Wednesday, November 27, 2013

In the Jobs News: Economic Resources Deteriorating, Pundits Who Don’t Get It, Where R&D is Jumping, More on Sea-Tac, and Amortizing Employee Expenses

In American employment events, coming in to the holiday season:

First, a paper released at an early November International Monetary Fund conference in Washington made a fine case for the need for continued stimulus and for why austerity policies, such as cutting non-wasteful government spending, are bad in the long run.  A main point the piece, written by Federal Reserve Board members Dave Reifschneider, William L. Wascher, and David Wilcox, made was that economic supplies, such as the classic land, labor, and capital, do not automatically maintain themselves, and can atrophy like muscles with disuse.   I have contended that encouragements to “buy land, since they aren’t making any more of it” are misguided, since a gigantic amount of it is undeveloped and so, in effect, hasn’t been “made” yet.  The authors of the paper point out that when people leave the labor force and their skills deteriorate and become obsolete, the amount of national work capacity shrinks, even if the people are still in the population.  Capital, the third main resource, is as good as nonexistent when the people owning and controlling it do not think it can be constructively deployed; that is exactly why, despite the money supply rising close to 10% per year, inflation is only about 2%, and also why precious metals, usually a fine investment in times with so much paper currency, have had a very poor three years.

Second, most major columnists, even those who should know better, are still blind to the possibility that the jobs crisis is permanent.  I found the title of last week’s Paul Krugman’s New York Times piece, “A Permanent Slump?” promising, and it started out with good points made by Larry Summers:  our economic conditions may be a new normal, we can’t blame a recession which ended four years ago for them anymore, and the best 21st-century times have been caused by bubbles.  Krugman, though, considered the wrong explanations, specifically low population growth (no, the country is still taking on almost 200,000 people per month, which isn’t huge but is significant and is after all not a decrease) and continued trade deficits (have been around too long, and aren’t anywhere near large enough).  The answers are globalization, automation, efficiency, and a half-dozen other smaller one-way factors, which are not being offset by retiring baby boomers (they won’t) or anything else.  Not to worry, though.  The idea of a permanent jobs crisis has received some serious attention in major news sources this year – the New York Times did, in fact, print my letter and responses to it – and the reality of Work’s New Age will get much more in 2014.

Third, although corporate research and development have been down since and including the Great Recession, for information technology it is sky-high.  In the first half of this year, Twitter spent 44% of its sales on R&D, and Facebook spent 27% of the same in 2012.  Why?  As Robert Cyran pointed out in the DealBook blog, such products are often “winner-take-all,” and there is little room for second-place companies.  Who lately has even thought about Ping, Friendster, or Yahoo Auctions?  Some areas are natural for monopolies, and when combined with the chance of a competitor coming from almost anywhere in the world, survival, meaning staying on top, is always endangered.  What all that means for jobs is that if you are a researcher, you had better be in a field which needs you to stay in business, otherwise your opportunities may be slim.

Fourth, to update the Sea-Tac story, elections officials on Tuesday declared the $15 hospitality-worker minimum wage proposition a winner.  There will probably be lawsuits and demands for recounts, but it seems like it will become law next year.  As has been pointed out, the best comparison might be at Los Angeles International Airport, where employees are assured of at least $15.37.

Fifth, would businesses hire more workers if they could amortize the likes of training as if they were depreciating a truck?  That intriguing idea is part of a proposition put forth by Senate Finance Committee chair Max Baucus.  The pre-bill, as you might call it, calls for similar writing off over time of intangible and tangible assets, with rules on the latter becoming stricter.  For example, if accelerated depreciation now allows for 40% of the value of a new piece of equipment to be considered an expense in the first year, 24 percent for the second, over 14 percent for the third, and so on, it would be changed to something like 30%, 21%, and 15%, which would also be allowed for similarly perishable new-employee needs.  That adjustment, which would affect companies already with net incomes (as they would have tax bills to be cut), could be combined with other corporate tax reform, and would also encourage more research and development in general.

These are some things happening on the frontier of American employment.  I am glad to see them.  Keep them coming.  We need more.   


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