The More Things Change . . .

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I will confess that I found this past presidential campaign sheer hell. I detested both Clinton and Trump, and voted for neither. I hoped that both would lose, and my only consolation was that they both did lose: Trump was defeated decisively in the popular vote, while Clinton was defeated decisively in the Electoral College contest. My view was and is that Trump will transform the Republican Party into a populist one, pushing nativism, protectionism, corporatism, and isolationism. It saddened me to see writers I had previously admired — such as Larry Kudlow and Steve Moore — who have long argued against the populist siren call to the Republican Party, succumb to it at last, in the form of Trump — The Boss. They, along with a large group of other soi-disant free market commentators, have been seduced by populism. This group I call “the Herd.”

Now, when those of us who are classical liberals — i.e., believers in the free movement of products, of physical capital, and of human capital — expressed alarm at Trump’s explicitly expressed nativism, animus toward Mexicans and Chinese, sexism of the crudest sort, and obvious protectionist aversion to free trade, the Kudlow-Moore Herd mooed, “Oh, he’s just saying that to get the workers’ votes. Don’t worry — he isn’t serious — it’s just bait for the bubbas.” The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

Well, even before assuming office, The Boss has started making major decisions as if he were already in charge. It’s as if he couldn’t wait. And it seems he was serious in his campaign.

One highly touted decision The Boss made recently was to coerce Carrier, a division of United Technologies that makes HVAC units, to keep roughly half the workers who were slated to lose jobs when the plant was moved to Mexico. Under pressure, Carrier agreed to keep about 800 of the jobs here. (The Boss’ propaganda ministry said it was 1,150 jobs, but it turns out that included 350 support jobs that were slated to stay anyway.) Gregory Hayes, United Technologies’ CEO, gave in to The Boss, and The Boss and his myrmidons hailed this as a triumph. Indiana, veep-elect Mike Pence’s state, sweetened the deal by giving the company $7 million in tax incentives (read: taxpayer subsidies), but clearly Hayes was most concerned with the continuing bad publicity driven by The Boss and his Herd, and the threat of a 35% tariff on Carrier gas furnaces made in Mexico.

The Herd never asked why the rest of us would ever be attracted by the pitch “Vote for The Boss — he would never do what he says he will!”

The reactions to The Boss’ gambit have been fascinating, to put it mildly. Richly ironic was Sarah Palin’s denunciation of the deal as “crony capitalism.” She wrote ruefully, “When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent. . . . Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail.” This is rich, considering Palin was one of the Republican Party elite who came out in support of Trump. And she may come to rue her small speck of intellectual honesty, since she has been rumored to be under consideration for government positions and The Boss has shown he tends to appoint his supporters to administrative posts.

Moving now from the ironic to the surreal, the arch-free-market opponent Bernie Sanders also criticized the deal. Yes, socialist Sanders was angry that The Boss didn’t “save” all the jobs by immediately imposing a massive import tax on the products of any company that dares to offshore its operations. Sanders thinks that “United Technologies took Trump hostage and won,” by getting tax breaks in exchange for only half the jobs. In fact, Sanders holds that The Boss has endangered the jobs of countless American workers, because “he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance [now].”

Surreal indeed! The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks. Certainly not to escape our punitive corporate income taxes, currently the highest in the industrialized world, and about triple the rate of Ireland. Certainly not because of our dysfunctional common law system, the only one without the “loser-pay” (or “British”) rule that limits frivolous lawsuits. Certainly not to escape Obamacare, a law that saddles companies with the obligation to provide costly health insurance to their full-time employees whenever they have more than 49 of them. And certainly not because of the metastasizing cancer of regulation, which under Obama has simply exploded. Here the senile socialist Sanders complains that United Technologies made a profit last year of $7.6 billion, and its top execs received $50 million each. (Imagine that! Top execs being paid less than one tenth of one percent of the billions in profits they helped produce! Outrageously generous!)

The loopy old Stalinist tool can’t imagine any other reason why businesses would legitimately want to move operations abroad than to get tax breaks.

In a revealing interview with CNBC’s Jim Cramer, United Technologies’ CEO Hayes explained his thinking. Nobody listening to the interview could doubt that Hayes is a decent and patriotic man, but also a man committed to running his company profitably and for the long term. He signaled that he caved to The Boss’ demands because he feared government retaliation against the other three United Technologies divisions — Pratt Whitney engines, Otis Elevator, and the aerospace division — no less than against Carrier. As he put it, “I was born at night, but not last night. I also know that about 10% of our revenue comes from the US government.”

Hayes outlined the reasons why his company had moved Carrier’s — but no other divisions’ — operations down to Mexico. While the skills of the employees at the other divisions are extraordinarily high, the skills at the assembly line for HVAC units are much lower. Moreover, Hayes noted, not only are labor costs lower in Mexico (80% lower) but the company’s existing Mexican plants, the absentee rate was only 1% and the turnover rate only 2%. These figures are much lower than those for the American plant.

Here Hayes touched upon two points I have to work to explain to my business ethics students — who, despite their choice of major, often incline to the Clinton-Sanders-Obama view of capitalism. First, besides intellectual virtues, employers have to consider moral virtues as well. And employees are often not “perfect substitutes” here: some are more inclined to show up for work reliably and work enthusiastically and conscientiously, because for them work is a moral prerequisite for being a virtuous person. Unfortunately, this attitude is more prevalent abroad than in heavily unionized American factories. (I attribute this to the unionization, not the Americanization, of the workers.) Second, what makes employees more valuable is their productivity, not their relatively low salaries. The top paid quarterback in the NFL is a lucky fellow named Luck, who earns $26.4 million a year from the Colts organization. Suppose I called the Colts management and offered my services for a mere 1% of that cost. Would the Colts jump at the chance to “snap up” an old, out-of-shape, overweight, nearsighted, clumsy, uncoordinated philosopher who has never played football in his ludicrous life? Hardly. But if the Colts management could find a man with the skill set of Mr. Luck for significantly less, then they might consider it.

What makes employees more valuable is their productivity, not their relatively low salaries.

Hayes explored this latter point when he noted that United Technologies sent 45,000 employees through their “employee scholar” program, with 38,000 receiving degrees. United Technologies spent $1.2 billion over the last two decades on increasing the skills — the intellectual virtue — of its workforce. And Cramer — an intellectually honest progressive liberal, which is as rare as a sympathetic fascist — pointed out for his CNBC audience (to wit, progressives who make money off capitalism even as they despise it) that United Technologies had early moved a plant from Nogales, Mexico to Florence, South Carolina — at a cost of $60 million in the first year. Notice that neither The Boss’ propaganda machine nor the Herd of establishment Republican apologists even mentioned the onshoring of the bigger Otis plant at great expense, nor the huge amount of money the company has put into improving the skills of tens of thousands of American workers. They mentioned only the 800 inefficient assembly-line jobs.

Hayes noted that United Technologies will now invest $16 million in the existing Carrier plant, to automate it as much as possible, to make it “cost competitive.” So the jobs “saved” by The Boss are not destined to last long. Yeah, the Mexicans won’t “steal them,” but the robots will. In short, don’t blame Juan — blame R2D2!

Hayes made one other point that one wishes The Boss could grasp: “The genie of globalization is not going back into the bottle. . . . Free trade is still essential to the growth of this country. This country was founded on two principles: immigration and free trade.” Boss, let me introduce you to Thomas Jefferson!

