this are 'inflationary'--in that at such times labour becomes a seller's market, driving up the price.

quote:

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Originally posted by radiorahim:

Come on Stephen the study says "average" and not "typical". There is a difference and as an economist you know that very well.

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Sure. So does Michael Baker and pretty much everyone who works at StatsCan. If the authors thought that the average was a misleading measure of central tendancy for unemployment duration data, I have every confidence that they would have mentioned it.

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Also that study covers the period 1977-1995 and so is over a decade old. Alot has changed since then. Sure alot of todays labour market trends began then...but today the negative stuff is a whole lot worse. For instance it misses the whole "dot com" boom and bust...and the electronic transfer of many jobs overseas.

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Possibly; I found that study in a cursory google search. If you've come across something more recent, then I'll be happy to accept the correction.

[ 06 April 2006: Message edited by: Stephen Gordon ]

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Originally posted by S1m0n:

No, that's not the theory. The theory is that in recent decades economists and government have been setting a target of 6 to 8 percent as the unemployment rate minimum, acting on the belief that rates lower than this are 'inflationary'--in that at such times labour becomes a seller's market, driving up the price.

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I thought the theory was that the range was the 8%-12% interval mentioned in the OP, but passons. In any case, the Bank's policy is quite explicit: inflation targeting. Since the movements in the unemployment rate are a lagging indicator for inflation, the Bank really doesn't pay much attention to it when it sets interest rates.

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Taking data from the 50s, long before this process began, and misprepresenting the nature of the argument both make your point, above, into a man of straw.

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Hey, it wasn't my idea to dig into the archives.

[eta:]

I think you misunderstood the goal of the thought experiment. The claim was that things were much better in the 50's, when unemployment was lower. My point is that if we had the same employment levels that we saw in the 'glory years', things would be much, much worse than they are now.

[ 06 April 2006: Message edited by: Stephen Gordon ]

I never worked harder for less than when I had two restaurant jobs, or when I spent over 240 days at sea in less than 11 months.

All self-made wealthy folks are hard workers, but not all hard workers are wealthy. In fact extremely few of them are. This is something that many folks like Sven don't seem to understand.

We'll leave aside all the Westinghouses and Rockefellers who merely had hard working great-grandparents, but somehow are entitled to dictate the virtues of hard work to the rest of us. And let's forget the royal/aristo types who merely had big & bloody ancestors 700 years ago.

[ 06 April 2006: Message edited by: arborman ]

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Originally posted by Stephen Gordon:
Some numbers, and a couple of questions.

- The February 2006 unemployment rate was 6.4%. The last time StatsCan reported an unemployment rate above 8% was in April, 1999.

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So for instance if you've "given up" looking for work because you've become discouraged and can't find a job then you've left the labour market.

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Originally posted by radiorahim:
My understanding is that the Statscan unemployment numbers reflect those who are "actively seeking work".

So for instance if you've "given up" looking for work because you've become discouraged and can't find a job then you've left the labour market.

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That's the classic description of the discouraged worker effect. It's often the case that at the worst of a recession, the unemployment rate will go down, even if there hasn't been any job creation. And the reverse happens as well: when job growth is strong, it attracts new entrants to the labour force, and unemployment can go up.

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Or if you're working part-time and/or temp, but you're really looking for a full-time job then you're "employed".

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True. Which is why we also look at hours worked.

[ 06 April 2006: Message edited by: Stephen Gordon ]

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Originally posted by radiorahim:
My understanding is that the Statscan unemployment numbers reflect those who are "actively seeking work".

So for instance if you've "given up" looking for work because you've become discouraged and can't find a job then you've left the labour market.

Or if you're working part-time and/or temp, but you're really looking for a full-time job then you're "employed".

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[ 06 April 2006: Message edited by: Stephen Gordon ]

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Originally posted by radiorahim:

And the "national" unemployment rate is grossly distorted by the oil boom in Alberta where high oil prices have created a job boom. Nonetheless it's also caused a severe housing shortage.

