Interesting thoughts on the Unemployment news

[kcjenkins]

“It wasn’t Bush, it wasn’t greedy corporations, or free trade, or history’s most over-predicted recession. It was not the oil companies, income inequality, or the excesses of cowboy capitalism. None of these things caused the unemployment rate to jump a half a percentage point in one month.

Ask yourself a few questions: Why did unemployment surge at a time when unemployment compensation claims are historically low? More to the point, how could unemployment spike this much without a coinciding spike in corporate lay-offs? The answer to all of these questions is same: because very few people lost jobs last month. This huge jump in the size of the unemployed comes from new entrants to the economy—hundreds of thousands of them. In short, well over 600,000 people who were not job seekers in April became job seekers in May. And who starts looking for work at the end of Spring?

That’s right—students. Hundreds of thousands of students are looking for work right now, and they’re not finding it. Congress is to blame. Last year Congress ... passed the Fair Minimum Wage Act of 2007, which started a phased hike of the minimum wage from $5.15 an hour to $7.25. Free market economists warned them that this would increase unemployment—that rapid increases in unemployment compensation hit teens and minorities the hardest. But ...they.... saddled America’s pizza parlors, municipal swimming pools, house painting businesses and lawn mowing services with a huge cost increase. Now, we see the perfectly logical outcome of wage controls, rising unemployment among the most economically vulnerable. Jerry Bowyer

...edited to take out some slightly inflammatory and unnecessary political language

[Amy (biznester)]

First thought about this: I think that is a fair conclusion to make.

Second thought: I'll continue to monitor it and hope there's not more devestating adjustments to implimenting the min-wage increase. BUT, based on this, my conclusion is that if this is the blowback of the increase, it's a minutely small price to pay for raising the wage for millions of working Americans (including struggling college students trying to work jobs to earn money to pay horrendous tuition costs, whether it be on their own or helping their parents pay for it).

Always hate to diss and cuss with ya, KC, cuz you know I luvs ya, but heck, we do have a long history of being on different political sides, winkwink.

And in the interest of full disclosure, I'm a centrist bluedog Dem who supported Hillary because she was the more centrist candidate, and now I guess I'm a swing voter who will decide in Nov on the issues, not the personalities or movements...

[BulldogTom]

HIllary....a centerist? What are you smoking Amy, because I want some of that.

There is another aspect to this that is not the minimum wage, it is that half of the kids coming out of high school are not prepared to work in a burger joint or other entry level job. They don't have the minimum level of skill to earn the minimum level of wages. Those that do have the skills to compete are moving to the next level of education, not looking for entry level jobs.

I would not pay $8 (CA minimum wage) per hour to a kid who can't fill out an application properly.

Tom

Lodi, CA

[Amy (biznester)]

Being that you are from Cali, Tom, it would be you who has more access to stuff to smoke, LOL.

Hillary was more centrist in comparison to Obama, hello...

Also, I see quite a lot of college students working in these entry-level jobs. Most kids go on to college nowadays. The just-as-important issue here is that this may be reflecting a strategy for paying the tuition costs. The student loan market just went nuts, remember? Things are looking even bleaker for that age demographic...

[zeke]

"a phased hike of the minimum wage from $5.15 an hour to $7.25. Free market economists warned them that this would increase unemployment—that rapid increases in unemployment compensation hit teens and minorities the hardest"

While I agree that The Fair Minimum Wage Act of 2007 increases payroll expenses and may well increase unemployment, I do not as readily agree that an increase in the minimum wage per se equates to a "rapid increase in unimployment compensation".

Zeke

[BulldogTom]

Being that you are from Cali, Tom, it would be you who has more access to stuff to smoke, LOL.

Hillary was more centrist in comparison to Obama, hello...

Also, I see quite a lot of college students working in these entry-level jobs. Most kids go on to college nowadays. The just-as-important issue here is that this may be reflecting a strategy for paying the tuition costs. The student loan market just went nuts, remember? Things are looking even bleaker for that age demographic...

I am sure we have better agriculture products out here, but I am talking about Hillary.

This is the woman who said everything anyone said negative about her husband was a "...vast right wing conspiracy". Osama, oops, I mean Obama has a yellow spine made of jelly, but he is trying to reach out and be civil to the right, even if he is a lefty on most issues. But Billary is the queen of social medicine. It don't get much more left than that.

