Comments on: Refuted economic doctrines #8: the superiority of flexible labor markets

By: Gary

Gary — Wed, 27 May 2009 19:01:15 +0000

I don’t see anything in this article that supports, let alone proves, you concluding assertion that “there is a sharper class divide, and less social mobility in the US than in the EU.” What justifies this conclusion?

By: lemuel pitkin

lemuel pitkin — Tue, 26 May 2009 15:09:59 +0000

(I forgot, you can’t use dashes to indicate lists. Oh well, I guess it’s still readable enough.)

By: lemuel pitkin

lemuel pitkin — Tue, 26 May 2009 15:08:01 +0000

Again, though, the question is why we are making the comparison. There is no single right way to measure unemployment in the abstract, it depends on the context. Are we asking

– whether aggregate demand is sufficient to employ all available labor, i.e. how far we are from “full employment”? – what fraction of the population are suffering the specific harms associated with involuntary unemployment? – how much slack in the labor market is required to keep the threat of job loss effective and in general to maintain the power of capital over labor (the real objective of those who run our economies)?

There’s no one real unemployment rate—depending which of these questions (or some other) is being asked, the right answer will vary.

By: Laurent GUERBY

Laurent GUERBY — Tue, 26 May 2009 14:25:50 +0000

#84 Thomas Jørgensen, I don’t think male 25-54 employment is affected much by the state of women employment, if it was given the massive rise of women E/P we’d see a widely different situation. As my data shows, the FR/USA discrepancy is even worse for women 25-54 than for male.

Also when doing time based comparison, like here:

http://fatknowledge.blogspot.com/2009/01/misleading-nature-of-unemployment.html

Male 25-54 is the only option otherwise you have to filter out in some way the rise of women E/P.

If you take employment/total population as quantity to maximise it means that you don’t want kids going to school and elders must work until they die. Not sure it’s a societal optimum :). That’s why 25-54 is good since it removes school and retirement from the picture and these categories don’t have an accepted optimal E/P whereas 25-54 optimal E/P is certainly close to 100%.

Of course you can play games and having measures redirecting jobs to 25-54 from 15-24 and 55+. Technically one can argue this is the case in France for 55+ with government sponsored layoff of elder employees, but with health care and other measures they usually don’t fall into unemployment or poverty.

I hope to have answered your concerns,

Sincerely,

Laurent

By: Thomas Jørgensen

Thomas Jørgensen — Tue, 26 May 2009 05:17:28 +0000

Honestly, measuring only male employment is absurd, because it renders any comparison between countries with differing degrees of gender equality and female labour market participation utterly meaningless. The labour of women does bloody well count. – Unemployment stats are not a very good measure to compare either, unless the countries involved measure this in the same way, which is rarely so. Employment as a share of total population is the only meaningful measure if you wish to compare the effect of diffrent ecomomic and social policies on labour market mobilisation, which is the entire point of this debate, no?

By: Ginger Yellow

Ginger Yellow — Mon, 25 May 2009 17:34:42 +0000

Steven, I don’t profess to have particularly well thought out opinions on the subject, but it’s a pretty mainstream idea (on the left, anyway), that directors of public companies should have explicit legal responsibilities broader than maximising shareholder value (which itself tends to be defined in pretty harmful ways). Basically, the principle is that society confers all sorts of benefits on oluntarily incorporated public companies s(including personhood, these days), so it should have social obligations in return.

By: StevenAttewell

StevenAttewell — Mon, 25 May 2009 17:13:24 +0000

mpowell: “This has a lot to do with why I think the incorporation model used in the US deserves to be reexamined by liberals.”

Interesting comment. Any suggestions?

Myself, I’ve always thought that Santa Clara could use some revisiting.

By: JoB

JoB — Mon, 25 May 2009 11:56:44 +0000

80: yes, the issue is especially clear in the case of banks (the Dutch finance minister now has the courage to explicitly call for deconsolidating banks, by the way) but it is imho lots more generic than that. Anyway, as you point out: we’ll not be able to change the system for banks without an associated change in ‘Wall Street’ which is, maybe, why currently the attitude there is of denial: nothing really happened, governments overreacted and back to the order of the day (lay-offs, & optimizations & consolidations)

By: Ginger Yellow

Ginger Yellow — Mon, 25 May 2009 11:37:38 +0000

79: This is an issue I’m looking at quite closely when it comes to banks. The implication of the regulations being proposed at the moment is a much lower return on capital for high street banks. Now I think that’s a good thing – high street banks shouldn’t be chasing risk or leverage in a way that produces high returns on capital. But, given the way “Wall Street” works, it does suggest they’re going to have more difficulty raising capital in future than riskier investment banks, which may create some perverse incentives at the macro level.

