Has Job Security Declined? (Update)

[Updates at the end]

The Economist blog, Free Exchange, says outsourcing and technological change have not impacted job security - it's all a myth:

Unstable?, Free Exchange: Last month, unemployment hit 4.1% in America, the lowest ... in thirty years. Yet at the same time, Democrats are vowing to protect American jobs from foreign competition... If globalisation is sending jobs abroad, how is it that unemployment is so low?

Anti-globalists often argue that the unemployment statistic hides a shrinking labour force and a job market that isn't what it used to be. Job security has been outsourced..., and those who have given most of their working lives to manufacturing jobs now find themselves surplus to requirements. Even if they find another job, it is likely to be part time, without the benefits and security they once enjoyed.

However, this does not necessarily comport with what labour economists are finding.

There is a big difference between job stability and job security. Job stability refers to how long a worker expects to be on a job; it does not distinguish between those who are sacked, and those who leave for a better opportunity elsewhere. Job security describes the likelihood that a worker will lose his job by either being fired or laid off.

Thus far, there is little evidence that job security has declined in the last twenty-five years... [According to] Princeton economist Henry Farber... [t]he likelihood of being in part time work after losing a full-time job ... varies with the business cycle, but there is no evidence that it has become more common overall. ...

Whether or not a worker has to take a pay cut in order to get a new job is similarly cyclical. Workers, particularly those with a college education, became more likely in the 2001 to 2003 period to be in a job that paid less than the job they lost, but this may be simply be a reversion to the mean after the abnormally high wages paid to educated workers during the tech boom.

Overall, globalisation doesn't seem to have had much effect on job security... [W]orkers have not fared any worse in the last ten years. But though many labor economists dismiss media reports of precarious employment as anecdotal, that doesn't make the anecdotes any less scary. Even the biggest supporters of globalisation agree that more can be done to ease workers' transition from redundancy into new employment.

I disagree with this. Recall what Janet Yellen said recently as she contradicts the assertions above with a comprehensive look at the evidence on these issues:

Economic Inequality in the United States, by Janet Yellen, SF Fed President: ...It's important to note first that our economy is always subject to large amounts of job turnover. Indeed, this is one hallmark of a dynamic, flexible economy, and it is not necessarily a bad thing on net. Data on worker flows ... indicate that ...[o]ver half of this job churning is voluntary in nature, reflecting worker desires to find a job with higher wages, better working conditions, or a different location. ...

However, involuntary displacement from permanent jobs, due to layoffs or downsizing, is important and has been on the rise over the past two decades. In particular, rates of worker displacement are up relative to measures of overall labor market conditions, such as the unemployment rate. ...

In addition, the distribution of displacement has shifted towards the highly educated: workers holding a college degree saw nearly a 50 percent increase in their displacement rates between the early 1980s recession and the most recent one in 2001.... So, more educated workers are seeing erosion of their job security relative to their less-educated counterparts. Of course, job displacement still remains a ... significant issue for low-paid workers...

Involuntary job loss frequently inflicts dire consequences, which have grown more severe over time. Involuntary job losers typically are unemployed for at least four months, about 70 percent longer than individuals who enter unemployment voluntarily. ... The picture looks even gloomier when you recognize that some job losers withdraw from the labor force... Put these factors together and it's clear that periods without earnings can be quite lengthy and costly for job losers. Moreover, when displaced workers do find new jobs, they're taking a pay cut of about 17 percent on average. The size of this wage loss in the early 2000s was the highest in at least 20 years.

Job displacement also has adverse consequences for health insurance coverage. Research shows that job loss substantially reduces access to health insurance over extended time periods...

Given the increase in job displacement and earnings losses that I described above, it is not surprising that yearly fluctuations in individual earnings and family incomes have increased sharply since the 1970s.... [B]etween the 1970s and the early 2000s, the gaps between the highs and lows in a typical family's yearly income have risen substantially. ... [T]he chances that an American family will see at least a 50 percent drop in its yearly income has more than doubled since the early 1970s, rising to about one in six families in recent years.

The increased risk associated with these income fluctuations is likely to reduce perceived well-being quite substantially, even if family incomes on average are growing over time. As with the risk of job loss, these income risks are most severe for less-educated Americans. However, during the 1990s, income instability rose relatively more for families with high educational achievement, consistent with the spread of involuntary job loss to highly educated individuals.

And, in keeping with The Economist's international perspective, here's New Economist with results for Germany:

Germany: Outsourcing and job security, by New Economist: Another paper from last week's conference on The Impact of International Competition on Firms and Workers was by Ingo Geishecker from Freie Universität, Berlin. Using a large panel of individual monthly employment spell data from German manufacturing, he finds that international outsourcing, when narrowly defined, has "a marked impact on individual employment security". Here is the abstract for The Impact of International Outsourcing on Individual Employment Security: A Micro-Level Analysis (PDF):

The paper analyzes how international outsourcing affected individual employment security in German manufacturing industries between 1991 and 2000. ... The main finding is that international outsourcing significantly lowers individual employment security. Interestingly, the effect does not differ between high-, medium-, and low-skilled workers. ...

I also support open markets, but there's no reason to downplay the negative consequences it has for some workers. The argument above attempts to convince workers that what they are feeling has no basis in reality, it is only due to anecdotal media reports. Doing so does not help the cause; it will not help to turn the populist political tide that is developing against globalization.

People are displaced by globalization and technology and, as the research shows, they end up worse off because of it. These workers deserve our help, not a denial that they face increased hardships. It's not just scary stories in the media that are making workers feel insecure, the consequences are very real.

To maintain support for globalization we need to stop denying there are problems, and then convince the vast number of workers reporting increased feelings of insecurity that their economic welfare is just as important as the profits of the firms they work for.

Update: By email, from a highly respected colleague at another university, a point I should have made:

Mark

 

As soon as I looked at your entry, my eyes bugged out. "LAST month, unemployment hit 4.1% in America, the lowest level the nation has seen in thirty years." Um, what? It was 4.4 percent, and the lowest in only 5 years. Wishful thinking? It may seem like a trivial thing, but anyone who pays the least bit of attention to economic numbers knows that unemployment, even aside from the caveats, still hasn't quite returned to late-Clinton levels. So whoever wrote this is either deeply ignorant, has a powerful desire to believe in the "Bush boom" that overwhelms their ability to think straight, or both. And this person presumes to lecture us about the facts of the labor market?

Update: The original post has been updated:

Update due to a typo, the unemployment figure was originally listed as 4.1. We've corrected above.

The correction is to 4.4%. Though it's not noted in their update, they also backed off the claim that the unemployment rate is the best in thirty years. It now reads:

Last month, unemployment hit 4.4% in America, the lowest level the nation has seen since 2001.

Given the preponderance of spelling errors in the original post (I corrected them above, e.g. see "gobalisation" twice in the opening paragraph), the typo seems quite possible, but where did the "lowest level the nation has seen in thirty years" claim come from?

Comments

[Idaho_Spud]

Re Job security: The reason ivy-league economics professors and government economists have little empathy for this subject is because they are in absolutely no danger of having *their* jobs outsourced.

I liken this to an officer ordering his troops to perform a frontal assault on a machine gun nest, or a President sitting the safety of the oval office telling terrorists to "Bring it on"

This dichotomy of life experiences explains why few who contribute at the policy level seems to understand the fears of the unwashed and uneducated - whom I might respectfully add, actually contribute to the GDP.

