There are a lot of stories around today that discuss one angle or the other about what the country needs to do to improve the lot of labor.
First, there is nothing the government can do beyond creating a a framework that encourages people to take charge of their own situation and make a good decision. The government cannot provide wages to an additional 25 mm people or whatever the number is of unemployed and underemployed. So individuals need to decide what skills they have or need and where their target markets for employment are. They should take on debt for education prudently.
The one thing we know about individuals is that they are not trained to manage this well, nor do many of them have the ability to manage pensions or health care well on their own. It is unfortunate that retiree health care got tied up into defined benefit plans because defined benefit plans with universal health care would have taken care of a lot of this leaving the individual primarily responsible for only their own education and work skills.
Now one thing that politicians gloss over in discussing all this is the fact that workers in foreign countries cost less. The reason they cost less is that the cost of living in these foreign countries is lower and they have universal health care so that labor cost does not directly include the cost of health care. It is in the individual and corporate tax rates. The big problem for the U.S. is that we spend so much on defense (that the other countries do not) that we don't have the funds available to spend on health care.
Thomas Friedman was focused this a.m. on education and the need for it to improve. But we are not losing employment to countries with better education systems. Education will not return the jobs that we lost. Education will only allow workers to fill the jobs that are open because there are not educated people to fill them. That will take a period of time exceeding any one politician's necessary time line to be reelected. That is President Obama'a #1 reelection problem.
Beyond that, we need entrepreneurs to create jobs that workers can fill. But these entrepreneurs need to be cognizant that older workers offer advantages and should not be ruled out. I bet more than 50% of the long term unemployed are over 50 and are educated in a sound way. However, entrepreneurs can only create jobs if there is demand for their output. Demand is created by fiscal policy that creates spending which creates demand. Tax increases do not inhibit job creation supported by increased demand. No entrepreneur holds up filling a job because his marginal tax rate is 39% vs 35%. Increased demand increases his profit by at least 60% of each dollar profit if he can produce the output.
Relative competitiveness of labor is a function of each country's labor force's education, work habits, total cost of employment, and transportation costs from work place to market. That is too complicated for there to be any generalities and why capitalism is the best way to manage the process to produce the most efficient economy. Unfortunately, that story does not fit the political news cycle.
I tend to agree with those who argue that European countries ultimately rely on the U.S. to be their protector. That is why the U.S. spends so much on defense. We are protecting everyone. In turn, European countries pass on the savings to their people in the form of enhanced government benefits.
ReplyDeleteYou are 100% correct that business is myopic in not recognizing the potential value of 50+ year old hirees.