Tackling The Real Unemployment Rate: 11%

Louis Efron - Forbes

Imagine being served your poolside drinks by a lawyer, or getting your chicken sandwich delivered by an experienced marketing professional. The first is a friend of mine, the second my waitress a few weeks ago. Both lost jobs due to economic downturns at their organizations. Both took available work to pay the bills while looking for new positions in their chosen professions.

My friend and the waitress are victims of a massive but hidden problem called underemployment. Watching falling unemployment numbers being reported at 5.5%, down from nearly 10% four years earlier, is simply misleading.

Despite the significant decrease in the official U.S. Bureau of Labor Statistics (BLS) unemployment rate, the real unemployment rate is over double that at 11%. This number reflects the government’s “U-6” report, which accounts for the full unemployment picture including those “marginally attached to the labor force,” plus those “employed part time for economic reasons.”

U.S. Bureau of Labor Statistics measurements U1, U2, U3, U4, U5 and U6. (Photo credit: Wikipedia)

“Marginally attached” describes individuals not currently in the labor force who wanted and were available for work. The official unemployment numbers exclude them, because they did not look for work in the 4 weeks preceding the unemployment survey. In February, this marginally attached group accounted for 1.052 million people. To put that in perspective, there are currently 8 states in the U.S. with populations smaller than 1.052 million.

302,000 discouraged workers – workers not currently looking for work because they believe no jobs are available for them – are included within the list of marginally attached people. Another 6.635 million were not considered unemployed because they were employed part-time for economic reasons. Those people are also called involuntary part-time workers – working part-time because their hours were cut back or because they were unable to secure a full-time job.

When you look at state populations – using the 6.635 million – the number represents more than the population of all but the 14 states with the highest populations.

These numbers mean the U.S. has over 7 million workers only marginally engaged in their work situation.

They don’t contribute their full potential to their households, the economy or society in general. While reporting a low, declining unemployment number may comfort people, we can’t ignore the millions of workers feeling the pain of the real unemployment number of 11%.

Dan Diamond’s Forbes article, Why The ‘Real’ Unemployment Rate Is Higher Than You Think highlights another disturbing fact that compounds the challenge: The longer you’re without a job, the less likely you’ll get called back for an interview. By the eighth month of unemployment the callback rate falls by about 45%. The article concludes “many employers see these would-be workers as damaged goods.”

These same people could be contributing greatly to the economy. Instead, they are spending their days trying to secure employment or working in unfulfilling part-time jobs while depleting their savings and 401K’s to supplement their income. Or worse yet, living off their credit cards just to survive.

The answer to these challenges is not solely job creation, but creating the right jobs to maximize a labor force.

Here is the solution:

Quality Over Quantity

Getting people back to work is good, but if the quality of their employment is down or the money earned insufficient you create other problems:

• unsatisfied and disengaged workers
• low productivity and work quality
• high turnover and operating costs
• financial, social, and household strain

To create quality jobs there must be an accurate window into the people needing work, not just programs in place to retrain highly skilled and experienced workers for low-skilled jobs. Retraining should be available, but for those truly desiring a new career. There must be an effort by employers to fully utilize and capitalize on the talents their potential employees can bring to their organizations.

When interviewing candidates – or evaluating your current workforce – look beyond the role they are pursuing or filling. Assess what else they can deliver for your organization. What skills and experiences are they not using in their current role? Is there a way to expand their current jobs to include and leverage missed opportunities? Paying attention to what is on a candidate’s and employee’s resume, closely observing their work, and asking good questions about other contributions they feel they can make are effective ways of performing this assessment.

Post assessment, work-sharing and job rotation programs provide employees a chance to apply unused but valuable experience and to contribute at higher levels.


High-Skilled Jobs Promote Healthy Economies

While governments may believe low unemployment is the key to economic success, it has not proven true. In 24/7 Wall St.’s article Nine Countries Where Everyone Has A Job, a highlighted 2012 study concluded: “only a minority of the countries with low unemployment actually have a healthy economy where middle-class jobs are abundant.” These middle-class, higher skilled jobs tend to have a greater impact on innovation, productivity and improved efficiency.

