I found the graph above, gleaned from this post at Bloomberg, fairly eye-popping. It illustrates the employment rate for men aged 16 to 64 in Canada, Germany, Japan, the UK, and the United States. Because of its construction (just men 16 to 64) it excludes the demographic explanation for our low labor force participation rate. And it also calls into question one of the routine excuses brought forward—that everybody’s in school. A higher proportion of the Canadian population has college educations than here so it’s at least a reasonable inference that more Canadians are in school but somehow they manage to maintain a higher LFPR than we do. Here’s the author’s explanation:
Despite job gains over the past few years, then, the labor market in the U.S. seems to be malfunctioning in a way that labor markets in other rich countries aren’t.
Why is that? Maybe the U.S. system of unemployment insurance and job retraining and placement is busted. Maybe the perverse incentives built into the Social Security Disability Insurance program are keeping people who could work out of the labor force. Maybe the U.S. educational system is doing an especially poor job of preparing people for work. Maybe increasing geographic divergence in employment in the U.S. is leaving job seekers stranded far from jobs. Maybe poor child-care options are keeping American women at home. Maybe U.S. corporations, under pressure from capital markets, are spending so much money on share buybacks that they’re underinvesting in labor. Maybe the U.S. is on the cutting edge of technological job displacement, with the robots taking over here first.
Why not the obvious explanation? That the job increase statistics are mostly phony baloney and a lot of the new jobs are going to workers imported from somewhere else because the employers have those workers over a barrel. They don’t dare complain or ask for raises because their continued presence in the country is contingent on the continuing good will of their employers.
Whatever the explanation there is clearly something wrong here that is not wrong in other major economies. We need to change something other than making college cheaper.
Probably good to note that a lot of the jobs in Japan, in particular, are not productive work but make-work sinecures. Walk into an Japanese department store and the help outnumbers the customers – a situation you will never see in a Macy’s where, as far as I can tell, there are no employees.
And we may just be ahead of the curve. It reminds me of that period of time when the entire world was ridiculing Americans as uniquely fat, only to discover that their own populations were catching up. We just get here first.
I do not believe the future involves full employment, not here, not anywhere in the developed world. And I am ever more convinced that the younger generation is shifting to an entirely different paradigm, one that involves far less consumption, one that actually fetishizes a lack of consumption. Their lives are simply not about owning stuff, and they do not identify with work in anything like the way earlier generations did. Their ‘identity’ is not accountant, car salesman, chef, lawyer; rather it is a created version of themselves in the online space.
One of the consequences of this is a lessening of pressure to consume. Bear in mind, two emotions drive consumption beyond simple need: greed and jealousy. When 90% of your circle of acquaintance consists of people you never actually see, it’s less likely that you’ll obsess over so-and-so’s nice new Porsche. If consumption is no longer the competitive sport it was from the 1950’s to the early 2000’s, you’ll find people less driven to work, more content to loaf and mooch, borrow or share. You don’t start up a Mom and Pop grocery store because you think it’ll be fun, you do it to survive. And you don’t work 70 hours a week at a law firm to buy what you need, or perhaps even what you want, you work to keep up with the other strivers.
Put it another way, the cost of living may be up, but the cost of pleasure is way, way down and approaching the cost of an iPhone and service, say, $200 a month? In that phone are thousands of friends and acquaintances, family, games, pornography, reading materiel, TV, movies. . . The sullen teen locked in his room now has virtually free access to more amusement and human interaction than the most debauched roué at Versailles.
But I can’t prove any of it, so I am content to let time reveal the truth. I think the iPhone generation is no longer living their lives in meat space. They’ve moved out. And in their new world they are a whole lot less interested in starting a business or getting a job.
“And in their new world they are a whole lot less interested in starting a business or getting a job.”
And yet, if the Sanders phenomenon is to be believed, they certainly are interested in getting a piece of the spoils of someone else’s business or job. Great. A generation of parasites living psychotic cyber-lives in their parents basement.
A Clockwork Orange.
I actually think Michael’s post has merit, in describing what may be a new paradigm dealing with our budding millennium society. However, what he didn’t throw in was the increased application of robots and AI into the mix, competing for level-entry jobs — a non-unionized workforce source that seems to be getting more real all the time.