But the Herd was mightily pleased with what The Boss did to United Technologies. Larry Kudlow and Neil Cavuto, who should know better than to tout protectionism and cronyism, approved on air, with Cavuto adding the deft ad misericordiam touch that these jobs were saved just in time for Christmas — which rather makes The Boss the Savior.

The jobs “saved” by Trump are not destined to last long. The Mexicans won’t “steal them,” but the robots will.

One of the founding members of the Herd — Glenn Reynolds — chimed in his support for The Boss’ crony capitalism. Reynolds wrote an amazing — really, psychedelic — piece favorably comparing The Boss and his tweets with FDR and his radio “fireside chats.” Like, far out, man, America is in the Great Depression redivivus, and the Boss is here to save us!

Of course, as Reynolds himself concedes, FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared. And I guess it’s better to feel the pain you cause in others than to be oblivious to it, although I am more inclined to say you shouldn’t cause the freaking pain to begin with.

But Reynolds’ point is that The Boss, in “saving” these pathetically few jobs, showed more “compassion” than Obama, because when Obama was asked about saving jobs at this Carrier plant, the Prez said that the answer was improved job (re)training. That caused Reynolds to wax sanctimonious, saying that when a factory closes (from outsourcing, free trade, automation, or just plain producing a product the public doesn’t want), the people laid off and the local economy suffer. And the existing job retraining programs — including the Trade Adjustment Assistance program (TAA) — don’t work well. Here Reynolds quotes a study done by the Heritage Foundation that says the TAA doesn’t work — though considering the infamous hit-report the Heritage Foundation did some years back on the cost of immigrants to the nation, which cemented the organization’s turn from conservativism to populism, I no longer put any credence in its reports.

Now, readers of this journal over the last eight years will, I believe, not accuse me of being a blind Obama supporter — far from it. But in this case, Obama is correct and Reynolds, the Heritage Gang, and the rest of the Herd is wrong. We all learned from Joseph Schumpeter that economic progress is driven by “gales of creative destruction,” when old, less efficient ways of doing business are eliminated by newer, more efficient ones. Cathode ray tube TVs died rapidly when flat screens came out; VHS tapes died rapidly when DVDs became available. And human-piloted cars, trucks, and buses may soon be replaced by autopiloted ones. And we all know what Schumpeter pointed out, that this process is often a hardship on some workers as they undergo retraining for more productive jobs. No doubt, if truck, delivery van, and bus drivers, as well as cab and Uber drivers are all put out of work by self-driving cars, some people will find it hard to find other, more productive jobs over a relatively short period of time. But most will find other, more productive work, easily.

FDR probably extended the Depression by seven years, but he certainly made economically illiterate Americans feel like he cared.

For those workers who can’t make the shift easily, the answer is precisely to retrain them. What other options are there? To let them languish on food stamps? Or (as the lumpenprotectionists, Luddites, and nativists would urge) simply outlaw progress? Let’s face it: progress is a bitch!

Let’s consider this for a moment. No doubt many truck and cab drivers will oppose self-piloting vehicles. But we as a country lose roughly 38,000 people a year in auto accidents, more than we lost in the Korean War. Does Mr. Reynolds — so much more compassionate than we unpatriotic, cosmopolitan, hard-hearted, elitist, and egoistic globalists — really want to see those deaths occur forever, lest some cabbie in Queens can’t find work?

As to why the TAA and the other few dozen other government retraining programs don’t work well, they don’t work well for the same reason public schools don’t work well: when the government runs a monopoly, it fails just all other monopolies do. The answer (in both cases) is to separate the government funding from the service by voucherizing it.

Specifically, we should kill all the retraining programs, along with (say) the Department of Energy, and use all that money for vouchers for long-term unemployed so that they can go to a public or private community colleges to get retrained (or get the high-school diploma they should have gotten when they were young). I would allow trade unions and private industries to use these vouchers to expand their apprenticeship and training programs they already have, and to open full-fledged trade schools as well. For example, the United Electrical, Radio and Machine Workers of America could run a chain of trade schools where people could come to learn the trades, paying the union with vouchers and perhaps by agreeing to be dues-payers for some period of time (say, ten years). Oh, and end the Obama Administration’s war on for-profit colleges, a war that killed so many hundreds of decent trade schools for no reason other than a desire to please the teacher’s unions. (The fall of the ITT college chain alone eliminated 130 campuses.)

There are several reasons why The Boss’ “victory for American jobs” is in fact disastrously bad.

First, it forces Carrier to keep paying high wages to its employees, thus ensuring that it will be unable to compete with foreign-produced products in the long term. This is the kind of “good deal” the US autoworkers received: ludicrously sweet contracts that drove two of the major American automakers into bankruptcy.

Government retraining programs don’t work well for the same reason public schools don’t: when the government runs a monopoly, it fails just all other monopolies do.

Second, it punishes American consumers, who will be forced not just to pay continuing high prices for Carrier’s products but also to pay higher taxes to provide the subsidies. The Boss’ “big-hearted” concern for the workers obviously did not extend to the consumers or taxpayers.

Third, as Bastiat would note, while the populace — with the Herd leading the cheers — hails the Boss for the 800 jobs saved, it will not see the many of thousands of jobs that will be lost. Any company, foreign or domestic, that is thinking of building new plants here knows that if any of those facilities turn out to be unprofitable — say, because the workers form a union as unreasonable as the UAW — and the company moves to close the plant, The Boss will punish it with whatever sort of sanctions he can dream up. As the French have discovered, the harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

This is where the Herd may be miscalculating. Kudlow, Moore, Laffer, Cavuto, Reynolds, et.al. assume that with lower corporate taxes and fewer regulations, the economy will boom and job growth explode as companies repatriate foreign profits and open new plants here. But in the face of The Boss’ demagogic, autocratic governance, the companies may instead use the money to buy back stock in their own outfits or invest the money abroad. The good effects of The Boss’ more classically liberal policies may be trumped by the bad effects of his populist ones.

The harder you make it to fire workers, the more reluctant companies will be to hire them in the first place, so you wind up with chronic high unemployment.

In fact, the Herd’s admiring lowing in response to his bullying of Carrier may be confirming to The Boss that his protectionism is working. He moved on rapidly to attack another company — Rexnord Corporation — for daring to move a plant to Mexico and “viciously fire” 300 existing employees. So far the company hasn’t caved, leading The Boss to renew his threat to hit Mexican imports with a 35% tariff. Ford, which he threatened earlier, still appears to be moving forward with plans to build small cars in Mexico. So The Boss may well be forced to carry through with his threat.

This is all reminiscent of Obama’s first year, in which he started trade wars with Mexico and Canada, while engaging in crony capitalism with environmentalist companies. As the cynical but insightful French put it, the more things change, the more they stay the same.




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Manufacturing Hubbub

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American manufacturing is in decline. It has been for decades, shrinking to half of what it was at its peak in 1979. During the 2000s alone, it lost one-third of its workforce — largely blue-collar workers who, without a college education, could still earn a middle-class wage — and, today, its output and employment remain below their pre-recession levels.

Who cares? We still make stuff. And we still have enough money to get the stuff we don't make — from countries such as China and Mexico, at cheaper prices. In an advanced, services-oriented economy like ours, so what if our trade balance (which was in surplus prior to the mid-1970s but has been in deficit since) has plummeted to -$508 billion (-$741 billion for manufactured goods) today? We can always borrow or print more money. Right?

By outsourcing critical engineering and manufacturing expertise, the US is frittering away its industrial leadership.