By: JoB

JoB — Mon, 25 May 2009 11:24:01 +0000

78: And another issue is that Wall Street compares across industry sectors forcing banks, food and car companies to converge on similar ratio’s, or else . In fact the mechanism of distributed ownership of increasingly big companies traded as if they all were in a primary business of them printing stocks is one of the largely non-discussed failures of the current system. The only real difference that Wall Street has allowed between companies is between established and new. The former have to generate cash by shedding employment and the latter are allowed to burn cash – up to the point they’re integrated in the former which is prior to the creation of substantial type employment. When ownership of companies is distributed and stock valuation an only measure to put all of them in front of the potential distributed owners, this must happen as far as I can see at least. A combination of issues: corporations that become too big, public ownership of the corporations via individual citizens de facto unfair to the citizens and concentration of a public power in non-elected officials (stock markets, Buffet’s, rating agencies, captains of industry and the odd politician elected to do something else than ensure the interests of private money).

By: mpowell

mpowell — Mon, 25 May 2009 10:51:16 +0000

77: Following up with this point, the idea that executives can afford to ignore the dictates of Wall Street is quite ill-informed. Some can get away with it, but it is not unreasonable to expect a stock value to change by as much as 50% downwards due to a negative Wall Street outlook. At that point, the P/E serves as a bottom but you are in serious buy out territory if outside investors see that the market attaches a negative valuation to your management team. As an executive, it is not just a problem with the board who are very interested in the share price, but also with outside vultures who will pursue higher margins. This has a lot to do with why I think the incorporation model used in the US deserves to be reexamined by liberals.

By: Ginger Yellow

Ginger Yellow — Mon, 25 May 2009 08:53:57 +0000

“Perhaps some managers were foolish enough to be bamboozled into such self destructive actions? I just can’t imagine it would be a widespread phenomena however.”

Have you looked at the US newspaper industry? It’s all over the place. The Chicago Tribune Co, for instance, was making perfectly decent (but not huge by newspaper industry standard) profits until Zell bought them out with massive amounts of debt and began slashing costs. Now it’s bankrupt. And this isn’t a freak occurrence. Look at the NYT Co, Philadelphia Newspapers or the Rocky Mountain News

By: Laurent GUERBY

Laurent GUERBY — Mon, 25 May 2009 08:38:05 +0000

#72, it’s not a “mistake” on my side, it’s more a “choice” :). When comparing country labour market you have a choice of indicators to use. Male 25-54 employment rate is my favourite for several reasons: – accross time and cultures, this category always has to work – leaves out end of studies and retirement, which are social choices, hard to say where the optimum is – leaves out women, also useful for time based comparison (not the case here though, see below). – alternative like unemployment are not objective measures since they are based on “effort” perception and not on a simple yes/no accounting observable like employment. And as shown by data unemployment even normalized is very dubious as shown by my examples.

#73, the issue is that the unemployment rate for this age/sex group should be about equal in France in the USA, but it show a 70% deviation! Doesn’t this show that unemployment measure is broken beyond repair? Why should it be wrong just for male 25-54 and not for other categories as well? I’m curious about your arguments or peer-reviewed papers on this topic.

As for women 25/54 in 2007 from OECD:
E/P
FR 76.1
USA 72.5

unemployment
FR 7.7
USA 3.8

So here we have clearly more women working in France (3.6 percentage point) relative to their population but unemployment is 102% higher in France! Even worse than for make 25-54.

Economists should get serious about the data they use at some point, don’t you think?

By: Martin Bento

Martin Bento — Mon, 25 May 2009 04:16:14 +0000

When we speak of unemployment in terms of its ill effect on the population, shouldn’t we factor in that being unemployed is a much greater burden where the welfare state is less generous? I would like to see an “unemployment misery index” that accounted for this, by looking not just at the fact of unemployment, but its effect on standard of living.

By: bilejones

bilejones — Sun, 24 May 2009 21:35:38 +0000

Comparing these unemployment figures is meaningless. The BLS numbers have been politically bastardized for decades, for example a nasty little shit called Reich reduced the sample of inner city (read black) people by 20 % . I’m sure that the political filth in Europe have their own set of lies.
See John William’s Shadowstats.com