[kcjenkins]

Amy, I actually do not have any disagreement with you on the wage, as such, as long as we are honest on the fact that it is a job killer at the low end. And since that low end is where the job ladder starts, it means that the kids have to be able to jump higher to reach the first rung. Which is what Tom is talking about.

What most places even here in rural AR were paying for beginning jobs was around $6.5 to $7, without the new law. BUT, that also means that the worker needs to prove quickly that he/she is WORTH that much. And it means that some jobs simply disappear. Because they are not worth paying that much to get them done.

Or, at that price, it makes more sense to buy a machine that can do the job, with none of the related problems that workers have, no requests for time off at bad times, because they just can not miss __________[fill in the blank] or even worse, just not showing up for work, without even a request for time off. No need to pay overtime, and no need to deal with the ever-present new job problem of employees use of their personal cell phones on the job!!!!!

Thank you, also, Amy, for making this a real discussion about the issue, not a political issue so much as an economic one. I edited the original quote [twice] to take out as much of that as possible, while keeping the point. I don't think it is really either party, I think both of them are using the min wage as a political point, and personally, I don't believe it is any of the government's business what I agree to work for, or to pay someone. It should be between worker and employer, and if they both agree, especially in these days of low unemployment, when there are always alternative jobs to go to, that should be none of the government's business, IMO.

But every new law has consequences, and I do think it is useful to look at the actual consequences of changing laws, and debate honestly and openly whether the actual outcome is a good one or a bad one. Or whether, since most outcomes are 'mixed', part good and part bad, whether it accomplished it's goal. If we only pretend that it is all good or all bad, we don't really learn much. Like many laws passed for good reasons that had bad, or unexpected, consequences, if we can not face those fairly, and weigh them against each other, we will keep on making the same mistakes over and over.

I personally enjoy such debates on groups like this, made up of tax professionals that I respect, because even when we disagree, we usually learn from each other's experience and different point of view. Unlike political boards, which tend to be full of rabid partisans who sometimes seem to live in a very different world than the one I know, a group of tax professionals tends to be much more realistic and practical. Even those I often disagree with are usually able to make some valid points that either help me modify my position, or at least strengthen my reasoning behind my point. And while there may be some sarcasm thrown around from time to time, it's usually done without insults and personal attacks, which makes it OK.

[Jack from Ohio]

I am a bit confused how college/high school kids can affect unemployment claims.

1) Unemployment claims are filed when a person who IS working, is NO LONGER working. If the students have been in school, the best they could have been was part-time employed. If a student leaves a job to go back home for the summer, he/she is ineligible for unemployment benefits.

2) I live in a small county seat town in Ohio. Population 12,000 - 14,000 depending on whose numbers you believe. The actual "market driven" minimum wage has been over $7.00/hr for over 2 years. All part time employers have to pay that to attract workers and they still have trouble staffing entry level and fast food positions. Therefore the Federal legislation has changed NOTHING in my town or county.

3) I believe most of the country fits the same scenario. I saw a help wanted poster in the window at a White Castle in Dayton Ohio offering $9.00 to start and signing bonuses.

4) Most of the people applying for these jobs here in my town are NOT worth $7.00/hr. Even though they are "High School Graduates (?)"They cannot speak properly, poor grammar, cannot count, much less make change, and have a work ethic of... "Well if I don't keep a job, mom and dad will support me." Sad but too true of our teenagers today.

[jainen]

>>a huge cost increase<<

The minimum wage last month was only 60 cents more than it was ten years ago, so the "huge increase" is only about 10% of the pizza parlor's labor costs. Don't you think the price of cheese went up 10% over the last decade?

If the pizza parlor isn't hiring it's because they don't have the CUSTOMERS. Are people not buying pizza because the delivery guy gets two and half bucks more on a 4-hour shift? No, they are cutting back because their own wage scale, not just the minimum, is so far behind the inflation curve. That fact is the opposite of Bowyer's rant, and a big part of the reasoning behind the Bush administration's stimulus rebate. Consumers can't buy stuff if they don't have the money.

What Bowyer characterizes as a seasonal fluctuation last month was the worst employment news in a quarter century. It wasn't caused by the pizza delivery guy, or the kids on summer break.