Indeed, politicians, especially liberal politicians, welcome the decline. America has the coolest companies (Facebook, Amazon, Google, Apple, etc.), run by cool, billionaire geniuses. President Obama, our coolest president, uses them to run his campaigns, promote his polices, tweet his followers (a twitterati of 63 million), and post his selfies. America's future lies with these energy-efficient, planet-friendly, high-tech giants. To the liberal elite, America can do with fewer factories, even ones making things that America invented. Besides, factories pollute and warm the planet.

Except that America is now losing its high-tech manufacturing dominance as well. By outsourcing critical engineering and manufacturing expertise, the US is frittering away its industrial leadership, eroding what once was the world's font of scientific discovery, technological advance, and product innovation, and guaranteeing future decay. In a 2009 Harvard Business Review article (“Restoring American Competitiveness”), it was noted that "Beginning in 2000, the country’s trade balance in high-technology products — historically a bastion of U.S. strength — began to decrease. By 2002, it turned negative for the first time and continued to decline through 2007," reaching -$53.6 billion. Today, it has dropped to -$81 billion.

This development has even alarmed the Center For American Progress (CAP), which attributed the deterioration to "the dramatic difference between U.S. innovation policies and those of our global competitors." The high-tech trade deficit "finds its roots in the negligence of our innovation policy," claimed CAP, which, after deep liberal think-tank thought, recommended "a strong policy response." Maybe, liberals suggested, a Department of Innovation is what this country has needed all along — one with strong policies, not those negligent ones.

In President Obama's first Hub, a handful of highly paid computer engineers diligently work to develop machines that will eliminate countless blue-collar jobs.

CAP's prescription may have been what caused President Obama to spring into action with his Manufacturing Innovation Hubs, to "create high-quality manufacturing jobs and enhance America’s global competitiveness." The idea is to bring industry, academia and, of course, government together into a joint effort to convert scientific knowledge into jobs — "a steady stream of good jobs into the 21st century," said Mr. Obama.

The first such hub, America Makes, opened for business in October 2012 in the Rust Belt city of Youngstown, Ohio. It focuses on 3D printing, and will be used as a model for subsequent hubs. As many as 45 hubs are planned, with projects that are intended to have a multiplier effect: each job created will support 1.6 other jobs, outside the factory. A Reuters article described the facility as "a sleek new laboratory" housing "a Silicon Valley-style workspace complete with open meeting areas and colorful stools." Inside, "Several 3-D printers hum in the background, while engineers type computer codes that tell the machines how to create objects by layering materials." That is, a handful of highly paid computer engineers diligently work to develop machines that will eliminate countless blue-collar jobs.

As of March 2014, when the Reuters article was published, none of the six businesses participating in America Moves had hired new workers. But the government component, the National Center for Defense Manufacturing and Machining (an organization funded by the US Army, i.e., funded by taxpayers), which manages the project, had hired ten. At this rate, 450 jobs will have been created when all 45 hubs are operational, soaring to 1170 jobs once the multiplier effect kicks in.

To be fair, it’s too early to tell how much of a dent, if any, Obama's struggling Hubs scheme will put in the 5.7 million manufacturing jobs that have been lost since 2000. For example, at a similar stage, the success of Obama's green economy scheme could not be determined. But after spending billions of dollars on green manufacturing companies such as Solyndra (solar panels), Nordic Windpower (windmills), and A123 (lithium batteries), all of the green jobs that were created ended up in China — which now manufactures all of our high-tech solar panels, windmills, and batteries. Whoops, bad example. But at least the Hub jobs have not left America, yet.

In 2011, Mr. Obama — the man who said that he wakes up every morning and goes to bed every night thinking about jobs — held a “town hall” meeting at Facebook, to discuss his economic policies. To Obama, Facebook is especially cool. Its young multi-billionaire CEO, Mark Zuckerberg, wears a hoodie to work. Its 500 million users (at the time) were available to watch Obama pal around with Zuckerberg, who "offered questions submitted online that gelled with Obama's key talking points and victories."

To Obama, factories are hulking, dilapidated buildings where glum Americans used to work, producing goods the world used to buy from us.

No one asked why — if Mr. Obama cared about creating jobs, in general, or manufacturing jobs, in particular — he didn't choose a company like Boeing, which, in 2011, was comparable in value (about $50 billion) to Facebook? Boeing — which is the only remaining American manufacturer of large jetliners in our declining Aerospace industry — employed 160,000 workers. Facebook, which apparently manufactures little more than narcissism and low self-esteem, only employed 2,000, all of whom, no doubt, gelled with Obama.

Factories, on the other hand, do not gel with Obama. To him, they are hulking, dilapidated buildings where glum Americans used to work, producing goods the world used to buy from us. That is why the regulatory policies he supports are designed to ensure fewer factories. The annual cost to comply with federal regulations for the average US manufacturing company is almost $20,000 per employee, twice that of the average US company (manufacturers included). For a small (<50 employees) manufacturing company, perhaps an innovative startup firm inspired by an Obama Hub, the cost is almost $35,000.$35,000! So much for global competitiveness.

Factories provide middle-class jobs for blue-collar workers. And, at $77,506 per year ($37.26 per hour), the average compensation for US manufacturing workers, millions of jobless Americans would like to see more of them — and may have wondered why Mr. Obama chose an Amazon fulfillment center as a venue to pitch middle-class jobs. Amazon is where middle-class jobs go to die.

Most of Amazon's 150,000 employees are seasonal workers — 80,000 of them hired just last year — who make $10 to $11.50 per hour, when there is work. Known as "pickers," they scurry about "the massive warehouses plucking item after item for shipment" and are paid no more than Walmart's "lumpers," who scurry about loading and unloading trucks all day. A smattering of Amazon employees, the ones with the good middle-class jobs ("the skilled direct-hire positions, like supervisor or forklift operator — the sort of gigs hyped during a high-profile visit by the president") shared Obama's stage. The pickers were offstage, scurrying. The slowest scurriers are discarded at season's end, or sooner; the fastest are rewarded with full-time employment, where they can earn as much as $27,000 per year, for as long as it takes Amazon to find robots that are faster.

Of Obama's visit, the White House asserted, “The Amazon facility in Chattanooga is a perfect example of the company that is investing in American workers and creating good, high-wage jobs.” No wonder he brags about the record-breaking number of fast-food and service jobs that his economic policies have created. He thinks they are high-paying, middle-class jobs.

Obama thinks that a steady stream of $27,000 service jobs is thrusting the economy in the right direction.

High-tech companies such as Amazon, Google, and Facebook, as important as they are to our economic power and prosperity, are not the places to go for middle class job creation. The American manufacturing industry is a much better bet. Existing US manufacturing companies would export more products if they were allowed to compete on a level playing field with foreign trading partners. Subsidies and tariffs are not needed. They would hire more workers, if they expected higher profits — profits now eroded by excessive taxes and regulations. A steady stream of $77,506 manufacturing jobs would stimulate the economy, increase tax revenues, reduce the trade deficit, and do many other substantial things.

Despite almost seven years of economic stagnation and the rise of a vast underclass of Americans stuck with lousy jobs, Obama thinks that a steady stream of $27,000 service jobs is thrusting the economy in the right direction. US manufacturing, hobbled by his trade, tax, and regulatory policies, needs only a nudge from his manufacturing hubs.

But it's not clear that Obama's Hub program is the place to go for good manufacturing jobs either. After all, it is a scheme whose principal objective is to invent and develop machines that will eliminate manufacturing jobs. Then there is his bizarre fascination with high-tech companies that either employ a very small number of the high-wage, high-skill elite or very large numbers of the low-wage, low-skill drudge.