After World War II, Europe’s economy recovered quickly despite its destroyed factories and infrastructure. This was primarily due to maximizing and strategically leveraging the experienced workforce.

Unlike investing in machines – which need replacing over time – human knowledge becomes stronger and more valuable the more it is used and developed. Highly skilled people grow weaker and become less valuable to our economy when they spend their days looking for work or occupied in jobs that don’t further develop and hone their capabilities.

A product designer spending 40 hours a week pondering and developing new products – plus getting additional training – will become more creative, knowledgeable and innovative. He/she will also add further value to their organization the more they work in their job.

An assembly line worker instructed to repeat the same required task over and over has little room to add more value to him/herself or their organization. Except for their own assertively offered suggestions, that worker may only add value when their task alters as a result of innovations from higher-skilled workers. While the product designer can help other product designers around him or her get better; the assembly line worker may again be limited by the job and unable to effect change in the same way.


Innovation First

In the early 1900s, economist Joseph Schumpeter coined the term “creative destruction” – occurring when something new destroys something older. When an organization creates a new product or finds a better way of doing something, it can eliminate its competition. The invention of the personal computer is a great example of this. Many mainframe computer companies became obsolete when the personal computer arrived. On the other hand, that creation allowed new organizations and jobs to develop.

The invention of photography revolutionized the world, eliminating some professions, but creating many new ones. Before photography, some prisons employed “recognizing officers” – people who identified repeat offenders. With cameras obtainable and affordable, photographers replaced the recognizing officer to process mug shots of each prisoner.

Schumpeter asserted that the “process of creative destruction is the essential fact about capitalism.” It is ebb and flow; a recreation or a rebirth sustained by constant innovation. As new ideas come to life, so do new industries, organizations and jobs. To keep innovative people working, organizations and governments must create jobs for them and invest in their progressive ideas.

Governments and organizations that create quality, high-skilled jobs focused on innovation will yield more of the right jobs, engage their entire workforce, and ultimately create a diversity of jobs at all levels. Creating such jobs is key to economic growth and sustainability. This, in turn, will fulfill the needs of the underemployed who desperately want to make a difference to their communities and the world.

If a country loses its most educated and skilled people to other countries due to a lack of fulfilling jobs, that economy will stagnate.


Facing Reality

Technology will change the jobs we do.

While secretaries, telephone operators, word processors and typists were rapidly disappearing between 2000 and 2010, employment in computer systems design and related services grew by a healthy 18% around the same period (BLS). The emerging sector even withstood the recent recession losing only 1% of its workforce during the downturn. From 2003 to 2013, BLS reported 37 percent employment growth in the IT industry.

Highly skilled innovators that dream-up and advance our future will create new jobs and industries. The more high skilled jobs there are, the lower both unemployment and underemployment will become.

How the Ultra-Rich Betray America

Monday, May 21, 2012 by Common Dreams

by Paul Buchheit

 

The betrayals come in many forms. Here are a few of the more outrageous, and destructive, examples:

Evasion: Corporations suddenly stopped meeting their tax responsibilities

While corporate profits have doubled to $1.9 trillion in less than ten years, the corporate income tax rate, which for thirty years hovered around the 20-25% level, suddenly dropped to 10% after the recession. It has remained there for three years.

We are seeing a manifestation of the Shock Doctrine. Corporations are using the national emergency of the financial collapse to make a statement about taxes, and a traumatized nation is too preoccupied to do anything about it.

Delusion: Technology companies won't admit that much of their 'innovation' is due to public assistance

According to the report Funding a Revolution, government provided almost half of basic research funds into the 1980s. Federal funding still accounted for half of research in the communications industry as late as 1990. Even today, the federal government supports about 60 percent of the research performed at universities.

Apple's first computer was introduced in the late 1970s. Apple still does most of its product and research development in the United States, with US-educated engineers and computer scientists.

Google's business is based on the Internet, which started as ARPANET, the Defense Department's Advanced Research Projects Agency computer network from the 1960s. The National Science Foundation funded the Digital Library Initiative research at Stanford University that was adopted as the Google model.

