Decades ago, not many people go to college. Most people graduated fresh from highschool and found good jobs. Nowadays, this is unimaginable, as everybody who wants a half-decent jobs need a college degree. Even people with higher qualifications such as masters or Phds often have problem finding jobs.
It is basically a buyer's market now, with the employers have the upper hand. An employer opens up a position and 10s or 100s resumes floods in. Compared to the old times, you didn't even need much experience, and employers were happpy to employ newly graduates.
So what has changed? My suspicions are as follows:
The declining population: most Western countries have low natural growth and even negative growth (e.g. Germany). This shrinks the job market and makes younger people harder to get jobs as easily as their previous generation do, especially the baby-boomers generation.
The "free trade". Yeah right, you hear this right. While free trade benefits, it has drawbacks as well. In the old time, when the manufactoring sectors were stil intact as well as many low-skill jobs in the States, it had to employ a lot of people, "absorbing" a lot of population. Nowadays all these jobs are outsourced to countries like China and India, so the same kind of people in the older generation who could easily get a low-level job now have to gain a college degree because the low-level jobs don't exist any more! This puts extra pressure on the people who go to college because now so many people HAVE to have a college degree, and because of this, college degree devalues significantly. So the end result is everybody got to have college degree now, today's college degree is yesterday's highschool diploma.
Employment laws: minimum wages, need I say more? Everybody here should know about it. And in many Western countries, it is hard to fire someone, which makes the employers much more cautious in choosing the right candidate than before. Connections becomes increasingly important, since it reduces the information cost, so the employer knows what kind of candidate he/she is. Interviews become much more prolonged and complicated than before, often invovling multiple rounds of interviews, asking all kinds of ridiculous, pointless questions. And this even prompt the emergence of recruitment agencies. You don't have this kind of agencies decades before. Their very existence siginals that the labor market now favors the employers, and it is filled with "too many" potential applicants.
Feel free to discuss. I really want to know. Add your thoughts!
It seems to me the bottom line is whether there is a pool of labor or a lack of such a pool. Europe has chronic unemployment, meaning there is a huge pool just waiting to work. So that declining population seems irrelevant.
Nowadays all these jobs are outsourced to countries like China and India, so the same kind of people in the older generation who could easily get a low-level job now have to gain a college degree because the low-level jobs don't exist any more!
But why are they being outsourced to China? Why weren't they outsourced to China or some other country many years ago as well? I found this article very enlightening. Especially interesting is the section called "Fair" Trade, where he talks about why wages are different in different countries.
Bottom line, in any country, the employer gets what he pays for. And if he is not hiring US workers and is instead outsourcing to China, it is because he is being forced by foolish laws to pay more than his money's worth for US workers, so he instead goes to China. Europe is suffering chronic unemployment, and the laws there make it impossible to fire workers, no matter how incompetent, an incredible financial burden on employers. Are those two facts unrelated? Seems logical to say the second is cause of the first. Similarly, the US has all kinds of insane laws that burden an employer every time he hires a worker. With Obamacare it will be worse, and indeed the layoffs are beginning.
This puts extra pressure on the people who go to college because now so many people HAVE to have a college degree, and because of this, college degree devalues significantly. So the end result is everybody got to have college degree now, today's college degree is yesterday's highschool diploma.
Many people with college degrees will tell you the stuff they learned in college did not make them more qualified in any way for the job they have, or would like to have. There is a different reason everyone nowadays needs a degree to get a job, mainly the govt getting involved in student loans. Long story, fingers tire. I'm sure you can search for info on this site.
...the labor market now favors the employers...
What exactly does this mean? That there are more people looking for jobs than jobs available? What happens when there are more apples than people who want to eat them? The price of apples goes down until the market clears. That is what should happen with labor as well, just like anything else. Why isn't it? The answer is that the expense of hiring a worker cannot go down, even if the worker is willing to work for less. The laws have increased the costs of hiring workers beyond their productivity.
I know of someone who has a very small business. I've seen his books. He has to pay social security, unemployment insurance, medicaid, and who knows what else, all over and above the minimum wage. He once fired someone for incompetence, aka drinking himself to a stupor on the job. Result? His unemployment insurance went up for all his workers, because the state claims he has shown himself to be the kind of employer who fires people, thus increasing the states' unemployment payments. So every time he fires someone for any reason, he instantly loses money every pay forever. His response to the situation: I'm not going to hire anyone from now on if I can possibly help it.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
And a century ago, even fewer people went to college and almost all people apprenticed including doctors, lawyers and engineers. There was no university in Athens, or Rome, or Florence, or Germany in the Enlightenment. College is a relatively new concept based upon the destruction of development of the young by public education. Look up a 6th grade test on the internet from 1890 and try it. It is not easy.