Re-training for another career is a paper tiger. Not everyone displaced can find an IT job in silicon valley. The jobs being created in the US today are of the waiting tables variety.

[evagrius]

Well, you know the saying, " It's a recession when the other fella loses his job, it's a depression when you lose yours".

I concur with Idaho Spud.

I have the prejudice that all who have ambitions to be policy makers should start at the place where policy has an effect, that is, at the bottom.

This is or was a tradition in Japan. Young ambitious university graduates would be hired by major firms and start at the lowest level. That way, they learned respect for those who really contributed to a firm's profitability.

[save_the_rustbelt]

This year Michigan will reach a milestone, the longest period of sustained job losses since the Great Depression. Ohio is close behind.

Using unemployment numbers alone to declare economic victory is dangerous for many reasons.

Some days real people are alot more perceptive than all the experts.

[ken melvin]

Cynical, but not accidental this pretending there is no problem with globalization for the workers of the first world. Why do I suspect that such apologists never liked unions, or even engineers? Why not just say to the former workers that, ‘you can now work for nothing and do as you are told or we will bring in illegals who will’? While back, during the short-lived NYC transit workers strike, The News-Hour had this Wall-Street type on saying that ‘by god, the workers had to realize that we were in competition with China and there wasn’t going to be any increases in wages and benefits’. Why not just gloat a little bit now that these problemsome folks are no longer needed?

If we accept Globalization as inevitable, there simply has to be a better way of going about it, and, that no new mechanisms were established for replacing the existing system(s) for distributing wealth is simply inexcusable.

The media can’t/won’t get it. I don’t think the Democratic Party understands what is happening. I do think that Grover Norquist and others at the right-wing think tanks do understand exactly what is happening and that they are dancing in the aisles.

[Lafayette]

"Re-training for another career is a paper tiger. Not everyone displaced can find an IT job in silicon valley."

Perhaps, but it is inevitable.

A major part of the world went to "sleep" under communism. Remember the great enthusiasm when we declared "Communism is dead"? I do.

We opened the flood gates with the GATT negotiations that reduced tariff barriers and incited China (and others) to start exporting.

Well, it all worked, meaning, the countries that choose to do so are on a road to self-sufficiency in terms of increasing GDP that is bettering the lot of most of their people. The consequence, however, went unnoticed. We doubled the supply of manpower available almost overnight.

The consequences are only now coming to light with the dislocation of low-skilled labor to the Far East. What do we need as a wake-up call? That all the hi-tech jobs start going to India?

This stupid war in Iraq took our attention of the real enemy, which is competition for manufacturing jobs from abroad. There are many ways to protect those jobs without tariff barriers. Retraining is one and product upgrading to a higher level of technological complexity is another. Tax breaks in specified industrial centers that create durable jobs. Lengthened amortization of R&D investment costs, which will prompt companies to develop new products.

And a few fresh ideas: Get America off its petroleum binge such as investment in crash program of nuclear reactors for electricity generation, or tax relief for new/old homes installing geothermal heating.

There's plenty to do that can create jobs at the lower skills level. Not everyone need go get an MBA to end up as asset manager in a bank somewhere, or flip hamburgers at a fast food outlet, or drive a taxi.

It is going to be a hard slog, but it is not Mission Impossible.

[ken melvin]

Yesterday's SFChronicle touted record low unemployment. No mention that the number of jobs hadn't increased since dog knows when, population growth, or that employment was still below previous levels. Let not a word of that be said.

[lonesome moderate]

I hear the statement "The jobs being created in the US today are of the waiting tables variety" a lot, but I wonder. Perhaps this is an issue not only of career but geographic mobility (I live on the eastern edge of the Bay Area). In the past few year I have apparently paid between $60 and $100 an hour in "labor costs" whenever I need car, heating, or plumbing repair work done (I say "apparently" becaus many of the bills no longer list an hourly rate, perhaps out of embarrassment). Now of course the workers don't get all, or even most, of that money, but I have to think that enough of it trickles down to make a rough equivalent to the famous "good factory jobs" that we have lost.

Is there something that I am missing here?

[Stormy]

“To maintain support for globalization we need to stop denying there are problems, and then convince the vast number of workers reporting increased feelings of insecurity that their economic welfare is just as important as the profits of the firms they work for.”

And how do you expect to convince them?

Profits have been glorious for the past few years, but wages, other than for those at the very, very top, have not kept pace.

I read recently that some Democrats may well put labor and environmental requirements into any new trade agreements.

The right to bargain collectively is important, don’t you agree? Or do you think only the interests of capital should be protected?

[Lafayette]

KM: "If we accept Globalization as inevitable, there simply has to be a better way of going about it, and, that no new mechanisms were established for replacing the existing system(s) for distributing wealth is simply inexcusable."

What mechanisms? The only way is by taxation.

Redistribution by taxation does not redress the problem of competition. However, if education and retraining became state subsidized programs and the consequence were skills enhancement of the workforce, then there is a chance to stop the job hemorrhaging if it coincides with new product investments.

The only way to create jobs is to create demand for new products / services. It remains nonetheless true that countries having salary levels at a tenth of the US in key skills will be more competitive.

The problem is that education is a "business" that accepts all customers. The greater percentage of graduate students at American universities is of foreign origin. To the extent that they remain in the US, they contribute to US GDP. But, should they return from where they came they contribute to the dislocation of expertise. This means that know-how is globalize as well.

In many ways, the problem is intractable and the real consequence is that American/European wages are going to stagnate for quite a while (a decade or more?) whilst the rest of the world plays "catch-up".

Which is all the more reason to train people for jobs that remain local. All services skills that cannot be "exported" (via telecommunications) will be spared, for instance. But, if "abroad" is the "near abroad"?

Nobody is going anytime soon abroad for a haircut. Or a plumber. But, for Asset Management advisory services? Or, dental services? Cosmetic surgery? Yes, why not?

It becomes imperative to keep local costs low and the dollar low as well, to discourage import competition where possible. This means that the party is over. America must become self-sufficient or less dependent in domains that are major currency drains. Petroleum being one such example.

But, slapping tariffs on imports will only provoke a similar action from America's trading partners. International trade will stagnate. That cure is worse than the illness.

[calmo]

Consider:

Technological advances and outsourcing have not impacted job security

Myth or

[insert healthy, invigorating and stimulating cluster of poster comments here]

or an undenial fact

[sign the author's names from FreeBlog here]

more impactful than say, Necessary Truths. (eg. Lime green is a cool color.) [You want more? You aren't tired of 'a a square has 4 sides'? You want to be difficult?]

Not the dichotomy it may first appear to those ready to cast their vote rather than exercise and be ever so stimulated and stimulating.

No, 60% decline to vote and be stimulated elsewhere. Only 40% tick one box or another...and this counts as participation.

I can find this issue people and provide that stimulating service. I must, but sadly I B overwhelmed.

Yes to Yellen. It was the technological advancement that precluded any rigorous labor-intensive so-yesterday mental huffing and puffing.
Send me in for re-training, I will not work in the salt mines.

[DILBERT DOGBERT]

lafayette,
In my neck of the woods we do go to the "near" overseas for a haircut and for plumbers. Instead of us traveling the barbers and plumbers come to us. Viva Mexico!