Apple got its tax bill down to 9.8% last year. About 2/3 of its profits remain overseas for tax avoidance purposes. Google, like Apple, avoids taxes by moving most of its foreign profits through Ireland and the Netherlands to Bermuda. Both Apple and Google, along with Microsoft and Cisco, are lobbying for a repatriation tax holiday to allow billions of overseas dollars to come home at a greatly reduced tax rate.

An Apple executive said: "We don't have an obligation to solve America's problems." That may be true, but they do have an obligation to pay the taxes that help America solve its problems. (Apple is nothing but a bunch of greedy cunts! Fuck Apple!--jef)
Desertion: The people who benefit most from government are renouncing their citizenships to avoid taxes

Perhaps the ultimate insult to America is to just quit on your country after making a fortune off of it. In 2011 almost 1,800 Americans gave up their citizenship to avoid taxes. (Good riddance, bastards.--jef) The wealthy benefit disproportionately from property and inheritance laws, contracts, stock exchanges, favorable SEC regulations, the Small Business Administration, patent and copyright and intellectual property laws, estate planning, trust funds, Internet marketing, communications infrastructure, highway maintenance, air traffic control, local and national security, and 60 years of research in technology and other industries.

A recent outrageous example is Facebook part-owner Eduardo Saverin, whose family came to America from Brazil partly for safety reasons, and who happened to land Mark Zuckerberg as a roommate at Harvard. Now after falling into billions, he's decided to renounce his U.S. citizenship to avoid taxes. (Well, stick his ass in Gitmo, then!--jef)

Denial: Traders feel it's inappropriate to pay even a tiny tax on a quadrillion dollars in sales

A quadrillion dollars sounds like a fake amount. But it's all too real. That's a thousand trillion dollars of derivatives transactions which, along with the high-frequency computer-generated transactions (5,000 per second) that make up over half of U.S. stock trades, contributed to a financial meltdown and a $3 trillion bailout for reckless trading.

But there's no tax on these transactions.

While average Americans pay a 10% sales tax on necessities, millionaire investors pay just a .00002% SEC fee (2 cents for every thousand dollars) for a financial instrument. And their supporters claim, inexplicably after the disastrous trading frenzy in 2008, that a tax would increase volatility.

Illusion: The media leads us to believe we should all be cheering when the stock market is booming

Conservatives insultingly assure us that the "democratization of stock ownership" is gradually making America more equal, as evidenced by the flattening of wealth ownership among the richest 1% in recent years. So we should all be excited about a rising stock market.

Here are the facts. Data from Edward Wolff confirms that from 1983 to 2007 the percentages of net worth and financial wealth for the top 1% remained steady. But the percentages for the rest of the richest 5% increased by almost 20%, while the percentages for the lowest 80% of the population DECREASED by almost 20%.

In other words, the share of wealth owned by the top 1% leveled off because the "democratization of stock ownership" spread the wealth among just 5% of the population, those earning an average of $500,000 per year. A few people -- 5 out of 100 -- got very rich, but everyone else lost ground.
Conclusion

The issues are difficult to address with Congress largely on the side of the wealthy. At the very least:

(1) Eliminate the tax break on unearned income (capital gains). The richest Americans, who own most of the stocks, should not pay a smaller tax than everyone else.

(2) Implement a small financial transactions tax. It would be easy to administer on computer trades, it would generate hundreds of billions of dollars in revenue, and it would help guard against the reckless speculation that devastated the financial markets and our country.

The Danger in Forgetting About American Workers

By Laura Flanders | Sourced from AlterNet

Posted at February 14, 2011

“We need better intelligence, the kind that is derived not from intercepting a president’s phone calls to his mistress but from hanging out with the powerless.”

That was one of  columnist Nicholas Kristof’s lessons for U.S. foreign policy drawn from Egypt’s revolution. In the New York Times this weekend he pointed out that American journalists and foreign policy experts alike missed the warning signs of what was coming in Egypt in part because they talk to the wrong people.  Aha. That’s not exactly a revelation to consumers of independent media.