Nonetheless, I don’t see how this new paradigm lifestyle of “loafing” will necessarily oxygenate the lifestyles of future generations. IOW, short term, people may be satisfied to live in meagerly circumstances, relying on human contact and stimulation mainly through their electronics and pizza deliveries. But, in the long term, fixed-cost realities set in, along with old age. Similar to Drew’s Bernie Sanders comment, the revolution being exhorted may change the world into something less electrified, becoming, instead, boring and devoid of many options or opportunities.
I’ll note that Japan has the most restrictive immigration policies of any of the listed nations, and also isn’t THAT concerned with demographic decline. After all, if you’re automating your workforce…. They also have the social cohesion that comes from being a rather monolithic culture and, to a lesser degree, a rather homogeneous population, ethnically.
I’m waiting for some of the SJW on the Democratic set to declare Japan evil and advocate for a new war in the Pacific to fix the situation. (It won’t come from the lily-white Sander’s wing, obviously, but it’ll come.)
Nonetheless, I don’t see how this new paradigm lifestyle of “loafing†will necessarily oxygenate the lifestyles of future generations.
In fact, the early returns would suggest demographic collapse as people just don’t even consider starting families. Of course, the people will be replaced with (wholly unnecessary) hordes of peasants from the Third World, so that’ll solve everything.
I’m not making a case that this new paradigm is good thing, just that it’s a thing. The youth are sensing a very different world, one with more machines and fewer humans working. They are adapting to new technology and new realities. I’m trying to avoid the fuddy duddy knee jerk condemnation. After all, it’s not like there’s anything compelling about the society we made. But I’m not endorsing this new world just noting its emergence.
From what I read, those pragmatists are diggin’ on those sex robots too. Hey, I’m basically libertarian on that stuff. But count me out……
“Dave, you seem upset. Was it good for you, too? Knock it off, Hal…..”
Taxes don’t have a birth/death fudge factor, uh, adjustment.
http://www.zerohedge.com/news/2016-02-20/alarm-goes-threatening-strong-us-jobs-myth-withheld-income-taxes-are-stalling
We have no evidence automation is contributing to joblessness. The evidence we do have says it isn’t.
The best bit of the post, Drew, was in the comments.
I was so depressed last night thinking about the economy, wars, jobs, my savings, Social Security, retirement, etc., I called the Suicide Hotline. I got a call center in Pakistan, and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.
See, there ARE growth opportunities for suicidal people with CDLs….
If I didn’t know any better, ice, I might think you were a cynic.
And for your economic reading pleasure:
http://www.zerohedge.com/news/2016-02-20/silver-linings-keynesian-central-banking-heading-massive-repudiation
My wife keeps accusing me of being an idealist. I deny that as an unfounded rumor started by a vast left wing conspiracy.
Might be a good time to repost this 2014 Pew survey of millenials.
I’d also point out the the LFPR for the above 65 cohort is at record highs, so one might argue that they are filling jobs that would otherwise be available for the 16-64.
Andy:
Interesting. I would have guessed pretty close to pretty much every number except the decline in support for environmentalism. That was food for thought.
@Ben Wolf
We have no evidence automation is contributing to joblessness. The evidence we do have says it isn’t.
If accurate, that supports my position that something is very broken. In-place mechanization and automation should have begun years or decades ago. While better than the other animal workers, humans are the least efficient or reliable for rote tasks. Instead, these factories have moved overseas to take advantage of cheap labor and lax regulations.
(Note: OSHA does not apply to robots. Overtime rules do not apply to robots. SS, Medicare, and Obamacare do not apply to robots. This is just the beginning.)
What has occurred is the relaxation of Financial Industry regulations, and we have had financial factories replacing the goods producing ones.
If it was all just a big misunderstanding, we should see manufacturing in the US exploding, and it should be a net gain of jobs because the jobs were lost years ago. These jobs should produce secondary jobs directly servicing and manufacturing the primary jobs, and there should be additional jobs needed for all those workers.
This is how it is supposed to work, but something has been very, very wrong for the past few decades.
There is no such thing as a “consumer driven economy” or aggregate demand. These do not exist, but I would be most excited to listen to somebody explain why they work in the US but not Venezuela, Greece, or Nigeria. A little stimulus or pump priming should get them moving right along.
While I am holding waiting for a sane and unified (applicable to the US and elsewhere), I will give the correct answer. As @Dave Schuler has been pounding the table over for years, the majority of free-trade, stimulus, and other consumer dollars do not go to US producers. They go to Chinese producers. (//End @Dave Schuler)
The Chinese send those dollars back to the US, and the end up in the financial sector being lent to US consumers. Through various financial engineering schemes, they are leveraged into additional dollars, but that is another topic. The US consumer uses the goods produced by the financial sector to make up the difference they are losing with the exporting of their jobs overseas.