[jainen]

>>"Well if I don't keep a job, mom and dad will support me."<<

I don't know how it is with Ohio kids, but the California version goes like this. "If you don't pay me enough to cover basic rent and transportation, then I can't afford to live on my own and I'm stuck with Mom and Dad. So as long as I'm stuck with them anyway, I might as well look for a better job." Our state minimum wage is $8, but my town has a "living wage" law at more than $12.

[Jack from Ohio]

I don't know how it is with Ohio kids, but the California version goes like this. "If you don't pay me enough to cover basic rent and transportation, then I can't afford to live on my own and I'm stuck with Mom and Dad." Our state minimum wage is $8, but my town has a "living wage" law at more than $12.

If I were hiring someone and they said that to me. My next question would be... "Show me why YOU are worth more than $8/hr to me." When I first went into the workforce, I had 2 minimum wage part-time jobs so I could have the money I needed. I then went to technical college to obtain the skills to learn how to be worth more to employers. Worked several years earning just above entry level, then after about 5 years, I started earning much better. And more steps like that over the last 35 years.

There is no Constitutional Amendment guaranteeing every citizen the right to a single job that will provide them and their family a middle class living. IMNSHO The influence of labor unions providing inflated pay for non-skilled jobs, whose only requirement are a body temp of 98 degrees, has ruined the work ethic of the last 2 generations of young people.

[jainen]

>>"Show me why YOU are worth more than $8/hr to me."<<

This has nothing to do with how much someone is "worth." It's simple arithmetic. Even if you could find a full-time schedule, minimum wage will only get you $1400 per month--not enough to pay for a studio apartment with utilities. How much rent did you pay in 1968? Not more than fifty bucks, so even though wages have tripled since then, housing has twenty-upled. Not labor unions or work ethic. Just simple arithmetic.

[BulldogTom]

<<< housing has twenty-upled. >>>

That is a new word on me. I would say he made it up, but knowing Jainen, he would have a cite for it.

Tom

Lodi, CA

[Kea]

IMNSHO The influence of labor unions providing inflated pay for non-skilled jobs, whose only requirement are a body temp of 98 degrees, has ruined the work ethic of the last 2 generations of young people.

Unions have their good points and bad. I'll leave that argument to others. However I am bothered by the opinion that union workers are "non-skilled." Many of these jobs may not require a college education, but they do require skill. My husband is a very hard working body shop mechanic. He has belonged to the union off and on - because sometimes they are good and sometimes not. But I know that I (even with my college education) do not have the skills to do his job. When your car is damaged, do you take it to a repair shop or take it to the kid down the street? I bet that kid's not in a union and you could get a much better price.

And, even for those with the skill to do the work, how many are willing to work in an un-air-conditioned building in Texas in the summer without being paid a reasonable amount? In my observation, many union workers work much harder than those of us working in offices -- it's just a different kind of work. I don't want my husband's job, and he doesn't want mine.

[Mel in Hawaii]

I don't really agree with any of the argument. What about the large number of people who have taken on a second job to pay off their now reset mortgage payment? They have filled jobs that other people would have been able to take which would have allowed them not to be considered 'unemployed'. It's pretty bad when I know people who were in my office with Master's degrees, taking jobs on the side that literally a HS graduate could get. When money gets tight, you do what you have to do, and that usually means work more and spend less. Unfortunately the spending less causes there to be less jobs available, which makes it hard to work more. While I am not advocating going on a spending spree, it seems as if the economy may need it.

[Jack from Ohio]

Unions have their good points and bad. I'll leave that argument to others. However I am bothered by the opinion that union workers are "non-skilled." Many of these jobs may not require a college education, but they do require skill. My husband is a very hard working body shop mechanic. He has belonged to the union off and on - because sometimes they are good and sometimes not. But I know that I (even with my college education) do not have the skills to do his job. When your car is damaged, do you take it to a repair shop or take it to the kid down the street? I bet that kid's not in a union and you could get a much better price.

And, even for those with the skill to do the work, how many are willing to work in an un-air-conditioned building in Texas in the summer without being paid a reasonable amount? In my observation, many union workers work much harder than those of us working in offices -- it's just a different kind of work. I don't want my husband's job, and he doesn't want mine.

I live about 40 miles from the Moraine Assembly Plant for GM. It WILL be closed by 2010. At the firm I work at, we do MANY returns for GM workers. The jobs that are going away, are assembly plant jobs. 90% NON-SKILLED!!! Many of the workers there have earned wages FAR in excess of what the jobs are worth for many years. Now, when life throws them a curve, they have NO skills or training to make them valuable for any other kind of job. I hear them crying about not being able to live. One lady worked there 25 years and had NO savings, and she was single with NO children.