It’s not just revolutions in far off places that we miss when reporters ignore the everyday working people, though. Another piece in the very same paper on the very same day examined the consequences of this country’s outsourcing-only manufacturing policy. The question raised there was pretty fundamental. It went to the entire justification for globalization.

We’ve been told that going global serves American interests because increased profits produce innovation, creativity, and investment in new improved products. Right?

The question raised in Louis Uchitelle’s deep-inside-the-paper story is, is it even true? Can a country continue to be innovative if it’s not making the stuff it innovates?

When great products of American innovation are made not here but there — Americans are a world away. Aren’t the innovations that will bring us the next iPads and iPhones, for example, in Asia,  mostly likely going to  come from people who spend their time actually making things, instead?

Robert Kuttner noted this week in the American Prospect that Democrats have become distanced from  labor—that most party officials come from the business class and have little appreciation of what workers can do. No wonder they don’t think of workers as potential innovators—they barely think of them at all.

The US must export to “win the future,” President Obama said in his State of the Union. Pundit heads nodded. But how much time are they spending listening to the President and his ilk. And how much are they listening to the rest of America?

American workers are not the “powerless” exactly  in Kristof’s sense of the word. But policy makers keep not listening, down the road, they certainly could be. Things are going that way.

The Innovation Delusion

The Innovation Delusion
Ralph Gomory
March 1, 2010

In the United States, innovation has become almost synonymous with economic competitiveness. Even more remarkable, we often hear that our economic salvation can only be through innovation. We hear that because of low Asian wages we must innovate because we cannot really compete in anything else. Inventive Americans will do the R&D and let the rest of the world, usually China, do the dull work of actually making things. Or we'll do programming design but let the rest of the world, usually India, do low-level programming. This is a totally mistaken belief and one that, if accepted, will consign this nation to second- or third-class status.

The latest offender to advance this line of thought is Thomas Friedman, who has prominently displayed this familiar and entirely incorrect line of thought in the New York Times. Unfortunately, this idea is one that is widely accepted without careful thought about either its truthfulness or its consequences.

Truth and Consequences

Cheap labor abroad is cited as the incurable handicap that explains why the United States cannot compete. But cheap labor doesn't explain the fact that Japan and Germany, both high-wage countries, are successful in the automobile industry. Nor does it explain how semiconductors, a model of a high investment, low-labor content industry, are mainly made in Asia. The premise that the inescapable burden of competing against low wages means failure is simply not correct.

Perhaps even more disturbing than the lack of truthfulness is the fact that we are not addressing the consequences of not competing. There are some inescapable truths about any economic good, be it a manufactured good or a service: (1) you either produce it in your own country, (2) you trade something you do produce for it, (3) you do without it, or (4) you import it and promise to pay later.

We are moving steadily away from producing what we need in this country. We are also moving away from producing on a scale that enables us to trade for what we do need. Rather than do without, we are increasingly importing things with a promise to pay later. This cannot go on. When our trading partners, especially China, no longer want to loan us hundreds of billions of dollars a year to be paid later, we will have little productive capacity left and we will be a poor nation.

Friedman is only the latest to assume that we can avoid this fate by emphasizing designs, ideas, and R&D and trading them for the items we need. This is an attractive idea; we often hear about innovation parks and university research centers and often their work is both exciting and good.

But the chasm-sized flaw in this otherwise alluring proposition is scale. Balancing trade on ideas and R&D simply cannot be done. The most elementary analysis shows that the scale is entirely wrong. As one who spent many years as the head of research of a large corporation, I know how much R&D matters; I also know how small it is. Eight percent is a very large percent of revenue to spend on R&D. Even in manufacturing, which is relatively R&D intensive, 4 to 5 percent is typical. It is really wrong to think that you can scale up R&D to be big enough so we can trade it for the huge quantity of things we need but don't make in this country.

