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This article is on job creation in our economy is interesting, thought-provoking and uplifting. Hope you like it. Worth sharing.

http://www.nytimes.com/2003/11/07/opinion/07COXX.html?th

The Great Job Machine
By W. MICHAEL COX and RICHARD ALM

DALLAS

Apparently unconvinced by last week's eye-popping growth figures, economic pessimists remain fixated on the labor market. Today's release of the Labor Department's latest employment figures, we are told, will give a true picture of the pace of economic recovery.

But the monthly statistics, while relevant within the larger context of all economic indicators, don't tell the whole story of what is happening with Americans' jobs. Focusing on net employment gains or losses misses the real show, the long-running drama that drives the economy forward.

While it may seem that little progress is being made on the jobs front, beneath the surface the economy is doing what it's done for decades: orchestrating a relentless and enormous recycling of jobs and workers.

Large-scale upheaval in jobs is part of the economy; the impetus for it comes from technology, changing trading patterns and shifting consumer demand. History tells us that the result will be even more jobs, greater productivity and higher incomes for American workers in general.

New Bureau of Labor Statistics data covering the past decade show that job losses seem as common as sport utility vehicles on the highways. Annual job loss ranged from a low of 27 million in 1993 to a high of 35.4 million in 2001. Even in 2000, when the unemployment rate hit its lowest point of the 1990's expansion, 33 million jobs were eliminated.

The flip side is that, according to the labor bureau's figures, annual job gains ranged from 29.6 million in 1993 to 35.6 million in 1999. Day in and day out, workers quit their jobs or get fired, then move on to new positions. Companies start up, fail, downsize, upsize and fill the vacancies of those who left. It is workers' migration to new and existing jobs that keeps the country from sinking into some Depression-like swamp.

Yes, this disruption can be very hard on some workers who lose their employment and have trouble adapting. But in the larger sense, the turmoil in the labor market is vital to economic progress. A good part of the turnover takes place in a handful of industries, like restaurants and retailing, but to greater or lesser extent the churning grinds on across the board, in bad times and good. Tallies of net jobs lost or gained capture only a fraction of the flux in the job market. As this plays out, most workers end up better off.

Societies grow richer when new products emerge that better meet consumers' needs, and when producers adopt new technologies that reduce costs by making workers more productive. In a dynamic, innovative economy, these forces unleash waves upon waves of change. Some industries and companies prosper while others wither. Some companies find themselves with too many workers while others struggle with too few. A free-enterprise system responds by moving resources — in this case workers — to where they're more valuable.

For example, e-mail, word processors, answering machines and other modern office technologies are cutting jobs for secretaries but increasing the ranks of programmers. The Internet opened jobs for hundreds of thousands of Webmasters, an occupation that didn't exist as recently as 1990. Digital cameras translate to fewer photo clerks.

A century ago, 40 of every 100 Americans worked on farms to feed a nation of 90 million. Today, after one of history's most brutal downsizings, it takes just two agricultural workers out of 100 workers to supply an abundance of food to a nation more than three times as large. Suppose we'd kept 40 percent of our labor on the farm. Absurd, yes, but if we had, we wouldn't have had enough workers to produce the new homes, computers, movies, medicines and the myriad other goods and services of our modern economy.

Likewise, the telecommunications industry employed 421,000 switchboard operators in 1970, when Americans made 9.8 billion long-distance calls. Thanks to advances in switching technology, telecommunications companies have reduced the number of operators to 78,000, but consumers ring up 98 billion calls. Let's face it: Americans are better off with more efficient long-distance service. To handle today's volume of calls with 1970's technology, telephone companies would need 4.2 million operators, or 3 percent of the labor force. Without the productivity gains, a long-distance call would probably cost 40 times what it now does.

Microeconomic failure is not macroeconomic failure. Quite the opposite, "failure" is the way the macro economy transfers resources to where they belong. It is the paradox of progress: a society can't reap the rewards of economic progress without accepting the constant change in work that comes with it. Efforts to soften the blows, by devising policies or laws to preserve jobs or protect industries, will lead to stagnation and decline, the biggest threat to American workers.

Job losses for farm hands and telephone operators came so long ago that they don't sting anymore. Today we see the benefits clearly and forget the costs. That's harder to do in the short term — it rightly distresses us to see newspaper photographs of laid-off industrial workers. But these are the economic forces that raise living standards.

Since 1980, Americans have filed 106 million initial claims for unemployment benefits, each representing a lost job. Facing unemployment and rebuilding a life can be hard on families, but the United States today is better off for allowing it to happen. Even with the net decline in jobs over the past three years, during the past decade total United States employment has risen to 130 million from 91 million since 1980, a net gain of nearly 40 million jobs. Productivity, measured by output per worker, increased a staggering 56.2 percent.