Your husband has a SKILLED job. He does not fit the labor union model. I rose to Service Manager at a Chrylser-Dodge-Jeep dealership. It tooke me 25 years to be qualified enough to write my own ticket at that time. 30 years total in the industry. I was a Certified Master Technician after about 8 years of working. I EARNED the right to ask for high pay. Tech School, several years just above entry level, tools worth $20,000 and countless hours of studying and training to keep up.

People would say I am lucky. No, I studied in High School instead of partying. I paid my own way through tech school (parents could not help), I put in my years learning, and I EARNED the right to command good pay at my job. Several years I worked full time as a technician, and also had a part time job to supplement so I could pay my own way.

The young person's mentality today is "I deserve the same income as the person with 25+ years of work history, just because...."

Done ranting now. This afternoon I listened to another GM worker crying about not being able to live, and how after 17 years of household income of $100K from him and his wife, they will not be able to live now.

[Kea]

I'm not sure why he doesn't fit the labor union model. Labor unions represent a lot of skilled jobs - construction, plumbing, mechanics, police, fire fighters and many others. In the case you are discussing, I'll take your word that the jobs are unskilled, although I hesitate to make judgments of other peoples' jobs.

I do agree with you the tragedy of people making a fair sum of money and not saving any of it. But I've seen that with people in all types of jobs - not just union jobs. I've also seen people who have modest incomes and now have large savings accounts. There can be many reasons for this. Some are in their control (how many cars did they buy?) and some are not (large medical bills).

[kcjenkins]

Jack is right about the situation he's talking about. The unions were a good thing, at the beginning. But like many good things, they became something else over time. They started out as people banding together to get fair treatment. But over time, they raised seniority to the highest good, and protected workers who were not doing the job, if they had that seniority. And they used strikes not just to get 'fair' pay and benefits, but to get pay far in excess of the value of their 'skills'. When someone who's entire 'skill' is to use a power drill to attach screws to a frame, gets paid $25/hr plus the best medical benefits in the world, plus unusually high retirement benefits, something is wrong. It's not at all surprising that when he loses his job because the company can not sell the cars that are overpriced to pay those inflated wages, he can not find another job paying nearly as well.

As for the savings, I've seen people who made minimum wage their entire life, and when they retired they had a paid for home and cars, and savings in the bank. And I've seen people who made over $120K and everything they own has a debt behind it, and they are maxed out on their high limit credit cards. It's the choice of lifestyle that makes the difference, not just the amount of pay they earned.

The big problem with many kids today is that they expect that they should be able to afford, right out of school, the same lifestyle their parents have, after a lifetime of working to earn it. And that their parents should pay for that school, while they should be able to afford fun trips for spring break, a nice car, clothes, and lots of 'toys' like iPhones, XBoxes, Wii, laptop and iPod, etc. And then, when they finish, no matter how close they scrap by, they should get a starting salary that will enable them to a nice apartment to go with the nice new car. And they can't understand why that attitude turns off employers who interview them.

[BulldogTom]

I don't have a problem with trade union members. They work hard, mostly. Electricians, plumbers, masons, etc. are all very skilled.

My problem is with the way the unions buy influence to get jobs. I work for a company that competes with unions on prevailing wage jobs in CA. We are a merit shop. Prevailing wage in CA means union scales. They bought the politicians who make the rules for labor rates on public jobs. Want to know why the roads suck in CA? Because that sign holder telling you to slow down is not only making $20/hr, they are getting $8 in retirement pay and $4 in healthcare pay. Journeymen are getting upwards of 35/hr plus ret plus health. Apprentices are getting $18 plus plus at the first level of training.

It is no wonder the state is broke, they pay too much for these jobs.

Whenever we bid a prevailing wage job, the cost is at a minimum 40% more than a private wage job, and usually more like 60% higher.

Now the unions are using environmental laws to sue private works developers to force them into using union only labor. They call these agreements PLA's, or Private Labor Agreements. It works like this: I plan to build a huge hotel in the old Sacramento railyard (an area of Sacramento that is being redeveloped). I put out the project to bid. The unions file an environmental lawsuit and threaten to hold up my project in court until I sign the PLA. If I agree, the lawsuit is dropped. This is all with the blessing of the Democratic controlled legislature in CA, that gets a big chunk of union cash for their campaigns.