[ken melvin]

Someday, mankind will look back on the worship of wisdom of markets and say how quaint, so very like believing in voodoo. Someday, some will ask what in the hell were they thinking allowing the great accumulation of wealth by Gates and the like. Someday, children continued growth is impossible.

For growth to be the solution consumption would need be at least four times what it is now because in auto,-----, any industry or profession, one person now does the work four did in 1975. One engineer, one assembly line worker, you name it, .. and, that’s if the job hasn’t been offshored.

Education only shifts the selection, doesn’t create jobs.

We don’t need more mechanics, barbers, etc, per capita than we did in 1975. In fact we require less, and due super-cuts et al, few can make a living at barbering. Here, in CA, the auto repair shop, painting contractor, roofing, etc must compete with either Chinese or Mexican shops/contractors. Nearby, there’s a large nursing home owned by local doctors that is being re-roofed by a Chinese contractor. The laborers, who only speak Cantonese, start before day break and work until after sunset six days a week. All, are her illegally and none are making five dollars an hour.

And, they are offshoring medical, legal, accounting and engineering. Working people, be they white collar or service workers, nee blue collar, need to wake up. They are loosing position and livelihood. Maybe self-sufficiency is the answer. To each nation it own.

One area crying for attention is quality of life. A people can’t have too much culture, too good schools, too many parks, too clean streets, or too good housing.

[cm]

ken melvin: Yeah, but how do you put quality of life on a balance sheet? If it's not on there, it doesn't exist.

[Idaho_Spud]

Lafayette you make some excellent points. I don't think anyone is advocating tariffs as a response to this problem. At least someone is (sort of) admitting that maybe there may actually *be* a problem. Nor do I have easy answers...

What we really seem to be addressing here (as Lou Dobbs seems to be) is the explicit and implicit obligations that we have to one another - as indivuduals, businesses, and government.

My thought is that government and business have recently been obsessed with improving the profits of business - which has worked, but which has also resulted in a great deal of individual suffering, and a re-allocation of wealth with government manipulation via the tax code.

Meanwhile most implicit obligatons have been ignored, and a lot of the explicit obligations (pensions, health care, security) are being dumped as well - to the benefit of the business, and with tacit government blessing.

There seems to be an uneasy symbiosis between these three entities. There is also a definite sense of a shift in the direction of the balance, which has a lot of the business and academic economist community uneasy.

Lou Dobbs has (I think) been pointing out the skewing of the previous balance, examining the detriment of the new status quo to the individual. It's unfortunate that rather than addressing his points, the business (and academic) community chooses to attempt to de-legitimize him by calling him a "populist".

[lonesome moderate]

From Lafayette:

Redistribution by taxation does not redress the problem of competition.

[...]

In many ways, the problem is intractable and the real consequence is that American/European wages are going to stagnate for quite a while (a decade or more?) whilst the rest of the world plays "catch-up".

I don't think that stagnating wages are inevitable, and it seems to me that taxation (though not import taxation) could fix the problem.

At least here in the states, job security per se is not a problem. Anybody who wants a crappy job in this country can get one, or two or three of them if you prefer. Per capita GDP continues to expand. The problem is how the pie is getting cut up--the increasing income gap between the top one percent of the population, and the increasing downward mobility of many in the middle class.

People tend to see this in terms of "job security", since the way it works out in the real world is that you lose your job and can't get another one that pays as well. But this is really just a pay cut in disguise. If government were to address the problem of declining middle-class incomes then I'm sure people would be less concerned about globalization.

[dissent]

This, folks, is the commentary that shed some light for me. Why is it 'comparative advantage' used to work and now no longer seems to?

Free-trade as a positive-sum game doesn't actually work if you are running a big and expanding current account deficit.

See Mark Chapman:

I've done no study, but here's a conjecture: The countries where protectionism is becoming popular are those with both growing current account deficits and shrinking tradables sectors. A shrinking tradables sector is not the same as a declining industry. Declining industries are normal and good. Even the near extinction of manufactures as a whole is okay. But a shrinking tradables sector is not. A shrinking tradables sector means a decline in nation's capacity to produce goods or services of any sort that citizens of other countries want to buy, at competitive prices...
Ricardo is dead, and we live in a brave new world where, at least for a while, some countries are willing to trade persistently for debt not backed by expanding (if adjusting) tradables capacity on the part of the debtor. This is not a Ricardian paradise. This is economic terra incognito, and citizens are right to be spooked.

[happyjuggler0]

Mark Thoma,

Some of what your anonymous economist told you via email is true, and some is false. He is wrong to say it is 4.4%, unless the BLS website has the wrong number listed. It is indeed 4.1% unadjusted for seasonality. It was 4.4% two months ago though if seasonally unadjusted. The adjusted (for seasonality) figure is 4.4% though for last month.

That said, the last time the US had an (not seasonally adjusted) unemployment rate lower than 4.1% was during the last three years of the Clinton administration, when it happened 12 of 36 months by my count, and a tie at 4.1% six times. Interestingly, we are in the last three years of the Bush administration....

Before those last three Clinton years, we have to go back to May 1970 to get an unemployment rate that low. In France, by contrast, they are happy that they now have a "low" unemployment rate of 8+%.

By the way, I now get an error message when trying to get the link I used at BLS for my post here. I'll give the link in a new post as soon as their webpage is back up.

[dryfly]

In France, by contrast, they are happy that they now have a "low" unemployment rate of 8+%.

That 8% might be equivalent to our 4%... Trans-Atlantic fugacity correction you know.

****

Point is we in the developed world ARE going to have stagnating real incomes at best, declining ones more likely.

There is no way we can 'incorporate' those billions of new workers from China & India - compete head to head with them and expect to continue to live like the Brady family. It isn't going to happen... there aren't enough resources on the planet for us all to live that way UNLESS we stop buying STUFF (like gasoline & SUVs & big screens) and start buying more IDEAS & true services... and travel isn't a 'service' if it consumes oil like SUVs & jet travel does.

Remember it isn't money that makes us 'wealthy' its the stuff & services money represents - money is just the score card. The chits & game pieces.

So the key is to quit trying to fool average people into thinking there isn't a 'decline' and start figuring out a way that everyone gets what they need (medical, food a place to live) and then still enjoys life enough that they don't go looking for torches & pitch forks.

I don't have the answer but that is the challenge.

[ken melvin]

Juggler, if you believe real unemployment anywhere in the vicinity of 4% I have a bridge to sell you.

If, after a six year period when job growth exceeded population growth by some nine million jobs, unemployment was five percent in 2000 then the real unemployment rate in 1994 must have been nearly twelve per cent. Similarly, if population growth exceeded job growth by 1.2 million between 2000 and 2006 and unemployment was five percent in 2000 then unemployment must be at least 5.9 percent in 2006.

[Steve Waldman]

dissent,

the text you excerpted above is not by Mark Chapman... it is by, well, me. your link is correct though.

i have a post that directly responds to this one as well.

smiles,
    Steve

[Dick Harmer]

The sooner we accept that globalization is leading to a racheting down of the U.S. middle class standard of living, the better. Let's drop the wishful thinking. More education isn't going to stem this tide. That's a working class or sub-working class solution.

The fat years are past. So we're heading back to a living standard more like what prevailed in the late 50's and early 60's. One car per family. One TV per family. Kids sleep in bunk beds rather than a room of their own.

Is that so bad?

Dick

[evagrius]

Dick Harmer:

I think that you're wishful. It ain't gonna be the fifties', ( that's when the U.S. life WAS the tops in the world). It ain't gonna be the sixties either.