The reason this has been able to work for the US but not Venezuela is the amount of capital (or stored value) in the US is orders of magnitude greater. The US has stored value in its built-up infrastructure, military, legal system, cities, culture, financial system, good will, worldwide standing, and numerous other intangibles.
Europe also has a large store of value, but it is not all useable. Some of it is historical, and understandably, they are not willing to mortgage it. This has been somewhat offset by the US providing their military. Europe is quickly approaching the end of the line, but as with the US, it may be able to coast a long time.
Since the original theories have not worked correctly, our 21st century geniuses have devised even better schemes. Negative interest rates and the elimination of cash are designed to force the consumer driven economy upon a country, but it will only work if the consumer has no other outlets. As such, gold and other precious metals or gems must be banned (except jewelry), and all non electronic cash transactions criminalized.
It will still fail. Cash alternatives will be developed, and people will begin purchasing commodities to store value. (In the old days, cigarettes were used as currency in prison. If you had too many packs of cigarettes, you were up to no good.) More importantly, the free-market will fail.
What is occurring now is a free-market meltdown caused by free-trade in name only. This “free-trade” has distorted the free-market beyond all rational understanding of free, and NIRP and criminalizing cash will push it into the Twilight Zone.
Production has artificially been induced to relocate to China, and now, it is apparent that this was not a rational decision. Had the market been operating freely, it would not have made this choice.
TastyBits:
I think part of what’s been “wrong” is that we used the wrong base line for comparisons. In 1945 the UK was broke, Germany was rubble, Japan was ruined, Russia was in thrall to Communism as was China (shortly thereafter.) The only fully-functional large industrial economy was, guess who? The US. We had effectively zero competition, and the entire world needed food, railroads, factories, cars. . . all the stuff we make.
We rode that easy high for about 30 years. But in the meantime Japan and Germany recovered, and then the Asian tigers, and then the Chinese. We went from being the only people in the pool to having a whole lot of people splashing around with us. Before the war we had a huge depression. And if you roll the time machine back still further, we had a continent to tame.
So, I don’t think we have a basis for concluding that what we have now is “wrong,” it’s just different. We’ve gone from no competition to tons of competition, and we’ve learned we probably shouldn’t try to rely on inflating bubbles. So now the world is very different, but it’s only “wrong” when the baseline is the golden years of the 50’s and 60’s.
Things are changing, but take a look at that poll Andy linked to. Look at the optimism of the millennials. Granted youth tends to optimism, but still, they may intuit something we fogies do not.
@michael reynolds
You are correct about the post-WW2 era, but post-1971, everything financial begins to change. As we move forward, it only gets worse. The only thing that works as predicted is the financial sector, and that only works is if you ascribe to modified Austrian theory. Simply, monetary manipulation is distorting everything it touches, and it touches a lot of things.
When you see jobs being replaced by robots and get apoplectic, there is a basis for it, but it is not for the reason you ascribe to it. It should be increasing the good for everybody, but instead, it is decreasing the good and increasing the debt.
It is not a conspiracy any more than all the toilets in the world have conspired to clog up if humans use too much toilet paper. When you allow money to be created through borrowing, there will be problems. These problems were addressed in 1933 by a US Senator and Representative, and they have been slowly repealed over the last 30 years.
If you ever want to have a laugh, follow the links posted from ZeroHedge, and then, go to some of the regular posts. Most of them would not piss on Sen. Sanders if he was on fire, but a lot of them sound like him. Most will freely acknowledge this. They are mostly libertarians and “gold bugs”, but they realize something is very, very wrong with the system.
Glad to see you back, but you have been playing hooky. I was getting tired of arguing with your political opponents.
Tasty:
Thanks. Unlike the younger generation my online time is still defined by work. I’ve been doing a bunch of writing (good) and a bunch of promo (aargh.) And since I’ve been writing alt-history (http://frontlinesbook.com/) my spare time is spent reading and researching. (I am currently all up in the Hürtgen, the Bulge and Oradour-sur-Glane.) Writing is quite a bit more time-consuming when you have to check a source on every damn page.
Negative interest rates and the elimination of cash are designed to force the consumer driven economy upon a country…
Tasty, this is something being discussed more and more in the public forum. It’s also a potential trend that is concerning to me.
Writing is quite a bit more time-consuming when you have to check a source on every damn page.
