An (Un)employment Compendium

[Demeter]

What thoughtful people were saying about the US Labor Markets last year:

It’s the stupidity economy by Paul Krugman

http://krugman.blogs.nytimes.com/2009/11/13/its-the-stupidity-economy/

"....That’s why, at this point, I’m turning to what I understand perfectly well to be a third-best solution: subsidizing jobs and promoting work-sharing."

Free to Lose By PAUL KRUGMAN


http://www.nytimes.com/2009/11/13/opinion/13krugman.html

"...Country A is the United States, where stocks are up, G.D.P. is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a hit to its G.D.P. when world trade collapsed, but has been remarkably successful at avoiding mass job losses. Germany’s jobs miracle hasn’t received much attention in this country — but it’s real, it’s striking, and it raises serious questions about whether the U.S. government is doing the right things to fight unemployment.

Here in America, the philosophy behind jobs policy can be summarized as “if you grow it, they will come.” That is, we don’t really have a jobs policy: we have a G.D.P. policy. The theory is that by stimulating overall spending we can make G.D.P. grow faster, and this will induce companies to stop firing and resume hiring.

The alternative would be policies that address the job issue more directly. We could, for example, have New-Deal-style employment programs....Alternatively, or in addition, we could have policies that support private-sector employment. Such policies could range from labor rules that discourage firing to financial incentives for companies that either add workers or reduce hours to avoid layoffs...."

Krugman Misses the Point about Kurzarbeit by Peter Dorman

http://econospeak.blogspot.com/2009/11/krugman-misses-point-about-kurzarbeit.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+espeak+%28EconoSpeak%29&utm_content=Google+Reader

"Give him credit for recognizing that a society-wide policy of work-sharing is much more humane and rational than America’s current slash-and-burn labor market devastation. Especially in light of the increased unemployment risk faced by minorities and youth, it would be much better for government to push companies to reduce hours rather than bodies. So far so good.

But this is not the main reason Germany has an institutionalized short-work (that’s the translation of Kurzarbeit) program. The Germans have this strange belief that working builds skill: you go through an apprenticeship, you work with master craftspeople, you learn the subtle ins and outs of the particular firm you are attached to (in German you work “with” and not “for”), and lo and behold you become more productive. The key purpose behind Kurzarbeit is to not lose this accumulation of human capital.

Oddly, Krugman writes, “Now, the usual objection to European-style employment policies is that they’re bad for long-run growth — that protecting jobs and encouraging work-sharing makes companies in expanding sectors less likely to hire and reduces the incentives for workers to move to more productive occupations. And in normal times there’s something to be said for American-style “free to lose” labor markets, in which employers can fire workers at will but also face few barriers to new hiring.....But these aren’t normal times.”

In normal times the US runs a massive trade deficit with Germany, unable to compete in industry after industry on quality-price comparisons. Labor in this country is strictly an expense, not an asset, and therefore quickly shed when sales go down. Note Krugman’s language: it is “occupations”, not workers who are productive. Even our most knowledgeable pundits can’t imagine an economy in which the skill of the average worker is the main competitive advantage, the last resource you would want to shove out the door."

Employment Policy Posted by Robert Waldmann

http://www.angrybearblog.com/2009/11/employment-policy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FHzoh+%28Angry+Bear%29

"Larry Summers, who is very very good at provoking debate, said
“It may be desirable to have a given amount of work shared among more people. But that’s not as desirable as expanding the total amount of work.”

... Germans have been doing this for decades. The idea is that there is a fixed number of hours of work demanded and it is better if everyone works part time than if some are unemployed. This reasoning is like a red flag to a bull to almost all economists certainly including Larry Summers (and including Paul Krugman in the past). Krugman considers it a third best approach imposed by political limitations. I'd note that the simplest way to do this would be to make the payroll tax progressive so that less has to be paid by firms and workers if there are more workers each of whom is paid less . Also a progressive payroll tax implies increased revenues in the future even if marginal rates are a function of real wages (so inflation doesn't cause bracket creep)...."

Krugman on the Need for Jobs Policies by Yves Smith

http://www.nakedcapitalism.com/2009/11/krugman-on-the-need-for-jobs-policies.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

"I submit that no one is willing to consider that the vaunted US labor market flexibility has produced lower skilled managers, one who resort to the simple expedient of expanding or contracting the workforce (which is actually pretty disruptive and results in the loss of skills and know-how) rather than learning how to manage a business with more foresight and in a more organic fashion because the business is defined to a large degree around its employees.

[Demeter]

1. This Was Known a Year Ago--and Where Are WE Now?

Germany is in recovery--US is on a slippery slope down.