Some people tend to forget this. The almost daily drumbeat of reports and "expert commentary" about a so-called jobless recovery prompts the question, "What's gone wrong with the labor market?"

The surprising answer: nothing.

Job growth will come, as it always has in the past. The economy, meanwhile, is as busy as ever in shifting labor from one use to another to make the country richer and more productive.


W. Michael Cox, chief economist of the Federal Reserve Bank of Dallas, and Richard Alm are co-authors of "Myths of Rich and Poor."
 

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...Free market in a nutshell.

I think a small majority of the liberal elite in this country actually understand this logic. Some, of course, are true blue socialists or communists, and will never understand. But either way, there is one common thread. A free market, uninhibited by useless regs and rules that artificially prop up failing systems, is not conducive to a soci-commie administration, mainly because in such a system people are not rewarded for being dependent on entitlements and handouts.

Imagine if there were a lasting policy of 'saving' every last job: we'd still have stage coach drivers, and old guys lugging big 'ol blocks of ice up ten flights of stairs...ridiculous.
 

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This maybe a sidetrack but all these jobs that have been lost are they just the "upper end" jobs? I am looking for a part time job for Xmas - 15 hours a week after my full time job. I know my papers are full of jobs. Granted many of them are in the $10 per hour range but there are a boat load of them in my area.

Is it that our mentality has changed? The old mentality of "I will work two jobs to support myself and family until something better comes along." Maybe it is just me as I was raised by my grandfather and missed a whole generation of ideals.
 

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I'm doing it right now. My wife had our twins 7 weeks ago. Since she's not working, our income is cut almost in half. So I'm taking on part time work landscaping and building decks, etc. Sure, she wasn't laid off, but it's the same thing. The fact is, a man should do whatever he has to do to support his family, and not look to the govt to help (that's what family is for, if you're willing to take it). I think that mindset is largely a thing of the past, and deferred to a "I deserve" mindset. All you deserve is what you earn...nothing more, nothing less.

BTW, she isn't gonna go back to work. She's gonna be a mother and raise our kids! What a concept!
 

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I think this is a bit optimistic/simplistic and I don't see any good news in it.

There is a big difference between gaining efficiency through technology (telephone operators) and losing entire industries to other countries. It is my opinion that we are in a process of equalization with the rest of the world and in 10-20-?? years, our standard of living will be greatly reduced.

Sure, the number of jobs may seem the same, but I don't think you'll find too many skilled workers who prefer their new jobs at Wal-Mart over their previous professions. My guess is that an economy can only support a limited number of service jobs and some of us may not even have Wal-Mart as an option.
 

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Re: Losing entire industries to other countries

I am certainly not for propping up/subsidizing industries that can't compete. The 'self correcting' free market weeds out those who don't provide a quality good or service for a competitive price, thus ensuring a stream of high quality, lower priced G & S's.

Part of the problem, as I see it, is that American companies are directly competing with industries overseas who are subjected to a fraction of the rules and regs that companies in the US are (minimum wage, et al). It's hard to blame someone for moving their operations to a place where they can actually compete on a global level. It's exactly the same as all those businesses leaving California to escape persecution (only in many cases they still stay in the US).

Ceteris parabis, tarrifs and other trade restrictions are a bad idea, but when industries are at an inherent disadvantage due to govt regs, I think an argument against them becomes harder to make.

Prime example: The timber market: Canada owns the vast majority of timber land in that country. They subsidize the industry buy selling timber contracts at far below market value. Therefore, companies can harvest timber, make them into various products, AND ship them 2000 miles, flooding the market with timber that costs them, say, $1 per board foot, whereas a company here in AL has a hard time realizing a profit on timber logged in state, at a cost of, say, $2 per board foot. It doesn't sit well with me to impose a tarrif on Canadian softwood lumber, but at the same time, the US timber industry is at a disadvantage because our govt doesn't subsidize the industry (and in AL, for example, 95% of the timber land is privately owned).
 

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Re: Re: Losing entire industries to other countries

Forstr said:
Part of the problem, as I see it, is that American companies are directly competing with industries overseas who are subjected to a fraction of the rules and regs that companies in the US are (minimum wage, et al). It's hard to blame someone for moving their operations to a place where they can actually compete on a global level. It's exactly the same as all those businesses leaving California to escape persecution (only in many cases they still stay in the US).

Ceteris parabis, tarrifs and other trade restrictions are a bad idea, but when industries are at an inherent disadvantage due to govt regs, I think an argument against them becomes harder to make.
I agree entirely. Rules, Regulations, and Taxes to be specific.