[dissent]

Dick Harmer:
The fifties were part of the Golden Age of pensions, health care, and the G.I. Bill. I think the problem we have now is that the bottom is dropping out from under the middle/working classes and the elites have taken their marbles and joined the world of globalized capital. They are *not* in the same boat we are. They rise, we sink, and 'we' is the bottom 98, 99 per cent.

At this point I just want to tear those sniffy brats a new one. I don't care if it impacts my future, because the sniffy brats have already made it pretty dismal.

[evagrius]

dissent :

Well I was going to be polite and not state what you've said, ( in polite terms). What I mean is that I think it might become time to take up knitting, Madame Defarge style.

I know it's a little crude- but I think it behooves the powers that be that revolutions don't come out of the blue.

Give it a few more years- when the cheap beer, lousy TV, lousy sports, start running out of steam and especially when it's a little too costly to drive.

All of this sounds a little shrill to some- but Medicare permiums are going up to $94 a month next year, Medicare Part D is still costing bucks, UIB is still too low, there's no hike yet in the minimum wage, ( and when they raise it, it'll only make up for inflation), rents aren't going down, people are foreclosing on houses at a record pace, people are losing jobs, and all one reads is how wonderful the Panglossian world is.

And this is only the U.S., the "richest" country in the world.

[Dick Harmer]

evagrius and dissent:

I don't disagree with you about reining in the super-rich. What they've been allowed to get away with is wrong. Reinstitution of more progressive taxes (like the 50's and early 60's) should be able to help there.

But that's a separate issue.

Reining in excesses on the part of the super-rich is not going to prevent the ratcheting down for the U.S. middle class that globalization is bringing. A good education no longer sets a middle classer apart in this new global economy. Every day that good education is becoming more commoditized by folks who themselves have acquired good educations and will do good education work for 1/3 the pay.

That means adjustments. The question is: Will those adjustments be wrenching or will we take them in stride? If we're headed back to a depression-era standard of living of the middle class, that's wrenching. If all we're headed back to is the 50'd and 60's, that can be another story. But a lot of it is in your head.

I'm just saying "Get a grip." Recognize what's inevitable and figure out how to live with it. Don't hang on to what's past. Try to make the best of a future that's going to be quite different than your expectations 10 years ago might have led you to think it might be.

Look on the bright side. Maybe our reduced future consumption can help slow down global warming.

[calmo]

O Mark pay no attention to your highly respected colleague's 'correction' (4.4% not the Clintonian 4.1%)

And this person [Mark Thoma] presumes to lecture us about the facts of the labor market?

We know how to treat these UE stats, not like some highly respected colleagues, that's for sure. We are beyond details and being teased by 0.3%. Our perspective and focal length is greater than 6" (or whatever it takes to read the fine print).
It B a test of intellectual rigor and we know who came out best on that score.
We do.

[calmo The Grabber]

Dick, The Gripper says:

I'm just saying "Get a grip." Recognize what's inevitable and figure out how to live with it. Don't hang on to what's past.

Right. So the new expression is 'Grab a grip'. Don't be left behind on the Information Highway (see how easy it is to get stalled in some back eddy?) and get un-plugged or suffer any of the multitude of disconnects.
Be alert and recognize the inevitable (as it becomes apparent) [Like this]: the middle class was not worth it.
Give it up and save the environment or grab a shovel and give those Mexicans a run for the money.
Be flexible.

[evagrius]

So's everyone, ( except the super-rich, of course) has been taken for a ride.
Except the tires are flat and the gas is low and there's no spare.
Guess I'd better get that shovel.

[dissent]

Well this thread may be dying a natural death and who am I to kick any life into a dying beastie but one problem I have is that my belief in experts and authorities has collapsed, along with my economic optimism. So say you that I need to just get a "grip" and adjust to the downslide and why for heaven's sake should I believe this? Those who spew this had another line before NAFTA and another before the tax cuts and it's all been bogus.

If we have some willingness to accept a downslide, why in heaven't sake, keep globalization and eschew tariffs? The upside of globalization appears to be only that if we do so, the richie rich get to keep making out like bandits while the rest of us lose ground. Hello, experts, wasn't free trade supposed to keep the downslide at bay? But now, we're supposed to accept the downslide because "globalization is inevitable"?

Sounds like hogwash to me!

[calmo]

Well, U B U dissent and this is some more of eloquent U:

Well this thread may be dying a natural death and who am I to kick any life into a dying beastie but one problem I have is that my belief in experts and authorities has collapsed, along with my economic optimism.

And I like just about every word here (esp the invite to kick some life into a dyin beastie).
Belief in experts, authorities...down the toilet --yes, courtesy of w (Snow job in particular) and MSM complicity (the levees catch and release in particular) IMO and along with that, incubation of general (not just economic) pessimism.
We are gravitating to where residents of New Orleans were last year --gonna need more than assurances that we'll just rebuild.
Or that middle class America was just living a little too high on hog and we'll be able to adjust with less until we get back on our feet.
No, we need to see some action --something more than just the same old talk, --the hogwash, as you put it. Mark is keen on education (no surprise) and I think that's part of it and maybe most of it, depending on how you spell that out. It's not just a matter of up-grading your skillset. It does include being able to express yourself and your aspirations and complaints...you are good at this already IMpersonalO, but there is such a long ways to go for others who are more easily directed.

[happyjuggler0]

This is the BLS link I was talking about earlier. Sorry about the delay. You need to manually change it to 2006 though instead of 2004. The site seems to have a bug that won't let you link to 2006.

Also, the last three years of the Clinton administration had 11 of 36 months below 4.1%, not the 12 I mentioned. (I accidentally counted the yearly total).

Anyway, looking at the chart and mentally adding in the recession bars that would be there if the government was a bit mor eon the ball, then it is totally clear that not only is our current very low unemployment rate normal for this part of the economic expansion, it is actually a bit ahead of the last cycle.

[Morgan]

Everyone is right - the rate was lower than the current seasonally adjusted 4.4% (and 4.1%, which is the current unadjusted unemployment rate) in 1999 and 2000. That really stinks.

Look, despite increasing globalization and return to technological savvy, the percent of the eligible workforce filing for unemployment each week has been in a general decline for 30 years, with no sign that it has reversed. Currently it sits at just over 0.2%. That's about 1/3 what it was in the 1970s. The raw number of people filing for unemployment each week has been remarkably steady, even while the number of eligible workers has increased from 53 million to 131 million.

There is local variation - in Michigan (hello save_the_rustbelt) it's been relatively flat since the eighties.

You can find the data here:

http://workforcesecurity.doleta.gov/unemploy/claims.asp

Specifically with regard to those saying that the unemployment rate can't possibly be as low as 4.4%, I would simply ask why you think I should trust your faith-based rejection of that figure over the self-report of people asked "are you employed"? Which is, you know, how they get that figure.

If you're looking for the black lining in the silver cloud, well, at least the amount of time people remain unemployed once they hit the unemployment rolls has increased a lot over the last few decades. That should gloom you up.

[Richard]

Back to the point of the thread . . . I'd be interested if job security isn't somehow linked to an urban / rural split. This is just a gut intuition, but my sense over the last two decades is that work (and workers) have flowed from rural to urban areas, and from smaller urban locations to larger urban locations. If that is the case, then

1) If you live and work in a smaller city or rural area, jobs have become more unstable, and

2) If you live and work in a larger urban area, jobs have become more commodified, i.e., more tightly categorized, identifiable and bartered against one another.

