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Gotta love socialism. German Jobless rate hits new record (12.6%) (pg. 4)
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| Blue Balls |
| quote: | Originally posted by occrider
I am also an economist, however, I would tend to disagree with your economic theory. First off, those who are on welfare in the US are counted as unemployed in the Bureau of Labor Statistic's household survey. Second of all, Germany subtracts those who are not looking for jobs from their unemployment calculations the same as the US, therefore that is not a factor in any of the calculations. As for underemployment, I would state that that is hardly dictated by the threshold that a person is able to remain unemployed (to a reasonable degree) as opposed to the welfare of that country's labor market. The duration of German Unemployment Insurance is generally 12 months (it's 6 months in the US). Are you saying that those extra 6 months of looking for a job are the definitive factor in a person finding another white collar job as opposed to finding a job at McDonalds? The law of supply and demand apply to the labor market as well. If there is a demand for more skilled jobs, than prices will adjust accordingly to reflect the supply shortages. If there is an excess of supply in the labor market, than no amount of waiting in the world is going to affect the aggregate market price that is dictated by the demand of the labor market. In other words, that extra 6 months of unemployemnt insurance is probably going to accomplish very little to adjust wages in the aggregate economy. It likely has a weak correlation at best when compared to several other indicators such as the weekly payrolls number. |
The unemployment data have a number of problems that lead to an understatement of unemployment. For example, the data count as employed all people who are working part time but who would like to work full time. Since these people represent unused labor effort that is available, the unemployment rate understates the extent of unemployed resources in the economy. Another problem that causes the unemployment rate to understate the extent of unemployed resources is the "discouraged-worker" effect. If someone wants to work, but becomes so convinced that there are no jobs available that he makes no effort to find work, he will be counted as "not in the labor force." Since there will be more discouraged workers the more severe the recession, this factor will tend to dampen the fluctuations in the unemployment rate.
Both part-time workers wanting full-time work and discouraged workers tend to make the unemployment rate lower than it would otherwise be. Working the other way, to increase the unemployment rate above what it would otherwise be, are government payments made to people only if they fit into the "unemployed" category. Unemployment compensation stops if a person announces that he no longer wants to find a job. Thus even if a person does not want to find another job, he still may make the trip to the unemployment office because in effect the government pays him several hundred dollars to make that trip. The principle involved here is the one of moral hazard. Economists have argued that the more generous unemployment compensation payments of the 1970s added about one and one half percent to the normal rate of unemployment compared to the 1950s and 1960s.
Another problem of interpreting unemployment numbers and of comparing unemployment for different years is that changes in the age structure of the population can affect the unemployment rate. There are four sources of unemployment: people enter the labor force, they reenter after temporarily dropping out, they quit jobs, and they are fired or laid off from jobs. Young people seeking their first job will of course undergo a period of unemployment, but young people are also more likely than older workers to switch jobs--which may involve a period of unemployment--and to shift in and out of the labor force as they choose between work and education. As a result, young people have higher rates of unemployment than do those over the age of 25. If the percentage of young people in the labor force rises, one should expect the overall unemployment rate to rise as well. A reason that unemployment rates were higher in the 1970s than in the 1960s is that the percentage of young workers rose in the 1970s as a result of the post-World-War-II baby boom.
Finally, the decision about what constitutes unemployment may change. In 1983 the Labor Department experimented with a second unemployment rate that counted as employed members of armed forces stationed in the U.S. The traditional rate excludes them from the labor force. The reason for considering this alternative series was that "with the change to a volunteer system, military employment is not substantially different from civilian employment."1 If those in the armed forces were counted as employed, unemployment rates would fall by several tenths of a percent.
The question of who is unemployed has much larger implications for the unemployment rates of the 1930s. The official Bureau of Labor Statistics (BLS) figures counted as unemployed all those in various government emergency work programs, such as the Civilian Conservation Corps, the Civil Works Administration, and the Works Progress Administration. In 1938 these programs "employed" 3.5 million workers. If these workers had been counted as employed, as they would be under the present way the BLS measures employment status, the unemployment rates from 1933 until 1942 would have been substantially lower.