His Hub scheme may indeed help US manufacturers. They would certainly welcome any technology that increases their productivity and profits — especially if it was paid for with taxpayer money instead of company R&D funds. Companies such as Amazon may already have agents salivating in the demonstration areas of the robotics hubs, looking for faster pickers. But peering inside a future factory spawned by Obama Hub technology may surprise even Mr. Obama.

These factories will not create the "steady stream of good jobs into the 21st century" that he had hoped for. Rather, they will create a flood of lousy, underclass jobs — the scurrying human labor needed to feed parts and raw materials to Obama's deft, voracious machines, and relieve them of their prodigious yield. All the jobs in such a factory will be held by these pickers and lumpers, except for one: the cool job held by a geeky-looking guy from an elite engineering school, who runs the factory computer system and earns a six-figure salary. He wears a hoodie and fastidiously controls every function performed (by both scurriers and machines) for the entire operation, from his colorful stool. He gels with Mr. Obama.




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The Rise of the Underclass

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If you are a working-age adult who is stuck in a low-wage job, or have no job at all, then you belong to the largest segment of the American labor force: a vast, sprawling underclass, with little, if any, economic value to the society that it burdens. Despite the ongoing monthly celebration of job growth, the number of working-age adults without a job is increasing rapidly and the jobs being created are, for the most part, of the subsistence variety, driving tens of millions of Americans into the lower reaches of the labor force.

During the recession that began in December 2007, 8.2 million American jobs were lost, 60% of which were middle-class jobs. The rest of the decline was split evenly among high-wage and low-wage jobs. Today, more than seven years later, the number of high-wage jobs has finally returned to its pre-recession level. But most of the middle-class jobs have not returned. They are being crowded out by low-wage jobs, largely the result of a stagnant economy, automation, and an enormous labor surplus.

The overwhelming majority of jobs are found in the two lowest wage earner quintiles. The bottom quintile, Q1, is 91.2 million strong, with an average income of $14,600; Q2 is 29.8 million strong, with an average income of $45,100. The other three quintiles, which I will call middle class (Q3), upper middle class (Q4), and upper class (Q5), include 19.1 million, 11.7 million, and 4.0 million, respectively, with average incomes of $70,100, $115,000, and $335,000. These three quintiles, which total only 34.8 million, have all the good jobs. The 121 million workers in the bottom two quintiles have the lousy ones.

As these jobs vanish, our already enormous labor surplus will grow ever larger, depressing wage rates still more.

Writing in the New York Times, Annie Lowrey reports that "the poor economy has replaced good jobs with bad ones." Most of the job growth has been in retail trade, administrative and waste services, and leisure and hospitality — the lowest paying sectors of the economy. Lowrey cited a National Employment Law Project analysis, which found that "fast food is driving the bulk of the job growth at the low end." To David Stockman, former Reagan budget director, the recovery has created a "Bread and Circuses" economy; he is not alone. To experts such as author and investment banker Daniel Alpert, it is a burger-flipper economy; "we have become a nation of hamburger flippers, Wal-Mart sales associates, barmaids, checkout people and other people working at very low wages.” Or, as Pulitzer Prize winning economics journalist Mark Whitehouse ("A Nation of Temps and Burger Flippers?") found, temporary burger flippers.

At least the burger flippers have jobs. With today's labor force participation (LFP) the lowest it's been in 37 years, there are 93 million working-age (16 years of age or older) adults who don't. This isn't to say that there are 93 million American who need jobs. Most retirees don't need them, and the Bureau of Labor Statistics cites "the aging of the baby boomer cohort" as the number one cause for the LFP decline. But in the 16–65 labor force age range, which excludes retirees, there are about 55 million chronically unemployed who might want a job. It's hard to whittle this number down much further. For example, the number two cause cited for the plummeting LFP is "the decline in the participation rate of those 16–24 years old." In other words, 16–24 year old Americans can't find jobs. They, along with many millions of others in this 55 million subset, are in the same boat as the 121 million with dead-end jobs — the underclass.

And it is growing fast. A recent Federal Reserve Bank study of eight major industrialized economies found that only the US has experienced a decline in LFP. Between 1997 and 2013, US LFP has decreased 4.6%, while Canada, France, Germany, Japan, Spain, Sweden and the United Kingdom experienced increases. Then there is the so-called "Great Decoupling." Beginning around the turn of the century, employment gains, which have historically followed productivity gains, ceased. Job growth and wage increases have become decoupled from the economic progress produced by technological advance. While productivity increased linearly, employment remained flat through the Bush presidency, declining thereafter. Of today's 93 million work force nonparticipants, more than 13 million (3% of the 4.6% decline since 1997) have dropped out since President Obama took office.

Automation played a significant role in this exodus to the underclass, and will only augment its future contribution. Many companies have not rehired the people they laid off during the recession. Instead, they have adopted new technologies — hastening the return to pre-recession profits, at a lower cost — that automate tasks previously performed by humans, including high-skill, middle-class humans.

Automation is no longer confined to tedious, repetitive tasks. Jobs in services, sales, and construction, even jobs in management, science and engineering, and the arts will be vulnerable to takeover by machines. So says an Oxford University study, which concluded that 47% of US jobs are likely to be replaced by computerized machines. And a technology research firm, Gartner, forecasts that smart robots will replace one of every three jobs by 2025. As these jobs vanish, our already enormous labor surplus will grow ever larger, depressing wage rates still more.

Obama's policies have created a record-breaking number of shitty jobs, which he brags about, and now promises to make less shitty.

Yet, as if existing wages were not low enough, we add one million new legal immigrants annually. Politicians, Democrat, Republican, and libertarian alike, tell us that we need them: they start new businesses, they invent things, they help support our aging population. In 1970, with a population of about 200 million and 53% of all households in the middle class, Americans competently started new businesses, invented things (almost everything that mattered), and took care of the elderly. Economic prosperity was achieved through productivity increase, not population growth. Today, with a population of about 320 million, the middle class has shrunk to only 43% (along with its wages and net worth), and we struggle in an economic mire. It seems likely that, with more people (438 million by 2050, under our current immigration policy), the underclass will continue its relentless growth.

Meanwhile, there is no serious attempt by our political elite to help create good jobs — middle class, "breadwinner" jobs that can support a family and reanimate the American Dream. The Obama administration, apparently fooled (monthly) by the declining unemployment rate, is encouraged by an economy that systemically produces low-wage jobs, as long as the number is large enough to flaunt. Mr. Obama regularly brags about record-setting job growth, 12 million at his latest count, asserting that "the economy is headed in the right direction."

It is not. By instilling fear and confusion in American business, recent tax and regulatory policies (including immigration policies) are the chief contributors to underclass expansion. For example, there is a growing preference for companies to employ temporary workers instead of permanent ones. The use of employment services, observed Mr. Whitehouse, is "a practice that makes firing easier and reflects their caution about the economic outlook." Ironically, computer and management consultants, one of the few labor categories to have experienced job growth during the so-called recovery, consist of "people who help businesses figure out how to make do with fewer workers."

Capitalists believe that the way to reverse the trend is simply to reduce the taxes and regulations that have made businesses afraid to spend. Companies, then in possession of more capital and the freedom to invest it, would purchase new plant and equipment, create new products and services, develop new markets, etc., requiring better jobs and more workers to support the expanding operations. And with the increased demand for labor, wage rates would rise.