The first would increase insecurity levels, while the second would tend to hold down wages. Additionally, you'd expect the larger urban markets to have escalating housing costs as well . . . .

[anne]

Oh dear, use the seasonally adjusted unemployment figures which are fine from an historical perspective, but that is less the point. For some reasons that are not clear, the labor force participation rate has been falling for quite a while. Also, where we had monthly job creation of 235,000 through the Clinton Administration, we have nowhere close since and we do not even seem to understand what suitable job creation numbers would be any longer.

Also, while corporate profits and savings have been at or near records since the recession, wages are not keeping up with productivity increases and barely keeping up with inflation. Return to capital is simply higher than would be expected were there a healthy labor market. Also, benefits are increasingly problematic. We have after all about 47 million people with no health care insurance, most adults and most working.

Also, and I really get tired of the nonsense about western European employment, employment in Europe has been growing faster than in America since 2000. Good grief, please continue to complain about Europe though, I do enjoy investing and shudder to think anyone else will ever notice what's been happening in, say, Europe. I shudder to think of the response if I were to mention Finland, so I won't. How about Spain for a change? Say, Spanish banks....

[anne]

http://www.msnbc.msn.com/id/15674093/site/newsweek/

November 20, 2006

Europe: the Jobs Machine: Despite its laggard reputation, Europe continues to grow faster, and create more jobs, than America.
By Emily Flynn Vencat - Newsweek

America's employment model is the envy of the world for its ability to create jobs nearly as fast as its population expands. Old Europe, on the other hand, tangles its labor force in so much red tape that high unemployment and molasses-slow job creation are inevitable. Right?

So much for the conventional wisdom. Since the beginning of this decade, the average annual rate of job growth in the United States has been 0.7 percent. In Western Europe, it's averaged a significantly higher 0.9 percent, with highly regulated Spain topping the charts at 4 percent. These new figures, released by the OECD last month, put Europe's long-term job-growth rates further ahead of America's than ever in recent history. What's more: Europe's jobs machine has almost closed the transatlantic employment gap. Just six years ago, 81 percent of America's population was actively engaged in the work force, compared with 76 percent of Europe's. Now that gap is down to 1 percent. In other words, around 80 percent of both American and European 25- to 54-year-olds are gainfully employed. Says John Schmitt, senior economist at the Washington, D.C.-based Center for Economic and Policy Research: "The argument is that European countries should be basket cases [when it comes to creating jobs], but they're actually doing better than us." ...

[anne]

Ah, and as for unemployment below the age of 25 which is a problem in America and in western Europe, there is a difference in being unemployed with health care and with significant financial assistance for schooling and being unemployed with neither.

[ken melvin]

"...over the self-report of people asked "are you employed"? Which is, you know, how they get that figure."

Wonder why, while they were at it, standing on the door stoop, you know; they didn't ask how many in the household were unemployed and make note of whether or not the respondents were US citizens?

[evagrius]

ken melvin;

The question isn't "U.S. citizen" but "U.S. citizen or L.P.R ", ( legal permanent resident).

On another note, this time from Canada, relevant to a great degree;

Half fear poverty looming
Only a paycheque away; Poll finds 65 % say most of the benefit from economic boom goes to well-off

From;

http://www.canada.com/montrealgazette/news/story.html?id=0af3d1fd-4a50-4556-a26e-ff7730afb012

[anne]

Oh, yes, the household report on unemployment is considered less reliable than the employer report on job creation, which is why employer report is looked to more closely. But, why is job creation faltering here and not in, shudder, western Europe where job creation needs to be more robust as well?

[foo]

When I started out in hi-tech, getting laid-off was a big stain on your resume. Nowadays, practically everyone in the industry has either been laid-off, or knows someone that has. It's almost more remarkable to have a resume come across your desk from someone who hasn't ever felt the chop.

But not to worry, the moneyed classes and the tenured academics assure us we're just being silly - the new "flexible corporations" have our long-term job security at heart. Really.

[Morgan]

The household report doesn't get the respect it deserves. On a month-to-month basis, it makes perfect sense to look at the employer numbers - larger sample, less error, you know the drill. Over the time scale of years, however, it makes absolutely no sense to cumulate (is that a word?) the employer numbers and say "so that's how many jobs were created", because you cumulate (I'll just assume it is) any bias as well. There is cyclicality in the self-employed/establishment employed numbers. There may be a structural component, too - self-employment has grown rapidly over the last half decade. So I'd take the household survey over the establishment for judging how many jobs have been created over the last 4+ months, let alone the last 4+ years.

As for the participation rate, yes, there does seem to be a structural (as opposed to cyclical) fall. It looks to me like the underlying rate peaked in about 1997, give or take a year, and has been falling ever since.

It's always tricky trying to tease out the "all things equal" rate from the "real life" rate, but that's my best guess for now. For an explanation, I'd look to demographics first, but maybe there's a better one.

[Morgan]

0.7% annual job growth in the US?

From the BLS:

Annualized job growth since October 1999, 1.27%.
Annualized job growth since October 2000, 0.97%.
Annualized job growth since October 2001, 1.27%.
Annualized job growth since October 2002, 1.48%
Annualized job growth since October 2003, 1.73%
Annualized job growth since October 2004, 1.96%
Annualized job growth since October 2005, 1.87%

[ken melvin]

Ah, but to be a gleaning member in good standing of the willfully ignorant.

[anne]

Actually the household report gets just the respect it deserves, which is the reason analysts look first to the business survey on employment and have for years. Adjustments to the household survey however, in time, bring the figures for job creation close.

[anne]

http://www.krueger.princeton.edu/09_18_2003.htm

September 18, 2003

Pick one: The Jobless Rate Dropped in August; It Didn't; We Don't Know.
By ALAN B. KRUEGER - New York Times

"ESSENTIALLY unchanged" -- that is how Kathleen Utgoff, commissioner of the Bureau of Labor Statistics, described the unemployment rate in August compared with July. The secretary of labor, Elaine Chao, however, hailed the news, saying, "I'm pleased that the unemployment rate has dropped."

Why the different interpretations? Who is right?

In a sense, both are. The official estimate did fall by a tenth of a point, from 6.18 percent in July to 6.08 percent in August.

But the unemployment rate is just an estimate based on a sample of the population, and like all estimates, there is no guarantee it is exactly right. It could be off because of sampling errors (results differ from sample to sample) and nonsampling errors (respondents may not answer the questions correctly).

Sampling errors alone are enough to lead one to doubt whether unemployment actually fell in August.

If everyone in the country were included in the labor force survey, the unemployment rate would be unaffected by sampling errors. But interviewing everyone every month is not feasible. Instead, the survey is given only to a representative sample of households.

Granted, the number of households is large -- about 60,000 -- but if the same survey were put to a different 60,000 households, the rate would probably come out slightly different.

"Sampling variability" is the name that statisticians give to differences in estimates that arise by chance because of the particular sample surveyed. This variability can be reduced by drawing a larger or more efficient sample, but not eliminated.

Fortunately, the imprecision inherent in statistics because of sampling can be gauged because sampling variability adheres to certain statistical laws.