A Strange and Unworkable Strategy

Ignoring the issue of scale, Tom Friedman goes on to quote authoritative Chinese sources who say that by the end of the decade China will be dominating global production of the whole range of power equipment. To Friedman's approving eye this just means that China is going to make clean power technologies cheaper for itself and everyone else. Friedman says that Chinese experts believe it will all happen faster and more effectively if China and America work together with the United States specializing in energy research and innovation, at which, he asserts, China is still weak, while China will specialize in mass production.

It is probably true that all this will happen faster with the specialization Friedman describes, but where will we be at the end of that process? China will be making power equipment cheaply, but the chasm is still there, so what will we have to trade for it? Power equipment will be cheap in China, but if we adopt this approach it may well be unaffordable in the United States.

Meanwhile the Chinese wisely welcome our nascent innovations and turn them into products. They are building plants, making things manufacturable, and adding them to their growing GDP. Friedman's article contains an excellent example of this. He describes a U.S. developer with a new approach to solar-thermal power, whose proposal to the U.S. government asking for small scale support was easily outbid by a Chinese offer that was far larger and was aimed at much larger scale plants.

Specializing in R&D, but sending its fruits on to others is a strange and completely unworkable strategy for a nation.

Other Issues

Thinking of innovation as a standalone activity without production has other major flaws. First, our global corporations, understanding that innovation and production are in fact closely tied, are rapidly moving not only production but also R&D overseas. Intel's CEO made this very clear when he said that the goal of Intel's new plant in China is to support a transition from "manufactured in China" to "innovated in China".

In addition, the standalone innovation approach leaves most Americans entirely out. After all, only a very small portion of Americans are engaged in R&D. At a recent meeting I heard "The only thing that matters is innovative and passionate people." These people do matter, but they are very far from being the only ones. This attitude misses the point that it was all our people, working in many different work settings, that made this country prosper. And all of them will all be needed in any viable future for our country.

What We Must Do - The Role of Trade

We need successful industries and we need to innovate within them to keep them thriving. However, when your trading partner is thinking about GDP rather than profit, and has adopted mercantilist tactics, subsidizing industries, and mispricing its currency, while loaning you the money to buy the underpriced goods, this may simply not be possible.

The ability to compete in a world that is half-mercantilist, half-free is inescapably tied to effective trade policy. Our present policy is to beg. We ask countries like China to stop the subsidies and currency mispricings because they are creating a one-way flow of underpriced goods; goods that are destroying jobs on a large scale in many of the most productive sectors of our economy. But why should they stop? It's working for them.

We must move to balanced trade. With balanced trade every dollar of imports is matched by a dollar of exports of goods or services produced here in the U.S.A. We are fortunate that there are in fact ways to balance trade. One very attractive way is to adopt some version of Warren Buffet's Import Certificates plan, which Buffet has described in a remarkably insightful Fortune article.

We should act now to balance trade. We should not continue to beg while jobs disappear and our productive ability erodes.

What We Must Do - Motivating our Companies

Today our companies are motivated to take innovations abroad, produce there and import the goods into the United States. Increasingly we can expect services also to go overseas. We must produce here in the U.S.A., to employ the people of this country, and we must keep their activities effective by a steady stream of innovations in design and production. While other countries roll out a welcome mat of tax breaks and subsidies for our companies because their common sense tells them that their people being employed in productive work is the road to being a rich country, we provide no incentive for U.S. companies to produce here.

We cannot continue to have our corporations, faithful only to the interests of their shareholders, engage in a one-way flow of jobs, technology, and innovation out of the country. We need to realize that with globalization the interests of our country and of our global corporations have diverged. We can realign the interests of corporations with those of our country by rewarding companies that are productive here. And that can be done in ways that are consistent with our history and with the limited capabilities of our government.

Conclusion

Specializing in innovation is an attractive idea, but a misleading one; an idea that blinds us to what we really need to do.

We need to do more than produce exciting new ideas; we must also be able to compete in large productive industries. This requires us to both balance trade and to motivate our corporations not only to innovate, but also to produce in this country. While this is hard to do, it can be done. Specializing in innovation, though often recommended, is in fact a delusion, an alluring path that in reality will lead us straight downhill.