President Obama has different ideas. He is content with his Burger Flipper economy. Unlike his Green Economy, which briefly created a paltry number of green jobs, the Burger Flipper economy produces enough low-wage jobs each month (now 61 consecutive months) for him to gloat (now, it seems, 60 consecutive months). He apparently believes that this stream of lousy jobs will continue in sufficient quantity to accommodate the five million illegal immigrants that he wants to add to our existing labor surplus.

It is only the very wealthy who prosper, with the top 1% having reaped an astounding 95% of all of the nation's net income gains since Obama took office.

Hillary Clinton, likely our next president, is dismayed by his restraint. She "advocates expanding Obama's executive actions to allow millions or more undocumented immigrants to obtain legal protection and work permits." And if that does not expand the labor surplus enough, Clinton has said that she will "welcome back people who have already been deported."

With the labor surplus driving wage decline and "fast food" driving job growth, Obama has accordingly shifted his policies to help the burgeoning underclass. As Lowrey noted,

The swelling of the low-wage work force has led to a push for policies to raise the living standards of the poor, including through job training, expansion of health care coverage and a higher minimum wage.

Obama's new plan is to improve the quality of the lousy jobs that his old plan created.

Will it work? Those without a job will get no raise. That number, now at 93 million, will increase as businesses encounter the artificially increased labor costs. Those who have a qualifying job will be happy, at first — until they discover that (A) everything they buy will cost more, (B) they will pay more in taxes and receive less in benefits, and (C) at $10.10 an hour, they will still belong to the underclass.

To date, Obama's policies have been largely aspirational, and, for existing American citizens, lamentable. According to the BLS, only 6 million net jobs (not 12 million) have been created under his stewardship. And, according to a Center For Immigration Studies report, all of them have gone to immigrants (legal and illegal). "The number of immigrants working returned to pre-recession levels by the middle of 2012, and has continued to climb. But the number of natives working remains almost 1.5 million below the November 2007 level."

Given the immensity of the underclass, the thinking at the White House might be that Obama's plan will yield more bang for the buck than a plan, say, to help create high-paying jobs. Besides, they already think that the economy is headed in the right direction and expect that, in the burger flipper economy that their old plan created, nothing could possibly go wrong with a new plan designed to lift the wages of burger flippers.

Enter the Burger Robot, the fast food industry's answer to rising labor costs. The Burger Robot can make 360 sandwiches per hour (including gourmet sandwiches); it reduces liability, management duties, and food preparation footprint; it pays for itself in about one year (even at the existing minimum wage); and it doesn't need a hairnet. The machine is not designed to improve the efficiency of fast food workers; rather, says company cofounder, Alexandros Vardakostas, “It’s meant to completely obviate them.”

The rise of the underclass is a glowing symptom of our decline. Today's politicians are singularly incapable of fulfilling their economic promises. Their glib, clumsy, overbearing laws and regulations have forged a pathetic burger-flipper economy offering little more than peonage and destitution to the majority of its labor force. After more than six years of feckless meddling, Obama's policies have created a record-breaking number of shitty jobs, which he brags about, and now promises to make less shitty. After more than six years of Obama's promises to help the poor and the middle class, it is only the very wealthy who prosper, with the top 1% having reaped an astounding 95% of all of the nation's net income gains since he took office. For everyone else, there is stagnation and decline — unless you are an immigrant or a robot.




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Right-to-Work Nation?

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The mainstream media has more or less ignored some interesting news out of Wisconsin. It is that the governor, the unflappable Scott Walker, has signed into law a right-to-work bill that covers private sector unions.

This makes Wisconsin the 25th state in the country to adopt right-to-work legislation, that is, legislation that stops any union from forcing workers to support it.

Wisconsin’s action is notable for a variety of reasons. First, it is a traditionally blue state. Second, it is an upper-Midwest industrial state. Third, it has a history of heavy unionization — about one-fifth higher than the national average (8.2%, compared to 6.7%). Back in the mid-1980s, over 20% of Wisconsin private sector workers were in unions.

Also, like Michigan, Wisconsin passed the bill even though its governor was initially reluctant to support it. Walker had originally called it a “distraction,” but after the state senate majority leader pushed the billed through the legislature, Walker quickly signed it into law.

The law did not have bipartisan support. In the state assembly, all 35 Democrats voted against it while all 62 Republicans voted for it. In the senate, 14 Democrats (joined by one turncoat Republican) voted against it, while the remaining 17 Republicans voted for it.

The vitriol reached its peak when a union supporter threatened to gut Walker’s wife “like a deer.”

Proponents of Big Labor hegemony were predictably outraged at Walker’s signing the bill. One union supporter lamented, “It’s going to take 25 to 40 years to correct problems Scott Walker’s done in 4 ½ years.” Phil Neuefeldt, head of Wisconsin’s AFL-CIO, threatened, “We’re not going to forget about it.” And of course our unifying President Barack Obama had to chime in, calling the Wisconsin law “a sustained, coordinated assault in unions, led by powerful interests and their allies in government.”

As if Obama’s whole tenure weren’t a result of the machinations of powerful interests — not least of which is Big Labor.

But then, Walker has made a career of facing down unions. In his first term, he pushed through restrictions on public employee unions’ collective bargaining powers, forced public employees to contribute more to their pension and health care benefits, and gave government employees the right to opt out of the obligation to pay dues to the public employee unions.

These modest reforms appear to have saved local governments in Wisconsin $3 billion in taxpayer dollars and kept property taxes from rising while keeping the number of teachers from being cut. But the teachers’ unions are singing the blues: the National Education Association saw its Wisconsin membership drop from 100,000 to 66,000, the American Federation of Teachers (representing the college teachers) saw a drop of 50%, and the state employees union dropped from 70,000 to 21,000.

For all this, Walker faced near-riotous demonstrations and a recall election, with Big Labor money flowing in from across the nation, to remove him. The public employee unions even tried to remove a Wisconsin state Supreme Court judge who had upheld Walker’s earlier law.

The vitriol reached its peak when a union supporter threatened to gut Walker’s wife “like a deer.” I am always moved by the boundless compassion offered by progressive liberals.

The rhetoric of the Walker-haters aroused by the current law — which, please note, merely gives private-sector workers the freedom given to public sector workers, years ago — has been amazing. But what is to come will almost surely be worse. GOP legislators are now indicating that they will take on Wisconsin’s nearly century-old “prevailing wage law,” which forces governments to pay union-dictated wages on all public works projects.

In the end, what is driving the push for worker freedom is popular opinion, supported by unarguable logic. One recent poll put public support for the right of workers not to support a union at 62%. And the reasons have been the same for decades. First, unions force workers to support candidates and causes they abhor. Second, unions often destroy the businesses that employ the workers. Third, unions violate the human right of free association.

With the action in Wisconsin, half the states in the union now give liberty to workers to belong or refuse to belong to unions. In many of the remaining states, such as California, the stranglehold of Big Labor is too strong to break. Yet there is hope. Should Scott Walker ever become president, with a Congress controlled by Republicans, it is possible that a federal right-to-work law would be enacted.

Should that ever happen, there would be a cry of freedom from American workers that would rock the gates of Heaven itself.

And it could happen.




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The Joy of Work

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Chef is a film about the joy of cooking, but more than that; it is a film about building a business, doing something you love, working together as a family, and promoting one’s enterprise in the age of social media. It’s a small film with a surprisingly big cast that includes Scarlet Johansson, Dustin Hoffman, and Robert Downey, Jr., along with a slew of other well-known actors with whom director Jon Favreau has worked on such bigger budget blockbusters as Iron Man.

