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.   


Friday, November 22, 2013

Work’s New Age in Europe? Yes - And It Makes American Unemployment Look Great

Last Friday, The New York Times published a stunning graphic.  It showed the unemployment rates for young people in 11 European countries, comparing 2008 and 2013 and including where the United States fits in.

Joblessness among Americans aged 15 to 24, not including full-time students, was 16% for the year ending in June.  That’s way, way too high, and, after correcting for different measurement practices, may even be higher than the overall rate in 1933, the worst year of the Great Depression.  Despite a general fall in official unemployment since then, it has rocketed up from the 10% measured from July 2007 through June 2008.  It’s also much better than many other developed countries.

Great Britain, which has avoided the worst of the eurozone’s economic problems by keeping its own currency, has 21% of its 15 to 24-year-olds officially jobless.  Belgium, long regarded as one of the more solid countries using the Euro, is at 22%.  France, a large, diverse country of 66 million, has reached 25%.  But wait – except for Austria, Germany, and The Netherlands, with 8% to 10%, these are the good ones.  Ireland has 29%.  Italy has 38% of those under 25 and willing to work not finding it.  Portugal has no jobs for four young people in ten.  In Spain, which has a population of 47 million, 55% – over half – of those 15 to 24 count as officially unemployed, which is almost as high as Greece’s 58%.

It is true that the youngest workers are often not welcome in the workforce, especially at career jobs.  But the next generation up also has severe problems.  Unemployment in the eight troubled European countries above for those 25 to 29, when the massive majority of those in the United States are able to work in some form, ranges from 8% to 41%.

It’s hard for most modern-day Americans to even comprehend these percentages.  Joblessness in the Great Depression, still thought of as a time of hoboes, bread lines, and people taking opportunities far from home, peaked at less than 25%, even though it was assessed more liberally than today.  That meant three out of four people in the labor force were still on the job.  In most of our lifetimes, Detroit’s 17% rate in the early 1980s is the worst a large American city has been – tough times, with auto-related manufacturing positions disappearing to other domestic sites, various foreign locations, to automation, and to sheer lack of customers – but they have nothing on what’s happening to young Europeans now.

The closest we have had in this country to these jobless rates is the situation with some inner cities and some populations.  Even in the good times of 1990, two Chicago neighborhoods, Woodlawn and Oakland, had employment (not unemployment) rates of 37% and 23%, causing people to essentially give up on earning a living and move instead to drinking excessively, using illegal drugs, smoking at high rates, eating unhealthy foods, watching prodigious amounts of television, and general apathy.  As of 2009, 57% of black American males aged 16 to 19 were jobless – it is not a coincidence that, earlier that decade, more college-age black men were in prison, on parole, or dead than in school.   In Work’s New Age, I wrote that as joblessness seems both expected and unavoidable, more of our countrymen will, like the Jamaican Rastafarians, develop lifestyles and habits, not all constructive, appropriately adapted.

Why is half of Europe doing so much worse than we are?  It is tempting for me to blame higher minimum wages, as I do not support them in a time of fewer and fewer jobs, but they are not the primary culprit.  True, some of the countries above guarantee workers much more – at current exchange rates, France’s is $12.70 per hour, Belgium’s $12.28, Ireland’s is $11.65, and Britain’s $10.52.  Yet Greece, Spain and Portugal, the three worst off, have minimums of $5.31, $5.85, and $4.39, all well below America’s $7.25, and Italy has no national floor.   Several of these countries are officially in recession, which the United States is not.  The impact of automation is as strong in Europe as here, and its susceptibility to losing jobs elsewhere, with poorer countries closer, may be worse. 

Beyond the often-mentioned and true problem of a generation being permanently hampered financially by not being able to start careers earlier, what can we take away from Europe’s youth unemployment crisis?  We have five things.  First, when accounting for the permanence of the jobs crisis, these are good times, not bad ones, for the United States right now.  Second, the difficulties we face are hardly peculiar to us, or even to our political decisions.  Third, we are all in this together.  Fourth, with education levels ever rising on both sides of the Atlantic, degrees are less likely to come with success guarantees than ever.  And fifth, we had better be aware that our next recession, which will come sooner or later, may well be devastating.    