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IMO, this is a national disgrace, a paramount phuckup by two old line parties that have runout their best-by dates. I can see reasons for homelesness in some countries where they just can't get it together economically and because of corruption, but our wealthy nation should be able to tolerate some corruption and utilize some of our oceans of timber for a national housing program. This economy should be red hot with a construction boom. And we're short of people who can swing a hammer and use a tape measure. My god, what are we doing in this country?.

Instead of listening to the bastards tell us how they're twisting the Americano's arms to take millions of board feet of lumber off our hands every year so it can be shipped back to us as finished products, we should have a nationalized construction company and the most modern, energy efficient housing in the world. I see these government eggheads with the NRC who do nothing but travel to the states to discuss how fiberglass insulation and other building materials can be made better...in the states!. We should have a nationalized furniture company to compete with and take some IKEA's market share away. We should be the best in the world.

Instead, we buy chainsaws from Scandinavia and finished furniture from the states and IKEA! I don't think they even have any trees left in Sweden- the capitalists chopped them all down decades ago.

[ 07 April 2006: Message edited by: Fidel ]

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Originally posted by Fidel:

Instead, we buy chainsaws from Scandinavia ...

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I don't think they even have any trees left in Sweden- the capitalists chopped them all down decades ago.

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This from the website of the Swedish Consulate in Los Angeles:

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More than 50% of Sweden is covered by forests (and Sweden is almost the size of California). Consequently, since the 13th century, timber and other forest products have been an important part of Swedish exports, today accounting for 15% of total merchandise exports. Traditionally timber, wood tar, pitch and potash were the major sources of income. Today though, pulp and paper are the major exports

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and this:

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High environmental standards are an integral part of Swedish forestry. Since 1903, Swedish legislation has required planting and cultivation of new forests after logging. Today 40% of productive Swedish forests are certified according to the strict environmental and bio-diversity protecting regulations of the international Forest Stewardship Council (FSC). Sweden was the first country in the world to develop a national FSC standard in 1998. The six largest forest management companies in Sweden are all FSC certified.

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As I understand, the forestry industry in Sweden has some very tough environmental standards. They don't do the kind of "clear cutting" that's practiced in most parts of Canada.

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Large parts of the Taiga have a long history of forest use. As an example, the large-scale commercial exploitation of the Scandinavian forests began more than 100 years ago and has now transformed virtually all forest land to intensively managed secondary forests. This history has caused a massive biodiversity crisis in the Scandinavian forests, with more than 1900 red listed forest species in Sweden alone. In Russia and Canada however, large tracts of ecologically valuable old growth forests still remain.

According to a recent study conducted by the World Resources Institute, Russia and Canada host more than half of the world's remaining frontier forests, defined as large, ecologically intact and relatively undisturbed areas of primary forest. Unfortunately both these countries are about to follow the Scandinavian example by moving in extensive logging operations in these areas. This process might, if not halted, lead to a boreal biodiversity crisis with the same characteristics as the current Scandinavian one.

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I think Sweden's reforestation and research programs are world class since the 1950's or so.
Socialists there invested in reforestation and genetic research.

But we still have a shitload more wooded forests than Scandinavia by comparison. Even the Yanks tell us we're being taken to the cleaners for our lumber.

[ 07 April 2006: Message edited by: Fidel ]

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Originally posted by Stephen Gordon:

The basic idea behind the NAIRU model has been by no means discredited, and it's still the framework that guides monetary policy here and elsewhere. But you knew that already.

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... NAIRU has been discredited because it was essentially a fine excuse to call whatever rate of unemployment prevailed was the NAIRU rate, and therefore, unsolveable.

When, under Clinton, the US unemployment rate went below the supposed NAIRU rate and no inflation acceleration occured, they changed their calculations to reflect this fact. Which makes it pretty useless as a policy device, but pretty good as a way to rationalize the present.

btw: I don't see how that old thread reveals anything about my faith or not in the NAIRU.

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But this thread is about the 'enforced unemployment' theory, not the NAIRU. In addition to the data-inspired questions above, I have a few others about how this mechanism works:

- What is the government's role in all this? If businesses refuse to employ workers, isn't that the end of the story?

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Through monetary and fiscal policies, the government can influence the economic climate.

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- Whenever the Bank of Canada decides to crank up interest rates, corporate profits tank. So why does the Bank of Canada do it?