To distinguish the signal from the noise, the bureau computes the "standard error" of the estimate, a measure of the extent of sampling variability. Under plausible conditions, 68 percent of sample estimates would lie within one standard error of the value that would be obtained from a complete count of the population.

The standard error for the change in the unemployment rate from one month to the next is around 0.12 point.

To see why the Bureau of Labor Statistics considered the rate "essentially unchanged," consider the following: If the "true" unemployment rate had remained unchanged, there was still a 40 percent chance that the household survey would have indicated a movement of at least one-tenth of a point.

Clearly, there is not enough ground to conclude that the rate actually dropped....

[Nice analysis.]

[Michael Cain]

But not to worry, the moneyed classes and the tenured academics assure us we're just being silly - the new "flexible corporations" have our long-term job security at heart. Really.

Would those be the same moneyed classes and tenured academics who tell us that corporations have no responsibilities other than maximize return to the shareholders? I wonder if the politicians are so dependent on corporate funds for campaign financing that there is now no chance that they will ever remind the corporations that they do have some additional responsibilities?

[Morgan]

anne:

Thanks. As I noted in my comment, there is more error in the household survey. But the size of the error component is fixed - it's no larger today than it was in 2000 (well, slightly larger, because it's used to scale up to a larger population, and I think the sample size is unchanged).

So if the standard error is 0.12%, there's no way we're "really" at 5% unemployment - 5 standard errors away (all right, it's not actually impossible, just vanishingly unlikely). Nor is it possible that the roughly 4 million job discrepancy between the establishment and household surveys is simply the result of sampling error.

In other words, they aren't both right. And which is more likely to be *way off* - not off by a standard error or two, but *way off* - the one that counts some classes of jobs and systematically misses others, or the one that counts all jobs.

Yeah, that's right, the one that systematically misses some classes of jobs.

Remember, the BLS reconciled the two not long ago, showing that if you excluded employment counted by the household survey but not by the establishment survey, the two tracked one another very closely. The message most people seem to have taken from that is that the establishment survey is not broken. I agree, it isn't. It counts establishment jobs reasonably well (though the 810,000 revision a month or two ago was surprising).

But the message I take from that reconciliation is this - the establishment survey has drastically undercounted job creation over the last several years because employment in the classes it does not count has grown rapidly. The fact that BLS was able to reconcile the two simply bolsters the point I made above; the household survey is a better measure of cumulative change in employment. The fact is that the household survey accurately counted establishment employment (or the reconciliation wouldn't have worked), so there is no reason to conclude that it was wildly inaccurate in its count of other employment. And unless it was wildly inaccurate in counting other employment, it shows that other employment has expanded rapidly, and provides a far better picture of the actual change in employment than the establishment survey.

[dryfly]

Morgan - would you consider a real estate agent who makes little or no commissions and has little prospect of making a commission in the near term (say within a year), 'employed'?

If you say 'yes' then the household survey makes perfect sense. If you say 'no' - look to the employers reports.

BTW - I'm one of those self-employed and I understand what you are thinking and somewhat agree... but anne is right when she treats the household survey like Rodney Dangerfield. For most people those alt-jobs are a lot of work but not a lot of 'job'.

[Nick Kran]

"Only a paycheque away; Poll finds 65 % say most of the benefit from economic boom goes to well-off"

I think 35% need some economic education. 8^)

[anne]

Interesting argument, but suppose that we are modestly estimating job creation too conservatively, this is still not a robust job market. We are just not finding the wage and benefits increases we should be finding given so low an unemployment rate. I do not question the data collection or analysis, similarly with productivity numbers, but labor is not getting the share of national income I would expect for for low an unemployment rate. Monthly though look to the household survey second.

[Morgan]

dryfly:

If the real estate agent considers him- or herself employed, then yes, I'd consider him or her employed. Your point is taken, though, that self-employment may be, on the whole, less desirable than establishment employment (though not every establishment job is a bonanza, either).

I'd have to disagree, though, that for "most" people those alt-jobs don't pay. The nearest I can find to estimating the income accruing to newly created self-employment is to approach it via proprietors' income, which has increased as a proportion of national income by about 1% since 2000 - in other words it's about $100 billion more than it would have been if the share of income accruing to proprietors had stayed the same.

If there are 3-4 million new proprietors (the difference between the two surveys) that's $25,000 - 33,000 each - mean, and a very rough estimate if it has any validity at all. Still I'll go with it for now.

$25-33K doesn't stretch too far on the coasts but is a living wage on its own (for a small family or a single person) and a very nice second income in most of the country. And there are benefits to self employment that aren't reflected as income. As you know, I'm sure.

[ken melvin]

From Mar 2001 to Sept 2006, household went from 130.5 to 137.4 million for an increase of 6.9 million while payroll went from 132.5 to 135.7 for an increase of 3.2 million. The difference in increase, some 3.7 million is indicative of the number of illegals working off the books. So, more than half (54%) of the 6.9 million jobs that were created according to the household survey may have well gone to illegals. If the hires had all been US citizens the job growth would have been about right for the increase in population during the period, i.e., some 6.6 million. Using payroll growth as a guide, only some 3.2 million of the purported 6.9 million jobs (46%) went to US citizens. Chances are that the 3.2 million going to US citizens paid less due the competition from cheap labor illegal immigrant.

If the household survey is a complete jigger, then some 3.4 (6.6 –3.2) additional US citizens became unemployed during the period, and instead of unemployment going down it went up some 2.4 - 2.5 % from whatever it was in Mar 2001.

[ken melvin]

The labor participation rate, too, may be skewed by the employment of illegals. Rather being 66%, it may be 64% due to the 3.7 million illegals counted in the household survey but no tin the payroll. In fact, it could be 59% if all the some eleven million illegals show up as employed. There’s a very good possibility that for every illegal working in the US, a US citizen is unemployed.

[ken melvin]

Other being figments of Dick and Elaine’s imaginations, self-employed, and semi-retired are simply dignity saving euphemisms for being unemployed. These same self-employed, and semi-retired folk frequent parks and are known to take long walks.

[ken melvin]

"The nearest I can find to estimating the income accruing to newly created self-employment is to approach it via proprietors' income, which has increased as a proportion of national income by about 1% since 2000 - in other words it's about $100 billion more than it would have been if the share of income accruing to proprietors had stayed the same."

Ha!Pure wishful gleaning. There is a number; why not put it down? Approximately 395k didn't serve your purpose, did it?

[Morgan]

anne:

Absolutely, look to the household survey second on a month-to-month basis.

While you do, though, keep in mind that the labor force is growing more slowly now than it did in the past, and over the next 15 years the growth rate will crash. The 20-64 demographic won't actually shrink, but growth will slow markedly so that by 2020, sustained growth of 30,000 net jobs/month will actually result in declining unemployment.

I estimate that the 20-64 demographic is growing by about 1.7 million per year right now, down almost 20% since 2000. If the participation rate holds steady at 67%, we currently need 95,000 net new jobs/month to maintain total unemployment at a given level.

A lot of people have expressed puzzlement at the declining unemployment rate absent eye-popping jobs numbers. I think the demographic dip we're in right now is a big part of the explanation.

I also think that the demographic dip is good news for wages in the coming years. Maybe it's already begun - wage growth over the last year was quite strong, at least as measured against core inflation. Purchasing power didn't rise much - but if energy and food prices moderate, people will be smiling about their raise in 2005-2006. Well, no they won't, not really.

ken:

Are you saying that the entire difference between the two surveys is due to the household survey counting illegal immigrants? That there has been no increase in self employment and other "uncounted" employment classes among US citizens? That strikes me as extraordinary. Do you have any documentation?

