An Analysis Of Jobs - Past, Present, & Future

"Sadly, when you believe the government is the solution to America's economic problems. . . then you're forced to talk about things like minimum wage instead of the maximum potential for Kentucky women." - KY Senator Mitch McConnell responding to Democrat Senate opponent Alison Lundergan Grimes who has criticized McConnell for opposing proposed federal minimum wage increases.

 

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Over the past five years RTE has posted one labor report after another to illustrate that BO's administration has not provided one point to help the economy.  Of course the only thing we really need is for the government to get out of the way & not be a hindrance.  The above two graphs illustrate the points: 1) the graph on the left shows how the unemployment rate – employment-population ratio tracked each other until 2009 & 2) the graph on the right shows how the unemployment rate (U3) tracks the broadest unemployment measure U6 including in 2009 when both rose dramatically. 

 

It has been hard to find a truly accurate measure of the jobs condition in America since BO came into office – we just know it is terrible.  U6 includes the total unemployed (U3), plus all persons marginally attached to the labor force including discouraged workers who have stopped looking for work, plus the millions working part time who want full time employment.  I have recommended a U7 category.  My proposed U7 would include all of U6 plus those employed full time who make a fraction of their former pay.  U6 & U7 give the most complete picture of those relying on their wealth spend down to live on which is an excellent measure of the unhealthiness & misery of today's job market.

 

Far too many Americans have seen their lives ruined in the last five years; but the stage was set years before with such things as the Community Reinvestment Act of 1977 that was not rigorously enforced until the 1990s & early 2000s when the government required banks to make loans to unqualified borrowers as per the terms of the original act.  People in their 50s & 60s will never work again @ a satisfactory level to make a living & savers in their 70s, 80s, & older have seen their CD interest income decline to an almost nonexistent level. 

 

But the poor conditions of today's labor picture described above only gets worse when we look into the future - if we make no changes.

 

At the beginning of the year The Economist presented an engineering report of a study of 702 different detailed occupations in order to estimate the susceptibility of these occupations being eliminated by computerisation – i.e., job automation by means of computer controlled equipment.  The study resulted in an estimate that 47% of total U.S. employment is @ risk of being automated during the next twenty years & that occupations with low incomes & low education requirements are the most probable of being eliminated.

 

The conclusions of the engineering report were confirmed by the results of a recent Business Roundtable survey in which nearly half of the CEOs said they planned to increase capital spending on automation & only 37% said they expect to increase hiring.  Forty-four percent see no increase in hiring in the next six months.

 

The above past & present conditions illustrate the hardship people over 50 already have making ends meet & the conclusions of the aforementioned engineering report shows the impracticality for many in their 40s receiving the costly technological retraining necessary to maintain employment.  In essence, if you are not already properly trained when you are in your 40s it will be too late to start.  I knew a man 40 years ago who started retraining for a new career when he was in his mid 40s – he stopped when he realized he would be 55 when his studies were completed & thought no one would hire him then.

 

Please let me know if you would like to read the entire engineering report & I will send it to you.

 

ObamaCare's impact on future employment has also been a topic of concern for sometime.

 

The nonpartisan Congressional Budget Office (CBO) added to the dismal employment picture when in February they released a report that concluded ObamaCare would reduce the number of jobs in America by 2.5 million full time equivalent jobs in the next ten years – with 2 million of these full time job equivalents reduced by 2017.  To be clear - the CBO report said it expected total employment and compensation in the whole economy to increase over the next 10 years but "that increase will be smaller than it would have been in the absence of" ObamaCare.  The reduction in work will occur because people voluntarily choose more leisure time in order to maximize government-provided subsidies that are an integral part of ObamaCare.   The CBO knows that people will come to realize the less they earn, the higher the government subsidy & the more they earn, the lower the subsidy, if any.

 

Members of BO's economic team spun this reduction in work as a good thing because people would have the leisure time to promote things they preferred to do like write poetry or paint (& I don't mean houses) – they no longer would be tied to a job just to hold on to their healthcare insurance because everyone would have ObamaCare.  At the start BO's messengers seemed embarrassed presenting this foolishness but after a very few days of repeating it often enough they looked like they believed losing the equivalent of 2.5 million jobs was indeed a positive economic development for America. 

 

This work reduction does not promote the long term economic health of the country – right in line with BO's plans.

 

The ObamaCare employer mandate kicks in for employers with over 50 full-time equivalent (FTE) employees.  Once a business exceeds 50 FTE employees they are required to provide healthcare insurance for their employees or pay a fine (known as the "Employer Shared Responsibility Payment") thereby incentivizing employers to keep their FTE employees below 50.  FTE equals the total number of full-time employees plus the combined number of part-time employees hours divided by thirty – the number of hours per week considered full time under ObamaCare.