Carl Casper (Favreau) is an innovative head chef at a popular Los Angeles restaurant. He loves food, he loves cooking, and he loves the crew he has assembled in his kitchen. He is a true artist with a knife and a stove. But his focus on his work has led to a rift within his family. He is divorced from his beautiful wife Inez (Sofia Vergara), and he doesn’t know what to do on “divorced-dad weekends” with his charming 10-year-old son Percy (Emjay Anthony); he’s always in a hurry to get to the farmer’s market and plan the menu for the restaurant, and Percy is just in the way.

When Carl and his kitchen crew learn that a top food blogger (Oliver Platt) is coming to the restaurant Saturday night, Carl wants to create a variety of new dishes to showcase, but the restaurant owner (Dustin Hoffman) wants to stay with the tried-and-true menu that his regular customers know and enjoy. The blogger writes a scathing review, and Carl responds with his first-ever tweet, which he doesn’t realize is public. Their cyber war goes viral, and soon Carl is out of a job.

The red tape that surrounds the food truck industry is almost insurmountable. Sadly, such obstacles keep many small entrepreneurs out of business permanently.

All of this leads to a classic road trip movie. Carl starts a traveling food truck business and takes Percy and his best friend, sous chef Martin (John Leguizamo) with him. Together they travel from Miami to Los Angeles, developing delicious sandwich menus based on local foods and ingredients they discover in regions along the way. This is what makes the movie sing. Father and son work in perfect sync as they develop flavor combinations, cook sandwiches side by side, and discover local specialties. Percy tweets pictures and details about their journey, and customers eagerly await their arrival in new cities. The film becomes a delightful tribute to the small family business and the wonders of social media. Do what you love, and do it with the people you love, and life will be good — even if you are living in a food truck.

Of course, no one could really do this. America might be the home of the brave and the land of the free, but it’s not the land of the free market. Carl wouldn’t really be able to do this on a whim in a matter of days. As Kasey Kirby and Laura Waters Hinson demonstrate in their fine documentary about the food truck business, Dog Days (this year’s Anthem Film Festival winner for Best Libertarian Ideals), the red tape that surrounds the food truck industry is almost insurmountable. Never mind that Carl is providing a product that customers crave and willingly purchase; you can’t sell food without health inspections, business licenses, and location permits, and these all take time and money to secure — lots of it. Sadly, these obstacles keep many small entrepreneurs out of business permanently.

But red tape is not the point of this film, so Favreau wisely sidesteps the issue by giving a brief nod to the permit requirement and then asking us to suspend disbelief about the time it would take to acquire these permits in every city along the road. He focuses instead on the sheer joy of working together in a family business. Like many families today, the Caspers have been pulled so far in different directions that there’s an empty space where the home once was. As the story starts, Inez is a successful event planner who must be available for her clients beyond the standard 9–5 workday. Carl’s chef duties are mostly performed in the evenings. Percy’s “job” is school. Maids and gardeners take care of the work they might have done together at home. They are related by DNA and by a family name, but their productive lives are completely separate. The things that give each of them a sense of identity — the things they produce — are unconnected. Like many couples today, their root system dies as they branch out in different directions.

When the family business brings them together, the Caspers feel joy again. Yes, they work hard. Yes, it’s hot and humid in the truck. Yes, young Percy gets hurt sometimes — he burns his hand on the lid of the sandwich maker, and he cuts his finger with a paring knife. But he doesn’t let it stop him. He loves working with his dad. He loves providing food for customers who line up to taste their sandwiches. He loves mimicking his dad and knowing that his own work matters.

Carl says to Percy as they embark on their adventure, “I may not do everything great in my life, but I’m good at this. I manage to touch people’s lives with what I do and I want to share this with you.” It reminded me of Whoopi Goldberg’s commencement address to the Mercy College graduates at Sing Sing this year. As she praised their accomplishments she said, “I tried to go to college but I had learning disabilities and I failed. My mother told me, ‘You might not be good at this, but you are good at something. You just need to find it.’ And I found it.” Chef celebrates the joy of finding what you’re good at; the joy that comes from doing work that is productive, creative, useful, and fulfilling; and the joy that comes from doing it with those you love.


Editor's Note: Review of "Chef," directed by Jon Favreau. Aldamisa Entertainment, 2014, 114 minutes.



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Equal Pay for Equal Work

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Once again equal pay for men and women doing presumably equal work has become a live political issue. If Congress can achieve fair pay by passing still another law, why not?

But what is equal work? Is it the same numbers of hours spent? Is it work in the same industry or other category, broadly or narrowly defined?  Is it work typically done by people with similar levels of education as proxied by diplomas and degrees? Are what economists call “compensating differences” unfair — differences in pay for work considered particularly risky or boring and work found attractive in itself? More plausibly, does fair pay mean equal pay for work appearing to promise the same addition to the revenue or profit of a business firm? If so, as judged by whom? Without attention to availability, productiveness, and costs of materials, energy, and other things bought, including the many kinds of labor, a firm would go broke.

More equal-pay legislation will add to the burdens already borne by business firms, perhaps especially small businesses.

An economic system coordinated otherwise than by market transactions and the interplay of prices, profit, and loss would be very different from the system that has brought prosperity to the Western world. A market economy puts to good use vast amounts of knowledge both specific and widely dispersed. This knowledge, as well as informed conjectures, exists in the minds of millions and billions of consumers, employees, job candidates, entrepreneurs, and owners and managers of business firms and other organizations. Knowledge of how to conduct and mesh their activities simply could not be centralized for effective use by planners and regulators. The writings of Mises and Hayek (and, earlier, Henry George), reinforced by experience in Communist countries, have taught us this lesson. Even if, per impossibile, this knowledge could be centrally deployed, politicians would have incentives to disregard much of it.

Business owners and managers, sometimes aided by specialist consultants, can best judge how to structure their workplaces and employ the people most likely to contribute to profits. Supply and demand interacting on markets, including the labor market, contribute to these judgments. Business losses tend to weed out bad judgment of these kinds, while profits tend to reward good judgment.

Employers must judge how likely employees or job candidates are to fit in well with their businesses. How likely is a person to be available for working long or irregular hours on short notice or for shifting among assignments and geographical locations? How committed is the person to a career, or how likely to quit or interrupt work for family or other reasons or to request many hours or even months of paid or unpaid leave? How likely is the person to generate profitable new ideas? How likely to get along well with customers, colleagues, and supervisors? Or how likely to prove obnoxiously litigious? A good matching of jobs and employees benefits all concerned.

Realistically, of course, employers cannot have all the detailed and ineffable knowledge necessary for ideal decisions. They must make judgments based on categories, experience, probabilities, statistics, and hunches, and perhaps sometimes even on stereotypes. These regrettable gaps in knowledge are not blameworthy or avoidable, although detailed experience and practiced intuition may shrink them. The system of markets, profit, and loss tends, at least, to reward or punish good or bad business judgment; nothing similar weeds out bad legislation.

Government regulators drift into thinking that their own work is important.

More equal-pay legislation will add to the burdens already borne by business firms, perhaps especially small ones. These will include the burdens of keeping records of and reporting on job interviews held or not held, performance reviews, job categories and modifications, and innumerable other things. Risks compound the burdens, including risks of being second-guessed about honest judgments and of dubious statistics being manipulated to infer violations of rules even in the absence of evidence. Government regulators drift into thinking that their own work is important and into eagerly receiving and investigating complaints. Aggrieved employees have additional ways to browbeat their employers by threatening to file complaints or lawsuits. Opportunities for lawyers multiply.