Also, what is the approximately 395K you're talking about? Is that the average proprietors' income for newly created proprietorships? The increase in the number of self-employed since 2000? Some context, please, for your addlebrained debating partner.

[anne]

Morgan:

Agreed; well worth arguing about, and I am thinking further through the problem. This labor market puzzles me, but by unemployment alone I could be a whole lot more optimistic about these coming months of housing weakness. Also, I do not properly understand the employment characteristics of younger more poorly educated men and women or adolescents and anecdotes I come on are worrying.

[ken melvin]

” …. addlebrained debating partner”? Someone who can find the explanatory missing 2% in amongst the self-employed is perhaps better described as “agile brained”. I didn’t really think that you would fall for the unemployment survey.
This 95k/ month, your idea, too? Now, declaring someone who hasn’t looked for work in the past four months is no longer unemployed; what do you think, good idea?

[ken melvin]

To say that only 95k/month new jobs are needed solves the Administration’s problem of the economy not providing enough new jobs for the people. It doesn’t solve the problem of the fifty-plus laid off engineers or factory workers who have been unemployed for three years. In fact, it’s an insult to them, and to the collective intelligence of the nation. This ‘disappearing’ of American workers is not just dishonest; it is morally repugnant. We first saw it use with Reagan. Now, Bush would have us believe that we are not to believe our lying eyes.

[Morgan]

anne:

If we really understood the labor market, we could go work with Dr. Thoma, except we'd get a bigger office with a beach and chaise lounge in it.

ken:

The 95K is my own (though you're welcome to use it), and I laid out the rationale in my comment. To explain more fully, growth of the relevant demographic slice (1.7 million per year) comes from the US Census, though I had to do some smoothing using the 1990-2000 counts and the 2010-2020 projection to interpolate to 2006-2007, and might be off a bit. But yes, if the workforce demographic (which technically stretches from 16-64, I think) grows by 1.7 million per year, and the participation rate of that demographic is 67%, that's an increase of 1,139,000 workers per year, which requires 1,139,000 divided by 12 new jobs per month to keep pace. That works out to 94,916.67 net new jobs per month, which I rounded to 95,000.

Sorry to insult the nation's intelligence that way, but that's how I see it.

Is it a good idea to not count as unemployed those who haven't looked for work in the last 4 months? Beats me. But that's been standard for a long time. And we're not currently seeing a spike in the proportion of workers falling into the "discouraged" category. Or in the proportion working part-time for economic reasons. Or in the proportion marginally attached to the workforce. All spiked as a result of the recession, and all three are currently declining.

[lonesome moderate]

Ken,

How much of the increase in number of households do you believe is accounted for by illegals?

[save_the_rustbelt]

If we sell our furniture on E-Bay to pay the mortgage are we self-employed?

Inquiring minds want to know.

[dryfly]

$25-33K doesn't stretch too far on the coasts but is a living wage on its own (for a small family or a single person) and a very nice second income in most of the country. And there are benefits to self employment that aren't reflected as income. As you know, I'm sure.

$25K won't cut it in my rural Midwestern river town let alone the coasts if you include the cost of doing business, benefits, etc. I know that story all too well.

I mean we are talking $12-$16/hr IF they work 40 hr weeks (and not 60 hr weeks). That's before any take outs & there are always take outs.

Now another issue is we all know million dollar self employed - I sure do. So that brings up the skew... more likely than a lot of $33K/yr self-employed we have a quarter to a half of them breaking even or losing money (I been there a few times)... then a big slug hanging in there doing OK a few toppers.

The household survey treats them all the same.

*****

Are there benefits? You bet. Freedom. I can trout fish or blog instead of do what the boss says.

Of course I can also not eat.

I've been at it so long I kinda know how to not spin wheels & make work but most don't. And even I have to eat sometimes.

I would NOT recommend this living for most people. I might even go get a job some day - just to see how the other half lives.

If there are still jobs.

[dryfly]

If we sell our furniture on E-Bay to pay the mortgage are we self-employed?

STRB gets it - Morgan, spend some time hanging around this guy.

[ken melvin]

Lonesome,

“How much of the increase in number of households do you believe is accounted for by illegals?” Answered above, I think. It’s probably some 3.7 million, over half the jobs ‘created’, or, some 2.5% off the unemployed. Illegals could account for 11 million of the employed and some 7 plus per cent in unemployment of US citizens.

Morgan’s 95K/mo has been party line for a couple weeks now, so, I assume, the rationalization. What’s at play is adjusting the criteria to fit the data, or, as I say, disappearing Americans. A cursory look at BLS’s Oct 6, 2006, ‘Household and Payroll Survey Employment Seasonally Adjusted, 1994 – 2000’ Shows a gap of some 3 million was pulled from 2000 – 2004 and that, as Anne and others have noted, the rate after 2004 has never been sufficient to make up the gap. In fact the rate is so low as to increase the gap, thus the need for party hacks to change the criteria to meet the data.

I misspoke in re ‘not having looked for work in 4 months amounts to longer being unemployed’. The Administration wants to and may have changed the criteria to 4 weeks. In no time at all, unemployment will be zero and the Texas Cockerel can strut around Oblivia saying he had the best unemployment ever when he had in fact increased unemployment several per cent. Of course, Morgan’s little jigger above of reducing the jobs requirement 30k/ mos by 2020 helps. These guys belong in a carnival. Bush’s whole life has been about changing the criteria to fit performance.

But, the dirty secret is that these people didn’t disappear (nor did they really disappear during the Reagan years). It’s just a carnie trick. Behind the screen they are unemployed, losing their homes, and getting a divorce. Maybe their visage will return in the revolution.

[ken melvin]

What's need is something akin the 230k/mo of the Clinton era for several months to close the gap.

[evagrius]

ken melvin;

Please clarify your point about "illegals". Remember, there are "legal" immigrants who are employed and are not U.S. citizens. There's quite a few of them.
Immigration in the U.S. is badly administered. The laws are out of touch with the actual situation.
Too many "legal" immigrants have been admitted who have low or no work skills. As legal aliens, they can legally work. They too are part of the problem. Everyone focuses on "illegals" but not on "legal" immigrants.
Canada has a large immigrant population but most are highly educated with good work skills. That's what Canada wants. They don't want immigrants driving down or out native low wage workers, unlike, it seems, the U.S. policy.

[Morgan]

"Morgan’s 95K/mo has been party line for a couple weeks now..."

News to me; as I said, the analysis is my own. Two questions:

1) Can you point to a few instances of it being profferred as a "party line" (for any party)? I'd love to see what company I keep.

2) Do you have any answer to the substance of the argument, which is that the working age demographic is growing more slowly now than it was just a few years ago, that its rate of growth will continue to drop, and that this means net job creation required to create falling or steady unemployment is also dropping?

[cm]

Morgan: It's 4 weeks, not 4 months (the actively having looked for work threshold to be considered unemployed).

Re proprietor's income, I don't know how that and the term proprietor is defined, but I have a friend who is self-employed whenever he doesn't find a "real" job (which he prefers), and he told me his business is not incorporated and he does a regular 1040 tax return. Perhaps proprietors are those who have an incorporated business. Many of the "self-employed" and contract jobbers don't.