[ 06 April 2006: Message edited by: Stephen Gordon ]

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Note above where i said: "it seems to me that while the financial sector is powerful enough to have gotten two strong doses of monetarism, to which other sectors obviously had some agreement, there is a point after which consistently high levels of unemployment (and the deficits and recessions that accompany them) are not tolerated."

Obviously, businesses outside of the financial sector also have a vested interest in stable prices and a workforce cowed by insecurity, but there is only so much damage to their profits that they're prepared to take. Policy makers know this.

Regarding your extrapolations from the 1950s, I'll first say that given the explosive entrance of women into the labour force and the growth of the population, our system has done an impressive job of finding jobs for people.

But the conditions of job creation in the 1950s is much different from the conditions of the 1980s, 1990s, and today. It is the government's impact on job creation within the context of recent years that is important.

Your progressions from the 1950s are interesting, but they don't alter the fact that governments have a direct impact on the ability of the present economic system to create jobs.

The conclusion to be driven from your extrapolations is that both government and business have been going full-out to create jobs for people and that todays numbers are the best that anyone could ask for.

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However, it's an essential part of the strategy--the reason they put people out of work is to create a pool of desperation sufficient to put downward pressure on salaries. If the 8 percent gives up, then it stops working.

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Originally posted by Stephen Gordon:
The point of the NAIRU model is that monetary authorities cannot control trend levels of output and employment. They can certainly generate fluctuations above or below trend, but only for a short period (18 months or so).

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And I thought NAIRU says essentially that sooner than take a paying job and living a decent life, the unemployed will choose of their free will to remain unemployed and live in poverty on the dole until it runs out. I think it's easier to explain-away nul statistics that way.

According to Linda McQuaig, it was the mandate of the BoC to guard against unemployment and runaway inflation. At some point they dropped all responsibility for unemployment and focused on protecting the assets and money of the wealthy. And a good thing for the wealthy that BOC leaders are appointed and never owe any favours to rich people. wink-wink

[ 08 April 2006: Message edited by: Fidel ]

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Originally posted by radiorahim:
Anyway, while there's an oil-fed job boom in Alberta I understand there's nowhere to house all the job seekers moving there.

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Sounds like San Francisco in the late nineties. You know, people making $200K/a and sleeping under their desks.

Oh wait. It's not like that at all.

.
.
I can't disagree that smart and hard work combined with savings and smart investments will almost guarantee a good financial outcome for *almost* anyone who may manage it. There are perhaps a few points that should be seen in conjunction with this, though.

Firstly, NAIRU demands that 6, 8, 12, etc. percent of people remain unemployed, regardless of how hard working or smart they may happen to be. Until this policy is reinterpreted or changed, this will be the outcome for that percentage of people. The fudging of unemployment numbers should be taken into account here, as should the fact that those losing a job are likely to lose savings needed for retirement and are likely to find a job with the less pay, medical coverage, pension, etc. than the one they had previously.

Secondly, a certain grouping of people will tend to find themselves in the ranks of the unemployed. Those who were raised in abusive families, were undernourished, or born with (or later recieved/developed) learning disabilites will tend to be in this category. The lack of societal understanding and care will end up meaning that the realization of potential for many of these people will simply not take place. Tied closely to this is the lack of funding for social programs which would be more avialable with the much stronger economy that near-full employment would ensure.

This is not to say that healing and success for these people is impossible, just that it is not a fact historically for the majority of them. Those wishing to challenge this need only to look at the stats or research on early brain development to have their views strongly challenged.

Thirdly, focussing on employment as the main source of inflation is goofy. The fact that money does grow on trees for those lucky enough to own banks (banks invent money simply by punching some numbers into a computer with hardly any real backing, and lend it out at interest - and then often only with colladeral) is by far the main source of inflation, bar none.

Advancements in technology (ie. better stuff for cheaper than before) is another source, but then still far less of a cause of inflation than fiat currency (ie. money made out of nothing). Milton Friedman has proposed a way that this could be safely changed for the better, but (perhaps not surprisingly), those who control things would rather keep on controling them than have this control passed to governments.