Back to unemployment - anyone could see this economic downturn coming, and the increase in unemployment, but it isn't as bad as the media portrays it. The rate did jump, but 95% of Americans are working. And economist will tell you that pushing unemployment below 3% is virtually impossible and damaging to the economy (wage price spirals when labor is too tight). There are jobs available today, but not many that are going to pay a living wage to trully unskilled workers. I can hire 20 people at our company right now. But they must have good driving records, pass a drug test, have a high school deploma, and be able to work hard. The job is not difficult, and we offer great training and OK benefits including mostly paid employee health and partially paid dependent health and 401k with a 50% match. Because of incentive pay, some of the employees make more than I do in some weeks. We can't get enough qualified people to come in. The first 3 months are hard at our company, but if you make it, you can make a good living. Most new hires want to get that wage immediately, not earn it.

Stepping off my soapbox now.

Tom

Lodi, CA

[Randall]

We're digging the grave of capitalism with a shovel called DEBT. And its twin, democracy, will be buried with it.

[Jack from Ohio]

There are 2 distinct and different types of unions. I define a labor union as a union that can be joined simply by working for a company. These cause wages to be inflated above what the jobs are truly worth.

The second one is a trade union. This is a union that can only be joined when you have a special skill or trade. Plumbers, steamfitters, steel workers, electricians, carpenters, etc. In order to even be a member, you must have shown your willingness to work and learn. Most apprenticeships are 2-4 years. These trade unions allow employers better access to the skilled tradesmen they need.

Trust me, 90% of the jobs in the GM Assembly and parts plants in the SW Ohio area are jobs that any semi-intelligent person can learn in 2 weeks or less, and require the huge investment of a pair of safety boots, and a lunch box.

One of the big factors in these latest plant closings was the strike at the axle plant that shut down so many others in order to "keep our wages at a liveable level." Mission accomplished, now several hundred of your other union collegues are unemployed.

Back off my soapbox again....

[jainen]

>>These cause wages to be inflated above what the jobs are truly worth.<<

Your conclusion makes no sense. It is not possible for a company to pay more than a job is worth. The company must respond to ALL market forces, including it's own industry associations as well as those of its suppliers. Workers have just as much right to set wage levels as vendors have to set the price of parts and materials. It's what the market will bear.

Bulldog Tom says he has twenty vacancies today. Well, if he offered a competitive wage he would pull workers from other companies who ARE already providing satisfactory compensation. He admits that his competition is bidding 40% to 60% higher and paying workers accordingly, but his attitude is "There are jobs available today, but not many that are going to pay a living wage to truly unskilled workers."

If you need unskilled workers, how exactly do you expect to recruit them if you won't pay them enough to live on?

[Jack from Ohio]

Do you, or have you ever, hired employees for YOUR company?

I am not sure what area of the country you are in, but when the average person applying for a job cannot fill out a simple employment application without help, what do they have to offer me that would make them worth a "living" wage??

Another afterthought... If your assertions about business are correct, why is GM losing Billions now when they used to make Billions in profit?

[BulldogTom]

Jainen, you are not interpreting what I said correctly.

We have 20 jobs for skilled laborers right now. We will hire an unskilled laborer and train them to become productive in our company. The time it takes to become skilled in our profession is about 3 months. During that time, we pay for a boat load of training. Yet the workers want the wages of a skilled employee immediately. They have no skills and they require a great investment on the part of our company. When they learn our craft, they earn the wages of that craft. If the employee came to us fully trained, they would earn a good wage immediately.

As for the 40-60% increase, that is the built in extra cost for prevailing wage jobs. Our employees do not demand those wages, they would work for less. The state mandates those wages. We have to pay that "minimum wage", and it increases the bid by 40-60% over what a private developer would pay for the same project.

Tom

Lodi, CA

[jainen]

>>Yet the workers want the wages of a skilled employee immediately.<<

I know what you are saying, but I still take the worker's side. You think you are generous in offering them paid training; they don't think your offer is good enough. You already know you can't find anyone else, so you either pay them more or you do without.

What they are worth is not determined by your prospective investment in training, but by the labor market in general. Now, you did say you are only looking for someone who can stay sober long enough to drive to work safely, but apparently there is a shortage of those qualifications in the labor market so naturally the price goes up.