The burdens placed on job creation are heavy already. They apparently help account for the disappointing growth in employment as recovery from the recession continues only sluggishly.

Yet far from being morally obliged to bear such burdens and risks, businesspeople are under no obligation to be in any business or hire any workers at all. Even employing job candidates willing to work for less pay than others appearing similarly qualified is a service to workers and the public (even if a less noble service than one might wish). Employing anybody increases the scarcity value and the job and pay prospects of the rest of the labor force. Employers practicing discrimination unrelated to the value of employees’ work suffer the penalty of reduced profit and lose ground to firms showing sounder business judgment.

Speaking of fairness, how fair is it to draft businesspeople more and more into unpaid and thankless service as social-welfare agencies and as scapegoats?

Making a political issue of “fair pay” expands opportunities for politicians and demagogy. It illustrates how superficial bright ideas can get casually inserted into laws, notably into laws running hundreds or thousands of pages. As Thomas Sowell has explained, being both economically literate and honest is a disadvantage for a politician. (An economically illiterate one can honestly advocate bad but popular legislation, while a dishonest politician may gain votes by concealing his economic understanding.)

My message, in summary, is dismay at ignorance or disregard of how essential using widely dispersed specific knowledge is to a prosperous economy.




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An Unforeseen Development?

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On NPR this morning, I heard that 525,000 people had left the American labor force in December. I couldn’t find the number on the NPR website, so I looked on the Labor Department’s. My “find” function came up empty there as well. It’s probably there, but I think you have to add and subtract a little from the relevant columns of figures to come up with it. Having wasted precious minutes, I grew impatient. I baited my Google hook with the raw number (525k) and cast it into the data sea. The number was reported on many suspect blogs, tagged with red doughnuts warning me away. Then: Voilà. An article from Economics Analytics Research, Unemployment Rate Plunges to 6.7% in Dec. As Labor Force Shrinks; Payrolls Up Disappointing 74K”:

The drop in the unemployment rate came as a result not of new jobs, but a sharp increase in the number of persons not in the labor force — 525,000 — to 91,808,000, an increase of 2,969,000 in the last year. In 2012, the number of persons not in the labor force increased 2,199,000.

Why are people dropping out of the labor force? Some retire. Some grow weary of a fruitless job search and move in with their parents. Others migrate to the underground economy. But why the “sharp” increase at the end of 2013?

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare.

At least part of the reason may be this: before January 1, 2014, when you left the labor force early, not only did you lose any possibility of unemployment benefits but you were also probably tossed into the healthcare jungle of uninsurable pre-existing conditions, crowded emergency rooms, and lousy medical treatment.

Let us say that you are a 60ish empty nester who has been downsized. You have been looking for work for a year. Your unemployment benefits have run out and all your job leads have led nowhere. While you have a modest nest egg, Social Security won’t kick in for a few years and Medicare a few years after that. Your company-sponsored health insurance has run out and you are on the verge of applying for jobs for which you are ridiculously overqualified just to get the insurance.

But not so fast. Beginning on January 1, 2014, if you don’t have a job or more than a modest income, you are eligible for Medicaid — healthcare provided at no cost to you as a result of the Affordable Care Act. Please note: non-income assets don’t count against eligibility, and, under the new law, the allowable income ceiling has been raised (eligibility requirements have been relaxed) to allow millions more to enjoy this benefit, including the boomer described above.

Let’s face it, there are people who will choose to glide into Social Security and Medicare on the wings of Obamacare. They will choose not to take a big step down the career ladder in order to secure a benefit that is available for the asking. There is a facet of human nature that shrugs, “Why not?”

It has to be asked: was this incentive to hang it up early an intended part of the new law, or was this “sharp” shrinking of the labor force an unforeseen development?

In either case: heck of a job, guys.




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Continuing Obamalaise

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A spate of reports just out shows the continuing economic malaise created by Obama’s benighted administration, a phenomenon we call Obamalaise. Obamalaise set in early in the administration, and it has continued, despite what the administration and lickspittles in the media hail as the “miraculous recovery.”

The first item, from the Wall Street Journal, notes that the most recent jobs report was very disappointing: only 162,000 jobs were added in July, far fewer than the 183,000 that had been predicted by various economists. Worse, prior months’ figures were revised downward. Worse yet, average hours worked and average hourly earnings both dropped.

While the unemployment rate did fall from 7.6% to 7.4%, the supposed improvement was due in great measure to more people giving up looking for work.

The only reason the stock market didn’t react dramatically is that the weak report made it obvious that the Fed will continue its aggressive bond buying, which “the Bernank” had earlier suggested might be reduced.

What we have now is a far cry from the 5% unemployment rate that the administration promised us, back in 2009, if we just passed its grotesquely bloated $800 billion “stimulus” bill, with all its payoffs for Obama cronies and supporters. Moreover — as James Pethokoukis notes — we have never come even close to hitting the administration’s projected unemployment rate. For example, Obama promised that the rate would never exceed 8%, but he was off by one-fourth: it hit 10% by the end of 2009.

The real rate of unemployment is upwards of 10%, when you count in the people who want a job but have ceased looking for one.

In that year, the administration also projected that the stimulus would result in over 4% GDP growth in 2011, 2012, and 2013. In reality, growth has been happening at only half that rate, and it has dropped even lower recently.

As I argued in these pages long ago, it is for this sort of governmental fraud that we should extend Sarbanes-Oxley to cover government, not just business. If a program is sold on certain projections by an administration, and the projections prove false, the president, vice president, relevant cabinet members, and the senators and congresspersons who voted for the scheme should do jail time after their terms.

Pethokoukis observes that the real rate of unemployment is upwards of 10%, when you count in the people who have dropped out of the labor force. More than six and a half million Americans want a job but have ceased looking for one. If you count the underemployed, the real rate is above 14%.

Speaking of that, another report points out that of the 953,000 jobs created this year, 731,000 (or 77%) are part-time jobs. The main cause is the impending imposition of Obamacare, which requires employers with 50 or more “full-time” employees — now defined down to mean people working 30 or more hours a week — to purchase costly insurance for all of them. Employers are doing the rational thing: turning full-timers into part-timers. As Tyler Durden puts it, we are being converted to a part-time worker society.

Another recent WSJ piece adds yet more somber news. Over half the new jobs recently created have been in the low-wage sectors of the economy, especially the restaurant and retail industries.

The jobs news is especially ironic in one way: Obamalaise is going hardest on one of the groups that were most enthusiastic about voting for Obama: young people. Unemployment among 18–29 year olds stands at 16.1%. Again, the figure doesn’t include people who have only part-time work but want to work full-time. Only 43.6% of young people now have full-time work. And black teen unemployment has now hit an astounding 41.6%. This is up from 36% a year ago.

One last report puts the present youth predicament with tragic clarity. It turns out that 21.6 million Americans aged 18 to 31 now live with their parents, the highest number recorded in 40 years. This is 36% of all so-called millennials.

Obama built this. He did it with Obamacare. He did it with overregulation, and the leftists that he inserted into regulatory bodies. He did it with tax increases. He did it with his Green jihad on fossil fuels, led by like-minded people at the Department of Energy, the Department of the Interior, and the EPA — the “Employment Pulverizing Agency.” He did it with massive taxpayer-backed loans and subsidies of Green energy companies that employed few people (before going broke) but funneled untold millions to political supporters.