[cm]

I also know of people who were let go as employees, to be hired back as contractors the next day. Not into the same position, as there are legal problems with that, but into something similar e.g. in a different division. Large companies have substantial leeway in doing that. With thousands of employees there is enough slack to "manage" your workforce in such way.

Another somewhat related thing local tech employers have gotten good at is to replace the large annual 5-10% layoff with continuous cutting and churning of a few people each week. Avoids the big brouhaha, gets around regulations, and has the same dangling-sword effect.

[cm]

Re the original article, I'm reminded of an incident in my grad school years where tenured faculty was pontificating in front of adjuncts and associate profs and lecturing them to devote their energy to the research and not their petty job security concerns. It's easy to take the high road sitting in a position of perceived safety.

[Morgan]

cm:

Thanks for the correction regarding 4 weeks v. 4 months. I wasn't sure myself, but went with ken's statement.

My understanding is that proprietors' income is what gets reported on form 1040 Schedule C (or Schedule C-EZ). I don't believe that incorporated businesses are included.

The shift from on-the-payroll employment to contract employment seems to be happening all over. I don't have any numbers regarding how many people have been affected. Not all of these displaced people will become proprietorships, because some people are placed with a contract employment firm and draw a paycheck from that firm. Others are still paid by the employer on a "permanent" contract basis through their payroll system - they probably don't report proprietor's income. There may be other arrangements as well.

Ultimately, I think that tech employers will start to see the value of retaining good people through on-the-payroll employment, higher pay, and better benefits. Probably as soon as the tech labor market gets tight and offshoring reaches its limits. I'm sure some folks would argue that there will never be a tight labor market again; but the word is that the market in Silicon Valley is tightening already.

[cm]

Morgan: "Contract employment" is not employment, which is the whole point. I have to ask our contract secretaries and janitors whether they run a one-person secretarial/janitorial corporation, or are otherwise "proprietors" of a respective business. I think rather not. They are workers without benefits and with one foot outside the door, and without the protections accorded to employees by the law.

I have not seen anything in the way of contract conversion in software engineers, as ours is not a business where you can bring in commodity labor for a few weeks/months.

What I have seen and heard ad nauseam is "we cannot find local talent", and professed desire to hire locally, with no credible stepping up of hiring efforts, or trying to define a benefits and work environment setting oneself apart from other employers, which one should expect in that case. Growth has been offshore and the domestic employee population has experienced a noticeable albeit not dramatic net cut (I have yet to check product groups as opposed to all employees though), although of late there are indications the offshoring is secretly acknowledged to not work out as expected. But no domestic hiring for the time being, and our benefits and the way of supporting employees which were broadly understood to be quite good are trimmed down to "industry standard", and this is even being acknowledged.

By all indications, companies that I know about don't care to either attract or retain people domestically, other than by offering "retainers" in the way of raises, bonuses, and promotions to people regarded "key". But monetary bribes go only so far.

[evagrius]

cm;

"Contract employment" is a lovely way to avoid paying any benefits.

Counties have found another ingenious way- they hire people as "extra-help". These people are not permanent employees who have full benefits. Rather, they're considered to be "temporary employees". They do the same exact work under the same exact requirements with the same responsibilities but they have no benefits.

Theoretically, they're supposed to be only employed for six months or less but the county I worked in had employees as "extra-help" for periods of two years or more.

Statistically, they count as employed, of course. But there's something rotten when a two-tier employment system becomes standard practice.

[ken melvin]

The Cal State Universoties are notrious for hiring contract. Not sure anyone living remembers the last time SFSU hired a math professor.

[ninjaplease]

"Interesting argument, but suppose that we are modestly estimating job creation too conservatively, this is still not a robust job market. We are just not finding the wage and benefits increases we should be finding given so low an unemployment rate. I do not question the data collection or analysis, similarly with productivity numbers, but labor is not getting the share of national income I would expect for for low an unemployment rate. Monthly though look to the household survey second."

Is this from the same Beijing Anne who regularly posts on here? You forgot to include the other millions of people now included in our labor pool. I love your wording "We're just not finding," as if the benefits realy are there, but we just don't have the proper measuring tools to find them (I'm picturing an economist with a tire pressure gauge trying to measure square footage in a room.)

Well, now it's the Measuring Tools that's the problem you see, it's not our theories, heavens no, can't be that. Wake up, you drilled holes in our economic boat.

[Morgan]

cm:

"'Contract employment' is not employment, which is the whole point."

Well, they're employed in the usual sense, or statistical sense as evagrius put it. A member of my family has been a contract employee for more than a decade now, and I've always considered that person employed.

I assume that you mean something like "the terms of contract employment are not generally comparable to the 'standard' terms of employment, and to call them by the same label obscures that reality", which is consistent with evagrius's two-tier concept (evagrius, correct me if I'm wrong).

I'd write more, but I have to go. Cheers.

[evagrius]

I'm beginning to think we've entered a Phillip K. Dick novel.
I'm waiting for the androids to show up.

[cm]

Morgan: There is nothing wrong with contract jobs per se, some people prefer to have jobs with a bounded duration of involvement, and in a number of businesses/services it's the "natural" form of exchange.

What we mean when contrasting it to employment is that the concept/form of exchange is applied to jobs where the traditional and arguably natural arrangement is one of permanent employment, in line with the prevalent reality that organizations and businesses have continuity in time and space that makes it worthwhile and in fact required for being effective. And companies convert employee positions to contract positions precisely to rid themselves of the terms (benefits) and protections of employment. Contractors are "pre-fired" unless extended, whereas employees have to be terminated (at a cost).

It used to be the case that contractors can quote a rate allowing adequate benefits, FICA gross-up, and a "risk premium" compensating for the uncertainties of job hunting, but that requires leverage. Many people don't have that these days with the kind of Musical Chairs in labor markets. Based on sparse anecdotes, the deal appears to be often enough not-by-choice contractors making roughly the same, gross, as they used to make as employees (not necessarily in the same position), but without benefits, and paying 100% FICA.

[dissent]

Our situation:
1. adjusted for inflation, wages have fallen for 5 years.
2. the unemployment rate is low.
3. the per cent of population employed has fallen.

The first and 3rd indicate a slack labor market.
The second does not. But note: if this were a tight labor market, wages would not be falling.

[Morgan]

cm:

Thanks for replying, I think we're pretty close to agreement on the status of contract employees and the reasons for their proliferation. We differ somewhat on what the implications are.

I'm afraid I'm about done for the topic for the time being. I appreciate the relative civility of all the commenters here.

[cm]

Morgan, if you are reading -- I have not seen anything uncivil, or less than civil, but then mileage varies.

Some of the implications of contract conversion, and also increased employee churn, are loss of continuity, friction and loss of collective memory when "handing over the baton" (if there is a handover), and dumbing down of the process/business function to what can be handled with temp commodity or otherwise expendable labor. To be clear, the connotation not being that temp labor is underqualified, but that bringing in new and "marginally attached" people for a few months each can neither support reasonable evolution/adaptation of the business process, nor can it make good use of temp workers' abilities.

And of course, it has consequences for everybody's morale.

Morgan says...

cm:

I think the "employee churn" aspect is what causes the implications you've listed - but it seems virtually certain that churn will be higher among those firms with high levels of contract employees.

Also, I meant "relative" (in "relative civility") as in "relative to other blogs", not as a halfhanded compliment to the commenters on this one.