Michael,
Were you drawn to writing and research when you were in school?
I think it would be an interesting breakdown of millennials to compare and contrast the opinions and proclivities of those who have gone into the military versus those who didn’t. Earlier eras faced the draft, a mandatory obligation serving as a serious maturation tool. In my POV, it seems those having gone through such military training, in current times, tend to reflect the attitudes and behaviors of those polled in past generations.
Nowadays, thought, the vast majority of millennials have the choice to volunteer for military service or not. Those going directly into college also tend to languish there longer, than the students of yesteryear, where a 4 year Bachelor degree was standard fare. Then you have institutions giving students the ability to craft their degree into ones that are fairly useless in the real world.
IMO such changes have lengthened a millennial’s transition times into adulthood, putting adult obligations virtually on hold. This type of arrested development also dovetails into increasing their mood to being free spirited and single longer, financially dependent on parents more, and generally extending their idealistic view about a world they really haven’t fully engaged in…yet.
@jan
Europe has had them for some time, and Japan just started. In order for them to work, there cannot be any place to “hide” your “money”. All countries need to participate, and all physical currency needs to be eliminated. You also need to restrict gold and other precious metals, gems, cartons of cigarettes, beaver pelts, etc.
The idea is to force people to purchase things, but people may not purchase the things they are supposed to purchase. Rather than throw out their perfectly good toaster to purchase an over-priced fancy new one, they may decide to begin purchasing things that will provide a return on their investment.
I highly doubt that the financial industry is going to watch billions of dollars be pissed away on unneeded toasters when it could be invested in some fancy new financial product, and unlike the toaster that will never sell for more than its purchase price, the fancy new financial products are practically guaranteed to double or triple your investment.
NIRP is just the logical extension of a credit based monetary system. The financial system is by design bankrupt, and negative interest rates only make it more bankrupt. (It goes from being five months pregnant to six.) There will be the pulling of hair and the gnashing of teeth, but of course, none of the hair pullers or teeth gnashers will explain why nothing has worked. NIRP is an admission of the absolute and utter failure of every theory tried over the past eight years, and when this fails, they will dream up a new scheme to avoid admitting they were wrong.
Fractional reserve dollars are free money. If you do not support government handouts, you should have heart palpitations thinking about the government allowing financial institutions to freely create money. Basicly, financial institutions are welfare recipients with an EBT card, but instead of it being filled by the government with a fixed amount, the financial institutions refill it as needed.
If you ever wonder why most of the people at ZeroHedge sound like Sen. Sanders or Wall Street Occupiers while wanting to dismantle the government, this is it. They want a free-market, and they do not want anybody getting free money – least of all the financial industry.
@jan
When the hippies had no jobs and no future, sitting around all day smoking dope and bad mouthing your country was the hip thing to do. After years of not trusting anybody over 30, they woke up one morning, and they were over thirty. We then got disco and later yuppies. They tend to forget that they were the ones who were in charge during the financial buildup to the 2008 collapse, but as always, they refuse to take responsibility for anything.
Today, you are supposedly a child until in your mid-twenties, but this is not my world. In Iraq and Afghanistan, 18, 19, and 20 old, military personnel were/are making life/death decisions. Decisions that people much older than them refuse to make. These upstanding young men and women are not children.
I am awaiting a real time answer to your question. My two nieces are in basic training right now. They went in as fairly sheltered children. I talked to them at Thanksgiving and Christmas, but I did not get to talk to them before they shipped out. (I think it was because I encouraged them too much.)
I will say this about the millennials. Many of them are debt slaves because of student loans, and the ones without debt or a decent job do not have much chance of buying into the American Dream. Their only choice is to redefine the American Dream, but once the country gets back on course, I expect they will be similar to a combination of the Depression era and hippies.
If they do not reproduce, the next generation will be produced by mostly immigrants, and they may learn that the immigrants they placed on a pedestal do not share their values. It may be the case that the unsullied brown people aspire to be like the much despised old white men, and they may just think money is a pretty good thing to have. 11 million new US citizens who decide that they would rather be white than fight – the horror.
Jan:
No, I despised school. I dropped out after 10th grade. It’s funny, I’ve been doing school events and talking history, so I actually bought one of the standard High School history texts and let me tell you: there are good reasons kids don’t give a damn about history. I could stop taking melatonin and whisky before bedtime and just read a section of that book. It’s as if it’s not enough just to bore kids, it’s as if we’re actually trying to kill them with boredom.