Friday, November 15, 2013

Sea-Tac’s $15 Minimum Wage – What Does It Mean If It Succeeds?

On Election Day, there were two measures to raise minimum wages.  New Jersey voters agreed to boost their state’s to $8.25, one dollar above the federal rate.  The other increase was rather larger.  The Washington city of Sea-Tac had a proposition to lift theirs, for 6,300 workers connected with Seattle-Tacoma International Airport, to $15.00.  The success of that proposition is still unknown, with votes still being tallied and a recount all but certain afterwards.

Washington already has the highest minimum wage of any state, at $9.19.  Those favoring a higher level for Sea-Tac airport, restaurant, and rental-car workers, the scope of the ballot proposition, have cited the stimulus effect of higher pay and an end to workers’ poverty.  The change, as with that already passed in New Jersey, would also include cost-of-living increases. 

The nature of the city is different from most others.  Sea-Tac was incorporated in 1989 from four small communities, which had grown because of the airport.  Its other large employers include the headquarters of Alaska Airlines and Horizon Air, offices of 80 of the Fortune 1000, and a federal detention center.  Sea-Tac’s jobs, about 40,000, make it a place where almost one and a half times as many work as live.   Median income of residents is around $29,000, close to what, at the new minimum wage, the lowest full-time income would be.  

Consistent with my previous posts, I oppose any minimum wage increases.  Workers whose jobs are worth less to their employers than the new pay level will lose them, sooner or later.  Instead of reducing inequality, such forced raises create more of it, between those working and those not.  Such a change costs positions at a point when the country is short almost 20 million of them.  Demand for even the lowest-paying jobs is already high enough.  And, even in the limited Sea-Tac scope, not every employer is a multibillion-dollar corporation – one story cited in the recent press was that of an immigrant and lifelong small-business owner, who had recently bought a hotel near the Seattle airport and has since been forced to put plans to hire more workers on hold.  

So why might this effort be happening in Sea-Tac?  The scope of the amendment makes that clear.  The jobs that would benefit not only center around the airport, but serve travelers from elsewhere.  Locals rarely rent cars or get hotel rooms, and they use airport restaurants less often than those just passing through.  In Central Florida, a strong vacation area with low local taxes, the easiest new revenue sources to get voter approval have been those targeted at tourists, such as hotel and rental-car add-ons.  It is tempting for any area to pay its expenses this way, but can also backfire as outside people become aware of it.  

In effect, Sea-Tac may be trying out a new tourist tax.  Seattle-Tacoma International Airport had 33.2 million passengers last year, vastly more than those living near it, and like others they actually spend more, per person, on airport-related services than on the flights themselves.  The change may well be successful; prices will go up, but if typical fast airport meals move from, say, $6 to $8, little pleasure-traveler revenue and almost no business-traveler income will be lost.  Rental cars already vary in price two-to-one or more from city to city, and Seattle’s going higher will be only a small factor as well. 

The worst disadvantage can be seen in other recent articles.  There has also been a movement to greatly raise the minimum wage in Seattle, a large city without such a high share of captive customers.  An NBC News piece even said that the Sea-Tac proposition may “set the national tone” as well.  Some poor-quality objections, such as the higher pay being “inflationary,” may do more damage than good, but the real problem could be if the airport area maintains its number of jobs and observers say that a higher minimum would, therefore, do well elsewhere.  The actual outcome for too many small businesses would be closer to what one Seattle seafood market owner expected if $15 per hour became the law there – jobs cut, prices up 5% to 10%, and, with price-sensitive customers, a possible loss of sales.  Cities where most business is done with locals will always have different considerations.