There are difficulties with all economic statistics, but the problems do not arise because the people who designed them were stupid or lazy. The problems arise because we are trying to use a single number to summarize a phenomenon more complex than any single number can report. |
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| occrider |
| Good article :). Sorry I caught this so late otherwise I'd respond in full now. But as a preliminary, I'll make a few statemnets. First, it seems that Jackman acknowledges the labor market deficiency in Europe as a legitimate cuase for concern surpassing statistical manipulation. His goal however seems to be to shift the labor market woes from a structural deficiency to a cyclical deficiency. Am I reading his report right? |
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| Blue Balls |
| quote: | Originally posted by occrider
Good article :). Sorry I caught this so late otherwise I'd respond in full now. But as a preliminary, I'll make a few statemnets. First, it seems that Jackman acknowledges the labor market deficiency in Europe as a legitimate cuase for concern surpassing statistical manipulation. His goal however seems to be to shift the labor market woes from a structural deficiency to a cyclical deficiency. Am I reading his report right? |
Yes.
He opines upon the laffer curve dynamics and how higher inflation rates can artifically create lower unemployment.
I can argue that the USA actually has a higher a inflation rate than Germany (not using CPI data , which is a inefficent indicator but rather currency rates ( which take into acount real interest rates) and M3 growth)
He also mentions the cyclical pattern in the age of the work force in comparison to unemployment rate. More youthful work forces have demonstrated to have higher unemployment rates in contrast to older work forces.
He also mentions Sweden which at one time had high unemployment but latter suprised many with a long period of job growth and lower unemployment. All a result of no changes within labor laws,institiutions, or labor dynamics. |
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| Frode |
Unfortunately it won't help at all if many older people retire.
Social benefits in Germany include that you get money from the government once you retire. Everyone has to pay for this retirement insurance and instead of saving it up for each individual, the government uses the money to pay people currently retired.
With less people working this system can no longer be financed. |
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| ::TranceVanDyk:: |
| quote: | Originally posted by igottaknow
The answer is become an...
ANARCHIST |
yea, imagine america being like somalia, an anarchy. ive never seen an anarchy build highways, protect the people from outside invaders, provide a free education, etc. |
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| igottaknow |
| quote: | Originally posted by ::TranceVanDyk::
yea, imagine america being like somalia, an anarchy. ive never seen an anarchy build highways, protect the people from outside invaders, provide a free education, etc. |
if you read your american history you'll learn of the anarchist political movement. btw eduaction is not free its paid for by taxes.
but here's a definition for you noobs
| quote: | | Anarchism is a generic term describing various political philosophies and social movements that advocate the elimination of hierarchy and imposed authority, leading to a society characterised by the ability of each actor to have a say in outcomes proportionate to the degree they are affected by them. These philosophies use anarchy to mean a society based on voluntary cooperation of free individuals. Philosophical anarchist thought does not advocate chaos or anomie — it intends "anarchy" to refer to a manner of human relations that is intentionally established and maintained. |
http://en.wikipedia.org/wiki/Anarchism
If only conservatives realized they are pseudo-anarchists :haha: :haha: :haha: |
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| occrider |
| quote: | Originally posted by Blue Balls
The unemployment data have a number of problems that lead to an understatement of unemployment. For example, the data count as employed all people who are working part time but who would like to work full time. Since these people represent unused labor effort that is available, the unemployment rate understates the extent of unemployed resources in the economy. Another problem that causes the unemployment rate to understate the extent of unemployed resources is the "discouraged-worker" effect. If someone wants to work, but becomes so convinced that there are no jobs available that he makes no effort to find work, he will be counted as "not in the labor force." Since there will be more discouraged workers the more severe the recession, this factor will tend to dampen the fluctuations in the unemployment rate.