If this sounds conspiratorial, one only needs to look into the banking system in North America, or the fact that power has tended to accumulate (and corrupt those holding it) throughout recorded history to see how this could be happening today.

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Originally posted by Mr. Anonymous:
Firstly, NAIRU demands that 6, 8, 12, etc. percent of people remain unemployed, regardless of how hard working or smart they may happen to be.

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No, it doesn't. NAIRU-based models say that monetary policy cannot improve trend levels of output, employment or unemployment. The legal right to print currency is not the same thing as the power to create productive capacity.

Canadian studies on NAIRU said that by increasing unemployment by two percentage points above natural rate would lower inflation permanently by one percentage point. Economic output would suffer, and more workers would suffer poverty, but lower inflation should be worth it. But Canada's Pierre Fortin said that this wasn't true of Canada's situation after the recession at the start of the 1980's as unemployment averaged 10 percent, about two percentage points higher than the natural rate as defined by the Bank of Canada. NAIRU theory said that inflation should have dropped one percentage point every year from 1984 to 1987 for a total of four percentage points. Inflation actually fell by 1.3 percent, from 5.7 percent to 4.4 percent. As Fortin noted, the Canadian situation was similar to what was happening in Belgium, France, Italy and the U.K., where unemployment levels well above their natural rates were failing to bring down inflation. It would seem an ever larger reserve army of unemployed would be needed to stop European inflation from rising.

"The North American and European experiences of the 1980's call the Friedman view into serious question", Pierre Fortin told a conference of economists gathered at Sudbury, Ontario. ("The Cult of Impotence: Selling the Myth of Powerlessness in the Global Economy", Linda McQuaig, p. 52)

[ 09 April 2006: Message edited by: Fidel ]

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Originally posted by Stephen Gordon:
- The February 2006 unemployment rate was 6.4%. The last time StatsCan reported an unemployment rate above 8% was in April, 1999.

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StatsCan considers someone as unemployed if they don't have a job and if they're actively looking for one.

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Originally posted by Red Albertan:
That is why I made the observation that true unemployment - the un-fudged numbers include the discouraged, which do not vaporize to nothing - is much higher than what StatsCan reports.

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As someone who actually worked on some of those StatCan surveys (talking on the phone and entering the data), I can confirm that a fair bit of the data collected is of questionable value. Underemployment is not adequately measured, and that's a huge grey zone when you're looking at trying to get some realistic figures.

The limitations of the survey method itself creates problems: Stats Canada really relies on people telling the truth about their lives. Many people do. Many people stretch the numbers. Men talking to female survey-takers (for example) will inflate the numbers of their income and their average hours worked. People new to the country often give inaccurate information about their economic lives for various reasons. Data-collectors often make mistakes and don't care about correcting them. Some people outright lie. They're sick of Stats Can calling them, they don't give a f**k about accuracy of government surveys, and they think it's fun to play a game with them. And it's true that unemployed people who are neither on welfare nor on EI will not be measured in these surveys (people living on personal loans, people living on VISA, homeless people, people moving back in with their parents). They fall through the statistical cracks, and may show up only as estimates in unemployment figures.

There is no chance in hell that the national unemployment rate is currently only 6.5%. Not a chance in hell.

[ 09 April 2006: Message edited by: jas ]

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Originally posted by jas:
..There is no chance in hell that the national unemployment rate is currently only 6.5%. Not a chance in hell.

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Originally posted by Radical Progressive:

You may be right. What do you base your assessment on?

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In Canada, it's said that about 40 percent of the unemployed are eligible for EI benefits and are therefore counted as unemployed. I think it's about the same number in the U.S. now.

In Germany, if someone has worked 12 of the last 36 months and are not receiving a pay cheque, then they are counted as unemployed.

In Sweden, someone is unemployed if they have had a paying job in the last five years and are not working. In these countries, job training, re-training and access to higher eduction for unemployed workers are available at every turn because they understand that jobs are not long-term anymore and that the workplace in general has changed over time. Social programs for the unemployed and those incapable of working are, by far western standards, very generous.