Some are predicting that with continued Fed support, the economy’s growth will accelerate, and Obama will finish his administration with unemployment low again — meaning in the 5% range.

Perhaps. But, there is still a business cycle, and if in the next two or three years we have another recession, the workers of this country will be hit very hard, since the “recovery” has been so very anemic. To put it in another way, if this “miracle recovery” involves a record level of dependency on food stamps, a record number of young people forced to live at home, a record percentage of people having left the work force, more and more people forced into part-time work, and a national debt that will soon stand at $20 trillion — what will the next recession look like?




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Good News about Hispanic Grads

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Amid the ever-spreading presidential scandals, the country is focused on bad news in DC. So it is gratifying to report some good news nationally. The news is about a major improvement in Hispanic educational outcomes.

A report just released by the Pew Research Center shows that for the first time, a higher percentage of Latino high school graduates — an impressive 69% — is enrolling in college for this fall than are graduates identified as “white” (at 67%). Since the beginning of the 2008 recession, the percentage of Hispanic grads enrolling in college has steadily grown, while the percentage of whites has declined slightly.

More importantly, in 2011, the percentage of Latinos dropping out of high school hit a new low. Only 14% of Hispanics (aged 16 to 24) were dropouts, which is half the rate of a decade earlier (it was 28% in 2000). The dropout rate among whites also fell, from 7% in 2000 to 5% in 2011.

The Pew report suggests that this dramatic increase in Hispanic educational attainment is likely due to two factors. First, Hispanic families are increasingly cognizant of the fact that America has a completely knowledge-based economic system. A recent (2009) Pew survey found that nearly nine out of ten Latinos aged 16 or older agreed that a college degree is necessary to rise to the top in today’s economy, which is a much higher figure than that for the general population (of which only three out of four agreed with the proposition).

Second, the recent recession hit Hispanic youth harder than it did white youth. Since the recession started, unemployment among Latino youth (defined as ages 16 to 24) has gone up 7%, as opposed to only 5% among white youth.

Indeed, while the Pew report doesn’t note this, Bureau of Labor Statistics (BLS) data show with crystal clarity the correlation between educational attainment and unemployment. For example, the BLS records that the overall unemployment rate for the year 2005 was about 5%. But within that general figure was a wide difference among workers. For those with professional degrees, unemployment was a miniscule 1.1%; for those with doctoral degrees, it was only 1.4%; for those with master’s degrees, 1.7%; for those with bachelor’s degrees, 2.3%; for those with associate’s degrees (community college degrees), it was 3.0%; for those with a high school diploma and some college, 3.9%; among those with only a diploma, 4.3% — still below the national average unemployment rate for the year. But among workers with no high school diploma, it was 6.8%, or over a third higher than the national rate. Even in a boom economy, high school dropouts are dramatically more likely to be unemployed.

And in 2009 — a year when the unemployment rate was 7.9% — the BLS data show that the employment gap between those with little education and those with more only widened further. That year, the unemployment rate among workers with professional degrees was 2.3%; among those with doctoral degrees, 2.5%; master’s degrees, 3.9%; bachelor’s degrees, 5.2%; associate’s degrees, 6.8%; a diploma and some college, 8.6%; a high school diploma alone, 9.7%; and no diploma, 14.6%. This means that in a time of high unemployment, the unemployment rate among high school dropouts was nearly double the national average.

There is still work to be done to bring Hispanic educational attainment up to equality with that of whites. To begin with, while the Latino dropout rate has fallen by half during the last decade, it is still nearly three times the rate for whites.

Moreover, Hispanic students are still less likely than white students to enroll at four-year colleges, by a wide margin — 56% versus 72% — and are less likely to attend full-time, or graduate with a bachelor’s degree.

And of course, both Latinos and whites trail Asians when it comes to enrollment in college: recent Asian high-school grads are enrolling in college at an astonishing 84% rate.

Still, the Pew report is very welcome news. One hopes that the members of Congress still desperately fighting immigration reform will read it, and think it over.




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The Green Jihad's Human Toll

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In a few prior pieces, I explored in some detail the Obama Regime’s green energy jihad. Essentially, its goal is to “solve” the “crisis” of global warming by forcing Americans (but not the Chinese, Indians, Brazilians, or anyone else) to switch from plentiful, relatively inexpensive domestic fossil fuels to so-called green energy sources (solar, wind, and biofuels — but not nuclear), fuels that are orders of magnitude more expensive.

This jihad has two fronts. First, the Regime is shelling out massive amounts of taxpayer money to solar, wind, and biofuel companies — usually those that have greased the palms of the corrupt Regime, and often those that have failed despite the insane subsidies lavished on them. Second, the Regime puts every possible regulatory hurdle in front of domestic fossil fuel production, doing its uttermost to stifle the renaissance in American fossil fuel energy production created by recent technological advances.

Two recent stories illustrate the toll in human suffering that this green jihad is inflicting on the American people. The first story notes that the US House of Representatives is — finally! — expanding its probe into the green energy programs spawned by this administration. For example, it is looking at the $500 million in taxpayer cash spent on a “job training” program for “green” industries.

This costly Department of Labor program (part of the “stimulus” bill that stimulated only graft) started with the grand promise of training about 125,000 people and putting at least 80,000 of them into jobs. Well, after a year and a half, the program has trained only about 53,000 people, and placed a ludicrous 8,000 in actual jobs. Yes, that’s about $62,500 per job. One wonders, besides, why those people couldn’t have been trained directly by the companies hiring them.

This criticism has raised howls of outrage from the green brigades. Perhaps the most asinine came from Assistant Secretary of Labor Jane Oates, who defended the program on the ground that is wasn’t intended to provide immediate jobs. So I guess she’s admitting that when Obama said the stimulus projects were “shovel-ready,” he was shoveling lies. Oates proclaimed piteously, “It’s like coming to me three days after I join Weight Watchers and yelling at me because I didn’t lose 62 pounds yet.”

No, sweetheart, it isn’t anything like that. A proper analogy would be this: you force me to pay a half-billion bucks to send you to Weight Watchers (a program you could have paid for yourself), under the theory that you will lose 62 pounds, and a freaking year and a half later you have lost only 6 pounds. Get it?

The second story is about the cost of the Regime’s May 2010 moratorium on all offshore drilling in the Gulf of Mexico, because of BP’s deepwater spill. After fighting with the courts for six months, yes, the Regime lifted the moratorium. But ever since, it has stalled the issuance of the requisite permits. (This stall is called the “permitorium.”) Since the lifting of the moratorium, the number of deepwater permits granted has been 71% lower than the average before the spill. Shallow water permits have dropped 84% from their historic average.

The predictable result has been the destruction of a horrendous number of medium and small businesses, with a concomitant loss of jobs. The Greater New Orleans economic development agency has reported the results of a survey showing that 53% of businesses responding have not hired any workers since the moratorium, and 49% have had to lay off workers. Of the 47% that did hire workers, most were just replacing departing employees or hiring in small numbers, and most of them have reduced hours or wages.

That is because the companies are hurting. 82% of the owners reported losing personal savings as a result of the moratorium-permitorium, with 13% completely emptying their savings accounts. 76% of the companies lost cash reserves. 27% lost more than half of them. Only 59% are now profitable.

Few green jobs created, many fossil-fuel jobs lost — all to satisfy the environmentalist extremists who feed donations to the Green Regime.




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