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Exactly. As I said in an earlier post, the unemployment rate will never accurately depict underemployment. However, the point I was trying to make is that there are no significant methodological differences between the German calculation of the unemployment rate and the US calculation of the unemployment rate that would significantly understate or overstate unemployment as a relative measure not an absolute measure.
| quote: |
Both part-time workers wanting full-time work and discouraged workers tend to make the unemployment rate lower than it would otherwise be. Working the other way, to increase the unemployment rate above what it would otherwise be, are government payments made to people only if they fit into the "unemployed" category. Unemployment compensation stops if a person announces that he no longer wants to find a job. Thus even if a person does not want to find another job, he still may make the trip to the unemployment office because in effect the government pays him several hundred dollars to make that trip. The principle involved here is the one of moral hazard. Economists have argued that the more generous unemployment compensation payments of the 1970s added about one and one half percent to the normal rate of unemployment compared to the 1950s and 1960s.
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In a recent analysis by Olivier Blanchard, he concluded while there were some fluctuations of the natural unemployment rate in the 70’s due to the implementation of greater unemployment protections, the mid-80’s and onwards saw reforms moving in the opposite direction which have served to eliminate most of the distortions. In analyzing all of the varying labor markets in Europe, he concluded that there was no obvious correlation between the degree of social protection and the unemployment rate in Europe today … citing the labor markets of various Scandanavian countries or the Netherlands which all have high social protections with low levels of unemployment. This would lead credence to the argument that there are structural problems with the German and French labor markets as opposed to institutional problems.
http://econ-www.mit.edu/faculty/download_pdf.php?id=932
| quote: |
Another problem of interpreting unemployment numbers and of comparing unemployment for different years is that changes in the age structure of the population can affect the unemployment rate. There are four sources of unemployment: people enter the labor force, they reenter after temporarily dropping out, they quit jobs, and they are fired or laid off from jobs. Young people seeking their first job will of course undergo a period of unemployment, but young people are also more likely than older workers to switch jobs--which may involve a period of unemployment--and to shift in and out of the labor force as they choose between work and education. As a result, young people have higher rates of unemployment than do those over the age of 25. If the percentage of young people in the labor force rises, one should expect the overall unemployment rate to rise as well. A reason that unemployment rates were higher in the 1970s than in the 1960s is that the percentage of young workers rose in the 1970s as a result of the post-World-War-II baby boom.
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Yes, however, the German labor market is actually aging and contracting:
www.un.org/esa/population/ publications/popdecline/hohn.pdf
Significantly more so than US population ageing:
http://www.aoa.gov/prof/Statistics/statistics.asp
Therefore, the effect you describe above would not explain the labor market disparity between the US and German unemployment rates. Furthermore, just as a minor nitpick, I would argue that a younger work force doesn’t distort the structural or frictional unemployment rate of the labor market, but rather they are more sensitive to the cyclical fluctuations of the economy. In other words, I would say that the nature of the labor market determines the how much structural or frictional unemployment there is as opposed to the age of the labor market.
ftp://ftp.iza.org/dps/dp84.pdf
| quote: |
Finally, the decision about what constitutes unemployment may change. In 1983 the Labor Department experimented with a second unemployment rate that counted as employed members of armed forces stationed in the U.S. The traditional rate excludes them from the labor force. The reason for considering this alternative series was that "with the change to a volunteer system, military employment is not substantially different from civilian employment."1 If those in the armed forces were counted as employed, unemployment rates would fall by several tenths of a percent.
The question of who is unemployed has much larger implications for the unemployment rates of the 1930s. The official Bureau of Labor Statistics (BLS) figures counted as unemployed all those in various government emergency work programs, such as the Civilian Conservation Corps, the Civil Works Administration, and the Works Progress Administration. In 1938 these programs "employed" 3.5 million workers. If these workers had been counted as employed, as they would be under the present way the BLS measures employment status, the unemployment rates from 1933 until 1942 would have been substantially lower.