Here is my view of unemployment;

Corporations need unemployment. Historically, they have had much greater control over their workers, and have had to offer much less in the way of benefits, when unemployment is high. When unemployment is low they suddenly have to start offering positions that workers actually WANT to do, with wages that can actually support workers and their families.

Mr. Magoo, are you for real? Your view of the world of wage slavery is incredably pink-hued. You seem to believe that every worker earning low wages is a white, male, teenager living at home with mom and dad. Otherwise, you'd understand why it's not that easy to escape. When you have a family to feed, when english isn't your first language, when you're a single mom, things get a little trickier. When was the last time you had to live on minimum wage?

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Good lord, it's not like initiative and responsibility are the domain of the wealthy or the priveleged

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MM, given the rest of your comments, you seem to be contradicting yourself. Obviously initiative and responsibility aren't the domain of the wealthy, but they do appear to be the only ones who get paid for it....

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I don't know exactly how you could end up playing musical chairs every day and never, ever get a chair.

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Perhaps they're the one's rigging it?

[ 09 April 2006: Message edited by: beaver ]

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Originally posted by Stephen Gordon:

If you have a better model, one that explains how and why monetary policy can be used to keep unemployment sytematically at the rate of the policy-maker's choosing, I'd be interested in learning how it works.

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It's funny, then, that despite the blown smoke, if you flip over to saturday's Report on business, you can read hair-raising quotes like the following:

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"I think the Fed wants the unemployment rate to stop going down pretty much immediately, and if it doesn't the Fed will keep tightening," said Jim O'Sullivan of UBS Securities in Greenwich, Conn.

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This market analyst doesn't seem to be in much doubt about the mechanisms were discussing. That's an entirely blunt description of the process we're discussing--he expects the fed to raise rates in order to keep the uemployment rate steady, in order to suppress wages.

The teaser from the print edition was even blunter.

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U.S. employers went on another hiring spree in March, dropping the unemployment rate to a 4 1/2 year low. But the labour report, which was stronger than expected, has some economists worrying that much higher interest rates might be needed to fend off inflation.

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So uh, that's how it works.

[ 10 April 2006: Message edited by: S1m0n ]

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When was the last time you had to live on minimum wage?

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When I lived in Hamilton about 15 years ago and worked for Black's Camera. Having $325 per month rent helped some. And to be fair, Black's actually paid a nickel more than minimum, the generous bastards.

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And if anyone thinks that slaving away at some minimum wage 'job' is going to do anything but cause them to slip further into obscurity and potential homelessness they are probably doing a bit too much of those illicit drugs.

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It's true, and some people might forget that when they get carried away, but there's a time and a place.

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Originally posted by S1m0n:

So uh, that's how it works.

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Originally posted by Stephen Gordon:

But not the way you seem to think it does. Potential output is not set by the Bank of Canada, it is estimated. They then compare those estimates with what we observe.

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I'm having trouble grasping what difference this makes.

I suppose it allows you to recoup some pride, but it makes no difference at all to me whether they do something in the expectation of a certain result, or whether they do it in the knowlege of a certain result.

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When the Bank of Canada raises or lowers the key overnight interest rate ... it sets in motion a chain of consequences that influences:

...

- spending, production and employment through cost of credit.

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Originally posted by Stephen Gordon:
The Bank has no control about what potential output is. It doesn't have the power to peg unemployment at levels systematiucally higher or lower than what is consistent with potential.

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Who cares what the peg is? They DO--and the article makes it obvious--have the power to decide that the employment level is getting too low and that therefore they need to do something that'll throw a bunch more people out of work, in order to prevent wages from rising.

~~

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Originally posted by Mr. Magoo:
Still responding to this little bit of teen angst:
It's actually how I ended up in this thread, you see. While it may seem to you self-evident, it's apparently the stuff of fevered dreams to think that giving a shit might pay off in employment opportunities.

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I've worked shit jobs in my teens and early twenties. I paid off a student loan of five thousand dollars for my first community college diploma back when the working poor were not saddled with a quarter century of debt for the right to access higher education.

There is nothing about it that is real or necessary. Its just another ideology that only serves those at the top of its hierarchy while needlessly exploiting everyone else. It exists primarily in our minds.