But the value of a college degree at this point in time is dubious as the people are getting them just to say they have them, my mother finished her nursing degree when she was 60. Furthermore there is a mountain of propaganda from the University-Government-Banking Complex that is trying to get students to take on huge debts with no recourse but to work for the government to get them forgiven. Then all of the income statistics are skewed because these include certified professions, people who failed at college and people who could not pass college. If you adjust for these groups then you will find that the income differences between college and non-college graduates is not that large at all.
And outside of govenrment, the employment prospects for non-college graduates are probably better as they can at least enter the work force and not be over-qualified for labor force entry positions.
While I won't necessarily disregard the factors you suggested, I think one of the main factors that drive unemployment figures up is the general means and disposition of people not to work for a living.
In the past, people needed to work more than they need today. When being out of a job in practice meant having to eat leftover soup and stale bread everyday people looked more avidly for jobs and took whatever opportunity was offered.
In present modern society, the necessity for a given individual to work for a living is comparatively low, due to the large amounts of capital that are somehow available to almost everyone. People can afford being unemployed, either because they are backed up by relatives, by friends, by religious and other non-profit charities or even by the dreaded tax-funded bureaucracies set up by politicians.
Of course this presentation would be scarcely accepted as a politically compelling answer, since it doesn't fit any ideological predisposition either for the left or the right of the spectrum, perhaps a fact which further indicates it's plausibility.
That conclusion isnt logical on its own. Yet, the overall "decline" certainly plays a part in the game.
First of all, there is a connection between economic growth (and general optimism in society) and birth rates. If you plot (economic) growth rates against birth rates, you would easily see a correlation between the two.
Some of the most impressive "baby booms" were for instance Nazi Germany, or the post war U.S., reflecting general optimism within a society. Economic cycles do just as much represent this kind of (changing) optimism.
Low birth rates on the other hand impact the economic outlook. Without the prospect of long term growth, investment becomes less attractive. In this way, the lack of labor force could actually drive unemployment. Yet I would consider this aspect less important.
The most important factor for the difficulty in finding a job, is a poorly performing economy. Ever since the mid 70ies, western economies were into trouble. First of all you need to see what growth actually is: it is naturally limited to the manufacturing sector The service sector can grow by increasing the amount of labor employed, but it is impressingly immune to productivity gains.
Imagine a hair dresser, a plumber, a shrink, a prostitue if you will - how should they become more productive? There might be minor improvements in efficiency, but over all, it is not possible. This is contrasted by manufacturing, where technology and capital accumulation make all the difference.
Manufacturing however is into trouble, as we all know. This sector vulnerable to the supply of energy and raw material, and exposed to competition from abroad.
What we have gone through was a two staged shock to industrial production.
1. The oil crisis in the 70ies and 80ies. Ever since then, growth of industrial production was seriously restricted, income was redistributed towards oil exporting countries.
2. The "free trade" that there is not. In fact, trade has hardly been as unfair and unfree as it is today. Manipulating exchange rates is the most effective way of protectionism. It works both ways, effecting the trade account just as much as the capital account (excluding the currency account, which on its own is reflecting the intervention the central bank).
3. On top of that, there is the intend to bring down the rest of the shrinking industry for the sake the environment.
So what we can witness on the job market, is the fact that there is no economic growth. Thus there is no need for additional labor force. There is only the need for labor force to feed itself.
So the labor market is dominated by the supply side. People need to work, manufacturing however is a no go zone, for the reasons named above. Hence work force pushes into the service sector, supplying much more services than any one needs.
Everyone will seek to justify "his service". Special interest groups will seek to bargain a larger share of income for the service providers they repsresent, like for example the health sector, defence sector, fincancial sector and so on...
But even on a very low level, people will try to force their services on you. Like cleaning your windshield, without having you ask for it..
So.. it aint complicatied, it is just a long winding economic down turn.
The population of the USA is expanding not declining. Sure, birthrates of people of European descent and African Americans are dropping but that is being countered by increases in birth rates among Native Americans and immigration from Latin America, Asia and Africa. So there is no decline.
Now onto the economic outlook. Simply this is the result of turning to a system of fiat money that does not grow the economy but just creates the boom and bust cycle.