Since the dawn of time, since cave man times, humans have told stories. You want to teach history, tell a story. You know, protagonist, antagonist, conflict, suspense. . . Clogging a page with listicles and dull prose and crappy illustrations for no purpose other than shoving a disconnected fact into a kid’s brain for as long as it takes to pass a test, and then actually punishing a kid for not giving two shits about the Missouri Compromise, is appallingly stupid.
I was so right to drop out. By dropping out I preserved my interest in learning so that it could be revisited later in life.
Damn. Sorry about the open italics.
Michael,
Outside of political differences, I find you an interesting guy.
Similar to you my dad left school during the 10th grade. However, his reasons were different from yours, as he had 13 other siblings in his catholic family and a father who was drunk most of the time. So, he needed to work to support his family. Nonetheless, he was one of the wisest men I’ve known, and an avid reader given to muse about life’s twists, turns and agonies. I would imagine you would be an interesting speaker in a high school class room, as long as you informed rather than opined.
Tasty,
Two nieces in training — those are gutsy girls. We became friends with a woman and her young daughter working in a local pizza place. When the daughter graduated from high school she wanted to go directly into the army. Being that she was shy and sensitive we were both surprised and concerned about this decision. But, in following her through boot camp etc., she seems to be growing and doing well.
We had effectively zero competition, and the entire world needed food, railroads, factories, cars. . . all the stuff we make.
Exports made up less of our economy than you imagine, at a guess. Through the 1960s, export of good & services accounted for 5% of the US GDP, on average, according to the data I can find now. That is significantly LESS than the more than 13% the number has averaged through the years of the Obama Administration (thru 2013).
Imports start out below exports, but starting in 1976 we’ve only been negative.
Both sets of numbers are from the World Bank. Both hide various factors. And I’ve only got data back to 1960. But I’m pretty sure that Dave has posted the data on the 1950s before – we weren’t getting rich in the 1950s by building everything for everyone in the world. That helped, but it was on the margins. We got rich because of what we were doing here.
I’ll note that various problems in the US economy all seem to get started within a few years of 1970, either way. Several things happened back then, and have been exacerbated by decisions made since.
But the story isn’t as simple as “Everyone else was a wreck, and we got rich gouging them.” Far from it.
…
Maybe if I have time I’ll compare US data to Chinese data. That could be interesting because (a) the Chinese officially practiced autarky for many decades and (b) habitually lie about their economic data.
Heh, easier done than I was anticipating. (Still figuring out how to properly use the World Bank’s resources.)
In 1960 China was more reliant, by a smidge, than the US on imports. That dropped immediately in 1961 and stayed low, eyeballing it I’m guessing 2.5 to 3.5 percentage points lower than our totals, through the 1960s and 1970s. But in 1985, the Chinese passes us, in terms of imports of good & services as a % of GDP, and haven’t looked back. I expect something similar to occur in exports.
The export numbers are what you would expect – lower than ours until 1984, and then larger than ours. Export of goods & services (% of GDP) topped out over 30% for the Chinese from 2004 to 2008, reaching a peak in 2006. The Chinese peaked when we did, and dropped back when we did. Hardly a surprise.
But looking at both the import and export numbers, it couldn’t be clearer that the Chinese have a huge internal market to develop. Seems I’ve heard that around here, too.
And the German numbers are absolutely insane. I’ll have to do a little more work to quantify & confirm it, but their beggar thy neighbor policy couldn’t be more apparent. Greece will probably be worth a look too.
Just picking one sub-group like this doesn’t seem like a good idea. Link below goes to more comprehensive look. LFPR for those over 55 has kept growing. The big hit has come in the 16-24 group with most of that in the 16-19 subgroup.
http://www.bls.gov/emp/ep_table_303.htm
Steve
Things are bad all over, Steve. Down 2.2 percentage points in 45 to 54 year-olds from 2004 to 2014, for example. (That’s for everyone.) That is not good. Take that as a low end number to add to the U-3 numbers, for example, and things suddenly look start looking fucking awful.
Also, I don’t see how having several percent more men, or women for that matter, start their careers off with $0 of annual earned income is a good thing. A bad beginning often leads to a bad end, with a bad middle in-between.
Long term, delayed earnings mean delayed family/household formation, which has traditionally been a driver of growth in the US. Those bad numbers at the start portend bad things not just for the people not working, but for the economy as a whole.
And here I thought this had been covered extensively back in 2008-2010….