 

It is obvious that the employer mandate could not have a positive effect on employment but a careful analysis is required to see who will be affected. 

 

Employers look @ fines much like a stock investor looks @ dividends & taxes – they are considerations but the overwhelming driving force of their endeavors is the growth & commensurate appreciation of the business or stock.

 

Accordingly, employers with many high paid employees will find the fine a negative value & will start to provide healthcare insurance if they currently don't.  These employers can reduce cash wages by the amounts of the premiums & thus not increase their total cost of labor – businesses look @ the total compensation (cash wages & benefits) of their employees & those businesses who already provide healthcare insurance to their employees have taken this balance into account – as they do the cost of every benefit.

 

Employers of high paid workers are also not likely to play games by turning such workers into part timers to avoid the fine.  Such a strategy would discount the value their newly created part-time workers & future part-time hires have for healthcare insurance.  To maintain a sufficient number of part-time employees cash wages would have to be increased to amounts higher than the premiums that are trying to be avoided in the first place – part timers needing to buy healthcare insurance from their cash wages would pay higher premiums in the individual markets than the employer would have paid in the business-group market which also is favorably treated by the income tax system.  This analysis does not include higher management costs of supervising more employees or the cost of turnover & in turn finding more skilled workers that command the high wages.

 

It is employers with many low paid workers, who don't have the flexibility to balance the increased labor cost of healthcare insurance premiums with lowering employee cash wages below the statutory minimum wage whose employees will feel the effects of the employer mandate.  These are the employers who are much more likely to reduce hours to below the FTE threshold of ObamaCare rather than employers with many high paid workers.  It is low paid employees who will be affected by the employer mandate either by having their hours reduced to part time status or losing their jobs altogether.

 

Couple the above long term employment impediments with Democrats pushing increased minimum wage laws, extensions of unemployment benefits for the long term unemployed, & the latest attack on entrepreneurship of compelling employers to pay managers hourly overtime pay – thereby trying to stifle human potential & discouraging young people from going into management & the commensurate higher pay that follows – & you can see the tremendous sway toward the temporary relief that government programs offer the hopeless & deteriorating employment market that BO has purposely induced.

 

Now people other than statists should be way beyond asking why we put up with this government manipulation of our lives or what kind of country do we want?  What you see is the country the majority of Americans want.  Democrats have won the popular vote in five of the last six presidential elections, separate studies by the CBO & Tax Foundation each conclude that the vast majority of Americans receive more back from government in spending than they pay in taxes, & the graph below indicates that 67% of voters are more likely to prefer congressional candidates who bring home the pork than candidates who advocate spending cuts.

 

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Although America has a terrible current case of job market misery & deterioration government opposition & resistance to the creative destruction needed to move a society forward is nothing new to the history of the world.  Except in America, from the time of our founding to the Civil War, government leaders have been more apt to trust themselves & prefer the status quo than to encourage human ingenuity & the inevitable increases in the standard of living that progress brings.  Our current situation is the only one I can think of where the President is intentionally working against the best interests of his proclaimed country – BO obviously wants America to fall to the level of a semi-failing European state for starters. While I disagreed with most of them on most points - from FDR to GW Bush I never had the feeling any President was intentionally undermining or not trying his hardest for America.

 

To break out of the government dependent mindset that is log jamming employment opportunities people will have to dare great enough to have the faith & passion to believe in themselves once again – to realize that they make out of life only what they strive for - to see the importance of entrepreneurs & innovation for economic growth & accordingly an enhanced future for themselves far superior to being on the government dole.  We have to return America to the liberty to abundance stage of our history where people exercise individuality and self responsibility that lets a free enterprise capitalistic system thrive. 

 

But the worst part of a mixed economy (part capitalist & part socialist) like America has been for years is that it cheats people out of reaching the potential in life they were born to live by nature of their humanity.  They will never experience the thrill & triumph of high achievement - the highs of life - so that to reverse paraphrase TR - everyone's place will always be with those cold & timid souls who know neither victory nor defeat.  As such the true cost to any socialist society, namely the opportunity cost, is more than just enormous - it is literally unimaginable.

 

To have any chance to return to the excellence of the prosperity of our founding we have to throw off the collectivist veil that has been put upon us & once again "secure the Blessings of Liberty to ourselves & our posterity" that allow us to cherish individual rights that are the bedrock of America as defined in our Constitution.