It would be great if people could all be paid more.  But there is no free lunch.  We will keep our eyes on how Sea-Tac fares, if the measure passes into law, but we should not be fooled into extrapolating its results inappropriately.  In the meantime, too many people want to work to justify forcing businesses to pay those already with jobs more than they, or their customers, can bear.  

Friday, November 8, 2013

America Now 19.9 Million Jobs Short as Exodus from Labor Force Accelerates

America Now 19.9 Million Jobs Short as Exodus from Labor Force Accelerates

In today’s Bureau of Labor Statistics Employment Situation Summary, the words and phrases standing out are those of stability.  The official, seasonally-adjusted employment percentage, now 7.3%, “changed little.”  Rates by sex and race “showed little or no change.”  The count of long-term jobless, 4.1 million out 27 weeks or longer, “was little changed,” as was the 8.1 million employed part-time for lack of full-time opportunity, and the overall 2.4 million with statuses somewhere between not interested in working and officially unemployed.  All much the same, the message seems to be.

Yet the Summary did admit to some disturbing, if not directionally changing, differences.  In October, a month usually quite similar to the previous one, the civilian labor force tumbled 720,000, resulting in a 62.8% labor force participation rate and a 58.3% employment to population ratio.   Those are both new multi-decade records, lower than any since 1977 and 1976 respectively. 

Overall, the American Job Shortage Number (AJSN) dropped about 113,000, as follows:

Total Latent Demand % Latent Demand Total
Unemployed 10,773,000 90 9,695,700
Discouraged 815,000 90 733,500
Family Responsibilities 225,000 30 67,500
In School or Training 233,000 50 116,500
Ill Health or Disability 169,000 10 16,900
Other 842,000 30 252,600
Did Not Search for Work In  Previous Year 2,949,000 80 2,359,200
Not Available to Work Now 451,000 30 135,300
Do Not Want a Job 85,780,000 5 4,289,000
Non-Civilian, Institutionalized, and Unaccounted For, 15+ 9,434,354 10 943,435
American Expatriates 6,320,000 20 1,264,000
TOTAL     19,873,635
The largest variation since September was in the number of those saying they did not want a job at all, which increased a stunning 922,000.  For one month, that is a gigantic change.  Those officially unemployed fell 112,000.  People unavailable for work for being in school or training dropped 91,000, those discouraged were down 37,000, and those not available for jobs due to unnamed reasons rose 88,000.  Official non-seasonally-adjusted unemployment was steady at 7.0%.

Compared with October 2012, there are now about one million fewer officially jobless, 36% fewer naming school and training (wow!), almost 10% fewer saying they had not looked for a year, and 2.7 million more not wanting to work at all.  Other AJSN component numbers were much the same, resulting in the indicator’s drop of 688,000. 

As for last month’s government shutdown, the Situation Summary admitted to some confusion about the furloughed federal workers, many of whom reported at survey time that they were unemployed.  Although the report was delayed one week to help straighten out such issues, the BLS’s words make it clear that adjustments will be made later.  When they are, the official unemployment rate’s increase from 7.2% to 7.3% will probably disappear.

So, what are we left with?  No jobs-crisis progress at all.  Though I don’t expect almost a million more people to choose a no-employment lifestyle each month, that is clearly how Americans are reacting to the lack of work.  The headline unemployment numbers aren’t changing much, but other observers have done well to consistently see that as no sign of health.  At best, we are treading water, with too many people out of work for too long.  At worst, the base of the United States economy is shrinking.  There are virtually no job-creating or even job-facilitating efforts in progress in Washington.  Overall, I see no reason why our economic situation, whatever you consider it to be, will improve.    

Friday, November 1, 2013

Unequal Sex Distribution in IT and Other Careers – Is It a Problem?

There has been a remarkable amount of recent discussion about the share of women working in information technology.  According to the U. S. Department of Labor, 25% of the 3.6 million Americans employed in computer and mathematical occupations in 2011 were female.  Articles about the percentage of women in that field appeared in Slate, The New York Times, and other major publications last month, and BBC News Hour spent almost half of one broadcast discussing it.  These pieces share a common assumption, that this sex distribution and by extension others are problems which need correction.  That is incorrect.

