Right now, unemployment remains at over 8% in the UK while real wages are lower than they were 7 years ago and are continuing to fall. Yes, you read that correctly. Which immediately leads one to ask: on this explanation of a recession as expounded by Karl, how much further do real wages have to fall to eliminate disequilibrium unemployment?More from Richard Williamson on the UK (Marginal Revolution)
…I am finding the aggregate demand narrative an increasingly unsatisfying explanation of all that is happening in the British economy. Supply-side suffering is suffering too, and I think we need to take very seriously the chance that it is happening.
The International Labor Office (ILO) has just released a sobering report on the growing crisis in world labor markets. We began the year with 1.1billion people – one out of every three people in the global labor force – either unemployed or among the 900 million working poor who earn less than US$2 a day. On top of the existing glut of 200 million unemployed, global labor markets will see an average of 40 million new entrants each year. That means that an additional 400 million jobs will need to be created over the next decade in order to prevent a further increase in unemployment. To employ everyone who wants to work, the world needs 600 million new jobs.The World Needs 600 Million New Jobs (New Economic Perspectives)
Note - in case Thomas Friedman is reading this, a back-of-the envelope calculation reveals that based on the number of employees at Google, Twitter and Facebook, all we have to do is create another 21,126 of them and global unemployment is solved (assuming no further job losses or population growth, of course).*
The number of unemployed people reached 5,639,500 at the end of March, with the unemployment rate hitting 24.4%, the national statistics agency said. The figures came hours after rating agency Standard & Poor's downgraded Spanish sovereign debt. Official figures due out on Monday are expected to confirm that Spain has fallen back into recession.Spanish unemployment hits record 5.64 million (BBC)
Earlier this week, the Bank of Spain said the economy contracted by 0.4% in first three months of this year, after shrinking by 0.3% in the final quarter of last year. Other figures released on Friday showed that Spanish retail sales were down 3.7% in March from the same point a year ago, the 21st month in row sales have fallen.
In the first three months of the year, 365,900 people in Spain lost their jobs. The country has the highest unemployment rate in the European Union and it is expected to rise further this year. The rate has risen sharply since April 2007, when it stood at 7.9%
The new government has announced reforms to the labour market, including cutting back on severance pay and restricting inflation-linked salary increases, that it hopes will ease the problem. These measures have angered unions, which have organised widespread general strikes in protest. The government has also introduced drastic spending cuts designed to reduce its debt levels and meet deficit targets agreed with the European Union. These cuts are contributing to Spain's economic contraction.
"In Spain today, a cycle similar to Greece is starting to develop," said HSBC chief economist Stephen King. "The recession is so deep that when you take one step forward on austerity, it takes you two steps back."
The interest rate, or yield, on Spanish government bonds traded in the secondary market rose following the release of the unemployment figures and the S&P downgrade. S&P predicts the Spanish economy will shrink by 1.5% this year, having previously forecast 0.3% growth. However, the agency did make a number of positive comments about the government's attempts to bolster Spain's economy.
"We believe that the new government has been front-loading and implementing a comprehensive set of structural reforms, which should support economic growth over the longer term," S&P said.
"In particular, authorities have implemented a comprehensive reform of the Spanish labour market, which we believe could significantly reduce many of the existing structural rigidities and improve the flexibility in wage setting."
Note the bolded parts - to translate, in order to placate the 'bond markets' (i.e. banks and the 1 percent), protections for workers are being stripped away. So 'austerity' is actually going exactly according to plan. Only someone hopelessly naive would believe it has anything to do with fixing the economy for ordinary people. And see this: Spain Is Still Awaiting The Payoff From Austerity (NYT)
Wasting time on the internet recently I came upon a nasty statistic. In the next 10 years, there will be 1.2bn young people looking for work and only 300m jobs to go around. Next to this stark stat was an invitation to write an essay on what you would do to solve the problem. My essay is quite short and can be summarised in one word.Should job-hogging over-50s all resign? (BBC)
The same is true for almost all professions. The young can't advance because everywhere they find my complacent generation is in situ. Thus the only way of solving the problem is to make everyone of a certain age, say over 50, walk the plank. The choice boils down to whether it's better for people to have a decade at the beginning or at the end of their careers where they are demoralised and underemployed. The answer is easy: surely it is better to be more active at the beginning.
To have people idle at a time when they are full of energy and their grey-cell count is at a maximum is a shocking waste. Shifting from old to young would bring down wages and would also solve the executive pay problem in one shot. Almost all the people earning grotesque amounts are over 50 - getting rid of them would mean CEO pay would come thumping down.
I include this mainly for the statistic. Of course he's not serious. Hardly anyone over fifty can afford to not work, and that problem will only get worse, crowding out younger workers. I'm sure the writer is aware of this. In fact, pensions are being slashed and younger workers cannot put enough away to retire due to decreasing salaries, even if stocks were going up. The flip side is older workers who are involuntarily laid off to be replaced with cheaper younger workers. Many of these will no longer work again, whether they can afford to or not. So both young and old are affected. Welcome to labor market 'flexibility' (see above). Who wins in this scenario?
Of course if older workers were able to retire and workers overall worked less hours, unemployment would be ameliorated. We have older workers who've worked a longtime and want to retire but can't, workers who are swamped with too much to do, and workers looking for jobs who can't find them. Of course, things like this will never happen because all of this benefits the right people.
On a related note: My Faith-Based Retirement (Joe Nocera, NYT)
Remember, all throughout the decade of the Great Depression the leaders kept insisting over and over that a return to "normal" was imminent, and that prosperity was right around the corner, as soon as people had suffered enough. Of course, today they have the vast propaganda organ of the media to reinforce that message and squelch any talk of alternatives.
* My Numbers:
Facebook = 3,600
Twitter = 400
Google = 24,400
Total = 28,400
Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the past two years, but nearly three-fourths of those jobs were overseas, according to a Wall Street Journal analysis.
Those companies, which include Wal-Mart Stores Inc., International Paper Co., Honeywell International Inc. and United Parcel Service Inc., boosted their employment at home by 3.1%, or 113,000 jobs, between 2009 and 2011, the same rate of increase as the nation's other employers. But they also added more than 333,000 jobs in their far-flung—and faster-growing— foreign operations.
U.S. Firms Add Jobs, but Mostly Overseas (WSJ - the rest is behind the paywall)