You are correct that the solution is not complicated. Government has to stop spending money created by the central bank, and the central bank has dissolve. Only then will true interest rates convey correct information to entrepreneurs and consumers.
Skills. Skills matter. Fiding a job is actually easy if you have the skills in demand. A lot of people take the easy route and major in garbage like Sociology and Psychology and wonder why they have no job.
I dropped out of college after 1 year. I had little to no skills and could not find a job. That was until I decied to train myself and was given a hand up by a private ot for profit institution that trained me in the I.T field and paid for my 3 I.T ceritfications. Since then I have been able to actually land a job and I'm still below 30.
Certifications IMHO are more important then some college degree. If you have some technical skill then you can find a job easily. Read lots of books not just about Austrian Economics, History, Gold and ect. Read technical books like Java, C#, C++, Perl, App development, Operating Systems or learn how to physically build stuff. Basically it's all about learning a trade and you are marketable for life.
+1
I saw this thing, said that if they counted jobless numbers the way they did during the great depression, our jobless rate would be about 24%.
So, perhaps the current difficulty of finding a job is about as hard as it was then.
^ Can you source that by any chance?
Unfortunately no, I don't trust the source and couched my language because of that.
Best I can find on short notice is a guy claiming 16-17% real unemployment when adding in the people who have stopped looking:
"Even if we include the highest estimates – which include people discouraged from looking for a job, thus not registered as unemployed – the jobless rate reached around 16-17 percent. It’s a jobs disaster, to be sure, but not the same scale as the Great Depression."
The government adds roughly 30% expense in addition to an employee's wages for the employer. This is without considering the regulations they might run afoul of or become subject to if they expand their business beyond a certain size, e.g. mandatory healthcare provisions. Combine this with uncertainty as to future regulatory developments, a lack of appetite by the banks to lend and businesses to invest due to poor economic conditions, and then you can ask yourself, why would anyone hire? I wouldn't.
I do agree that the ballooning of the service sectors is in part to blame as well, as barring highly specialised jobs, e.g. accountancy, medicine, IT, these are paid less than manufacturing jobs because they produce less of value. The service sector should ideally increase the efficiency of manufacturing and provide services for personal consumption. Due to the government and the games it plays, the service sector - and in particular banking and insurance - are monstrous behemoths. It has proven more profitable to specialise in these industries since countries like the US can exchange junk debt for real goods. This is to China's detriment. It will suffer a huge loss of wealth in the future when it accepts this fact. The artificial profitability of the service sector has, nevertheless, lead to it crowding out manufacturing. I would expect services such as accounting to remain valuable absent the government due to e.g. the need for firms to control costs and be transparent for investors, but in large part it is the government that spawns the need for them at present.
I disagree that innovations cannot make services more efficient, even significantly so, but yes, there's probably greater diminishing returns involved here. Medicine for example has seen huge advances, not just in the capital goods the service provider uses, but also in the refinement of its techniques. It is a pure service, nonetheless. Services, to the extent that they assist production, do so by controlling its efficiency and acting as the interface and communication chain for the manufacturing process.
Freedom of markets is positively correlated with the degree of evolution in any society...
Medicine for example has seen huge advances
I would disagree on that. Sure, I will not deny that services can become more efficient in some areas. We may also question what is a service, and what is production (or creation). For instance software engineering looks much more like production to me.
Pharmaceuticals or advanced X-ray equipment are all industrial products. We might argue, that medical services became more efficient by capitalising from these newer technologies. And that may well be true.
But: you should not confuse reality with medical professionals boasting. What the average doctor usually does, is very unspectacular and usually full of flaws. When a face gets transplanted, there will be plenty of media coverage. The fact that are millions of wrong diagnosis, hundred thousands of deaths due to malpractice, gets rather ignored however. That is, not by econometrics who would count even these "services" into the gdp..
Most new medications today have little or no additional value, whereas a lot of usefull medications get discontinued when they are not profitable enough.
And there is another phenomenon I dont really understand. An abdominal computer tomography costs aroung 350 Euros (about 500 Dollars) in Austria, but aroung 2000 Dollars in the USA. I am afraid prices in the american health care sector are not reflecting costs, or technological progress, but are rather artificially overrated.
NonAnti: Shadowstats has the unemployment rate in the low-20's.
Clayton -
People keep cutting down the job trees so not as many jobs are blossoming for our use.
How do you decouple them from the services they're intended to facilitate, though? Yes, they are most certainly capital goods. As such, they can improve the efficiency of their operator.