There are difficulties with all economic statistics, but the problems do not arise because the people who designed them were stupid or lazy. The problems arise because we are trying to use a single number to summarize a phenomenon more complex than any single number can report. |
Yes I would agree with that. My argument however, is that there is no significant methodological difference between the German and US calculation of unemployment. Therefore while some of the disparity can be explained through methodological differences, it would be some stretch of the imagination to conclude that the entire disparity is methodologically related and that the welfare of the US labor market is in any way in the same state as the German labor market. I would argue that the US labor market is relatively healthy, while the German labor market has some serious structural problems.
| quote: | Originally posted by Blue Balls
Yes.
He opines upon the laffer curve dynamics and how higher inflation rates can artifically create lower unemployment.
I can argue that the USA actually has a higher a inflation rate than Germany (not using CPI data , which is a inefficent indicator but rather currency rates ( which take into acount real interest rates) and M3 growth)
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I dunno if I would go that far. I actually like the CPI and the PPI as measures of inflation. Most of the studies I’ve read on the CPI have stated that it has a tendency to overstate inflation by about a percent. The only problem I have with using exchange rate depreciation is that they are not necessarily leading indicators of price changes at the retail level. It ignores all consideration for how closed or open the economy is with respect to the fraction of goods and services consumed that are produced domestically. In addition, research indicates that the pass-through of exchange rate fluctuations is not instantaneous, complete or constant even for the prices of imported goods much less domestic goods!
http://www.newyorkfed.org/research/...ports/sr149.pdf
| quote: |
He also mentions the cyclical pattern in the age of the work force in comparison to unemployment rate. More youthful work forces have demonstrated to have higher unemployment rates in contrast to older work forces.
He also mentions Sweden which at one time had high unemployment but latter suprised many with a long period of job growth and lower unemployment. All a result of no changes within labor laws,institiutions, or labor dynamics. |
I’m not arguing that Germany’s labor woes are dictated by socialism or their labor market protections. The scandanavian countries are operating just fine with their labor protections. If you highlight my previous posts (I changed the text to black as a joke) I argued that the labor woes of Germany (and to a lesser extent France) are specific to the macroeconomic conditions of the two countries to which their social systems play a part of the problem.
Cheers, nice to have another economist around :) |
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| St_Andrew |
| quote: | Originally posted by Blue Balls
He also mentions Sweden which at one time had high unemployment but latter suprised many with a long period of job growth and lower unemployment. All a result of no changes within labor laws,institiutions, or labor dynamics. |
sweden did however change a lot of its policies to archive that. but yeah it had nothing to do with labour laws. |
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| Blue Balls |
occrider,
I am impressed with your knowledge of economics. I love having these converstations.
I think I am going to make sure to participate more in this area of the forum. It seems more educated people frequent it. |
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| occrider |
| quote: | Originally posted by Blue Balls
I think I am going to make sure to participate more in this area of the forum. It seems more educated people frequent it. |
Well not many know it, but this forum is where the ruling intelligentsia of TA actually resides. All the power deals and policies are brokered in here ... in the Israel vs. Palestine threads as a matter of fact, disguised as flaming to the uwitting unless you have a secret decoder ring :p. |
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| Capitalizt |
| I recall reading somewhere that the "Scandanavian" countries the left usually holds up as an example of successful lefty/socialist policies are only succeeding because they have a massive amount of natural resources (oil/gas) that they export each year. The average person in Holland I believe only works 170 days out of the year, given that unemployment and "sick" days are fully covered by the government. It seems the only way this system has been sustainable is because they have been exporting huge amounts of oil/gas for the past few decades. The income from this is what funds their generous welfare state. When the gravy train runs out, and the holes run dry, they are going to be in a world of pain. 55% of the population (workers) simply can not support the other 45% of population (retirees and people permanently on the dole). |
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