To see why, let us go back to 1948.  Despite jobs being plentiful, women’s labor force participation was only 32.7%, compared with 86.6% for men.  A lot of working women were nurses, secretaries, elementary school teachers, or in other heavily female occupations.   The idea of feminism had not made it into the mainstream, and girls were routinely taught that their real occupations were to support their husbands.   Many American families could do that, since 1948 was into the Winning by Default Years, with great prosperity and little foreign competition, and salaries for even remotely middle-class people were well higher, in constant dollars, than they have been for decades since. 

Fast forward to 2010 and 2011.  Sex discrimination in employment is illegal.  Education levels for women are passing those of men.  Most families need two breadwinners.  Women’s labor force participation has risen to 58.6%, and for men it has fallen to 71.7%.  Many jobs once held almost exclusively by men have substantial shares of women, such as 31.9% of lawyers and 33.8% of physicians with newcomers to both roughly evenly split.  Most physical positions still have high male percentages, but some imbalances seem to defy logic.  Why are registered nurses and mechanical engineers 91.1% and 5.5% female respectively?  Why are 97.5% of dental hygienists women, but only 4.8% of truck drivers?  

Now, on to 2013.  After Harvard president Larry Summers’ comments eight years before suggesting that women’s underrepresentation in some technical fields might be because of statistically lower aptitude, the idea of men and women having brain arrangement differences has been discredited in both academia and the popular press.  Yet otherwise inexplicable gaps in attitudes and outcomes keep popping up.  The “opt-out revolution,” in which many times more women than men leave high-powered jobs to support their families at home, has continued, ten years after it was first publicized.  Debates on whether women can “have it all” and whether they should “lean in” by pursuing their career advancement more aggressively have precipitated much debate and commentary, much of it on whether women can be expected to be as competitive, and distant from their children, as men. 

Most of these changes have been favorable.  There is no doubt that equal rights for women are a good thing.  The problem is when equality of opportunity withers into a need for equality of results.   Author Warren Farrell documented a quarter-century ago that women tended to choose career paths less risky and more comfortable both physically and emotionally, and that explained why pay for librarians, usually required to have master’s degrees, was about the same as that of garbage collectors, many of whom did not even finish high school.  If librarians’ pay were doubled, the field would draw an excess of people attracted to its pleasant work settings.  Likewise, in order for much more than 2011’s 1.1% share of roofers to be women, their pay would have to increase well beyond the amount needed to fill available positions.

Yet this view is incomplete.  It does not explain why nurses, on their feet and dealing with life and death, are so rarely male, or why engineers, usually in nice offices, almost always are.  Something else is happening.  I worked in information technology, in large offices, for twenty years.  The jobs at AT&T, while well sought after, required enough intelligence, aptitude, and specialized education, the first two measured by testing before hiring, for only a limited set of people to be considered acceptable.  There were plenty of women overall, but it was noteworthy that the most hard-core technical positions, such as those requiring hexadecimal dump debugging or intensely abstract system programming, were almost always filled by men.  There was no sign of any sex discrimination around those jobs – there as elsewhere, people were given opportunities based on how well their skills and interests matched the needs of the business.  The environments, fine settings with no physical strain and the only emotional stress coming from office politics, were essentially identical to those of similarly-paying positions at which women predominated.      

It may be that we are near a high-water mark for considering the sexes equal in all aspects of aptitudes, preferences, and what they want from their jobs.  Eventually we may be able to accept that some groups of individuals making choices will never be demographically identical.  For now, we need to at least consider the possibility that some careers will attract more of one sex than the other.  The real problem we face is the job shortage, as shown by the 20 million positions that could be quickly filled if available, the 4.1 million officially unemployed for over six months, and much more.  Distracting ourselves by confusing equality of opportunity, which is the well-enforced law in America, with equality of results, which even our descendants may never see, is the wrong way to go.