By John Ballard
Home Depot had a couple of people giving away hot dogs today trying to drum up business. One was pushing air conditioning and heating installations, and the other screen porch additions and deck improvements. Both were friendly but neither was very pumped. I had the impression that both were working by the hour, dreaming about commissions but not getting any. These are tough times even for those at work.
"Not long ago," said one, "the appliance and floor covering departments were too busy to turn around. Not any more. Now they just stand around and look for something to do."
I believe it. I see it myself. When you see perfect Christmas displays going in before Halloween it means that retail sales are gasping for oxygen. It's been going on for several years, but it looks worse this year than usual. I heard one guy on the radio warn listeners not to play chicken this year with retailers, thinking that they would get something cheaper by waiting until the last minute. "Forget that, folks. Retailers are a lot smarter this year. They won't get stuck with a lot of unsold inventory. You better get what you want or get ready to do without."
I'm no expert. I'm just an old food business guy who spent the last forty years or so in or around American shopping malls. So what do I know?
Don't take my word for it. Listen to John Robb.
Problem is that the US middle class machine is broken. Not only have wages been stagnant/declining for three decades and costs rising at multiples of inflation -- from education to health to housing -- it's not producing new jobs at a rate that can absorb those that want to work. Worse, the entrepreneurial system is broken too. Creativity/entrepreneurial energy become a low cost slave of finance (banksters) due to an economic system now penalizes risk taking (bankruptcy reform legislation that is akin to the 19th Century) and a morally bankrupt/predatory system for company formation.
Good luck kids. My suggestion, move back in with your parents. Get involved in resilient community industries. When the dollar crumps (and it will), everything produced on the local level will be VERY competitive with those from the global system.
He points to a Business Week piece by Peter Coy that is anything but reassuring.
[?***Video sound has started. If you can't read and listen
at the same time scroll down and make it stop and come back and read.***?]
The Lost Generation
Bright, eager�and unwanted. While unemployment is ravaging just about every part of the global workforce, the most enduring harm is being done to young people who can't grab onto the first rung of the career ladder.
Affected are a range of young people, from high school dropouts, to college grads, to newly minted lawyers and MBAs across the developed world from Britain to Japan. One indication: In the U.S., the unemployment rate for 16- to 24-year-olds has climbed to more than 18%, from 13% a year ago.
For people just starting their careers, the damage may be deep and long-lasting, potentially creating a kind of "lost generation." Studies suggest that an extended period of youthful joblessness can significantly depress lifetime income as people get stuck in jobs that are beneath their capabilities, or come to be seen by employers as damaged goods.
Equally important, employers are likely to suffer from the scarring of a generation. The freshness and vitality young people bring to the workplace is missing. Tomorrow's would-be star employees are on the sidelines, deprived of experience and losing motivation. In Japan, which has been down this road since the early 1990s, workers who started their careers a decade or more ago and are now in their 30s account for 6 in 10 reported cases of depression, stress, and work-related mental disabilities, according to the Japan Productivity Center for Socio-Economic Development.
When today's unemployed finally do get jobs in the recovery, many may be dissatisfied to be slotted below people who worked all along�especially if the newcomers spent their downtime getting more education, says Richard Thompson, vice-president for talent development at Adecco Group North America, which employs more than 300,000 people in temporary positions. Says Thompson: "You're going to have multiple generations fighting for the jobs that are going to come back in the recovery."
That bad enough in the abstract but the casual reader is apt to overlook serious implications for the future. This is the line that jumps off the page at us Boomers ?...the baby boom generation is counting on a productive young workforce to help fund retirement and health care. Instead, young people risk getting tracked into jobs that don't pay as well, says Lisa B. Kahn of the Yale School of Management. That would mean lower tax payments for Social Security and Medicare?
There has been very little mention, if any, about where the money comes from to fund health care in America, whether it be Medicare, Medicaid or private insurance. The picture is messy because it comes from three different revenue streams.
Insurance premiums pay for some of health care, and that is divided between copays and what employees see as deductions from their earnings, but the employer's portion is as obscure to the average beneficiary as the expense of raw materials or shipping. That portion is never thought about by the average insured employee.
Medicare is paid for by two sources. Part A is revenue from payroll taxes (take a look at your check stub) and Part B is deducted from the Social Security checks of those who are not poor enough to be taken care of by Medicaid.
Medicaid is another word for welfare. That is federal money mostly from income taxes, but the states are expected to match it from their own sources (sales, property, estate or income taxes and/or a variety of fees).
The point here is that the lion's share of the money is collected from payroll taxes and with the advent of universal health care that amount is about to increase. (That's the reason for all the hand-wringing over "costs.") Thanks for income taxes and our friends at the Internal Revenue Service and the Federal Reserve and there is plenty of money for federal projects. And if there is a shortage all they have to do is print some more. (That's why all the hand-wringing about "deficits.")
Anyone following the economy for the last year has come across references to Japan's "lost decade." Coy's article makes this observation.
The sense of stasis in many Western countries is reminiscent of Japan, where talk of a lost generation has been around since as long ago as 1995. Some 3.1 million Japanese aged 25 to 34 work as temps or contract employees�up from 2 million 10 years ago, according to the Ministry of Internal Affairs. Many Japanese blame the young people themselves, saying they are spoiled, alienated "freeters"�a term meaning job-hopping part-timers. But economist Souichi Ohta of Nagoya University argues that a big part of the problem is Japanese employers, who value long experience at their companies�which newcomers by definition don't have.
Europe offers different lessons about what to avoid. In Spain, employers generally put older workers on long-term contracts that are hard to break. When demand slumps, they get rid of the younger workers, notes Alfredo Pastor, an economist at Spain's IESE Business School and former Spanish Secretary of State for the Economy. That's one reason Spain's unemployment rate for 16- to 24-year-olds is a sky-high 39%. The rate is 24% in France and 19% in Britain.
Economists in several countries have studied the damage such high unemployment can cause. Kahn of Yale found that graduating from college in a bad economy has a long-lasting negative effect on wages. For each percentage-point rise in the unemployment rate, those who graduated during the recession earned 6% to 7% less in their first year of employment than their more fortunate counterparts. Even 15 years out of school, the recession graduates earned 2.5% less than those who began working in more prosperous times.
I know of one college grad who entered the workforce several years ago who didn't even bother to send out many resumes. She got a job immediately with a "temp to perm" strategy. When I took early retirement a few years ago I did the same thing. And now that I am what I call post-retirement I am working through an agency at an hourly wage, having the luxury of working whenever I find it convenient and passing when it's not.
But underscoring the point made in the article about younger workers, I was invited to consider returning to full-time work a few weeks ago after having been gone for nearly two years, because a new job slot had been approved and I was among those they thought would be good candidates for the new position. Why? Because of my years of maturity and experience as well as the fact that I have an undergraduate degree which a few other candidates (who in my opinion would be excellent choices) did not have.
The comments thread is a study in both arrogance and frustration, arrogance on the part of those who have "made it" and frustration on the part of those who struggle. Plenty of recriminations about immigrants and references to various visa types.
This article, the author's remarks, and the comments thread is symptomatic of a growing challenge to the American economy.
My guess is that a few years from now the Big Health Care Debate will in retrospect look like a tempest in a teapot.
As I was putting together this post I had no idea that Ron was simultaneously writing another one that dovetails nicely with this one. A Ponzi scheme built on depleting resources (water, land, fossil fuels, and ultimately humans themselves) is reflected in an economy marked by an incredible contradiction: investments become more valuable while unemployment goes up. As for the human population, as John Robb pointed out, " what we now produce are merely indentured servants."
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