In several other countries, government actively assists businesses. It seems like business is just looked at like deep pockets for the social agenda in our country.
 

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Re: Re: Re: Re: Losing entire industries to other countries

DHMeieio said:
Government here, contrary to some folks' notions, quite actively obstructs businesses.
I'll agree with that too.

Our government is more concerned about providing a tax funded retraining program for those who lose their jobs to NAFTA as opposed to doing what's necessary to help US companies succeed under NAFTA.

Another one of our many great gifts to the world.
 

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Re: Re: Re: Re: Re: Losing entire industries to other countries

James said:
I'll agree with that too.

Our government is more concerned about providing a tax funded retraining program for those who lose their jobs to NAFTA as opposed to doing what's necessary to help US companies succeed under NAFTA.

Another one of our many great gifts to the world.
James, what do we need to do help US companies succeed under NAFTA? Really want to know.
 

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I see a huge increase in the number of jobs being sent to India - these are almost all 'terminal' jobs - some high paid, some low paid - but there's a huge flux of jobs moving that way.

Basically, if you're job involves a computer, that work can go overseas - no reason except the business want more profit - if all those jobs go, there's less money being spent here in services/products that are based here.
 

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Discussion Starter #11
BerKim said:
I see a huge increase in the number of jobs being sent to India - these are almost all 'terminal' jobs - some high paid, some low paid - but there's a huge flux of jobs moving that way.

Basically, if you're job involves a computer, that work can go overseas - no reason except the business want more profit - if all those jobs go, there's less money being spent here in services/products that are based here.
There is a good ongoing discussion of this subject on the Lou Dobb's show on CNN. He takes it seriously and discusses it often with business and government types. It is certainly something that's having an impact.
 

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DHMeieio said:
Reducing costs is usually necessary for competitive reasons.
I don't see it that way - we made ~ $3B Net profit last quarter. there's lots they can do before shipping all these jobs overseas.

Being a computer geek, my job's going, not if, but probably when.
 

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Boy is that true!

DHMeieio said:
On what revenues? That number by itself means nothing.
On what revenues is a great question.

There's another statistic that can be misleading. You may remember times when some critic complains that a company or industry is greedy by citing a 100% increase in profits. What they don't say is that last year the net profit was 3% and this year it's 6%, giving a 100% increase in profits.

In the previous example of $38 million net profit, what percent profit is that of gross revenues?
 

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Re: Re: Re: Re: Re: Re: Losing entire industries to other countries

tonerguy said:
James, what do we need to do help US companies succeed under NAFTA? Really want to know.
Slashing taxes and reducing the number of bureaucratic hoops businesses have to jump through would be a great start. I know theres an ad that plays locally saying that there are 30 some federal state and local organizations that have regulations that businesses in WA must comply with in order to stay in business.

Compare that to other locations where they set things up so as to entice business and you see what happens.

Yesterday I read about how some internationalist organization was decrying how it was "unfair" the way certain countries with low tax rates and wage requirements were enticing businesses and jobs from European socialist countries with 70% tax rates, mandatory 3 month vacations, family leave, pregnancy leave, skyhigh minimum wages, etc.

:biglaugh:
 

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Re: Re: Re: Re: Re: Re: Losing entire industries to other countries

tonerguy said:
James, what do we need to do help US companies succeed under NAFTA? Really want to know.
I think Mus summed it up real well.

In addition to the taxes businesses have to pay, there are enormous expenses related to benefits (medical, dental) and social programs (Social Security, Unemployment, Workers Comp) that US business are expected or legally required to pay. On top of that, OSHA and the Dept of Labor tend to be adversarial to businesses and OSHA is more than happy to fine for the smallest items. Beyond the required costs associated with these items, there is the sad fact that the United States is an overly litigious society with very little protection for the party being sued. Huge settlements are often awarded to those injured on the job. Associated with our complicated tax system is the endless army of accountants and lawyers that must be kept on hand for tax strategies, compliance, etc. etc. I know this provides jobs but it would be like a bunch of us sitting in a circle passing the same $5 bill around.....we all get paid...but nothing tangible comes from it and we have nothing to sell to another country (the source trade growth or in our case - deficits).

Most of this stuff is a lot more relaxed in Mexico and Mexico is where we lost most of our jobs as a result of Nafta.

BUT, even Mexico is feeling some pain from China and other Southeast Asian labor markets. Mexican workers cost about $5/hr at some point while ours cost about $20/hr. Asian labor was at about .50 cents. In addition, I think you'd find that their working conditions still aren't up to US standards/regualtions.

I could go on forever especially if I did some digging through my stuff. The gist of it is that "free trade" is not all good. I am not saying we should revert back to sweat shops and child labor BUT, I think we need to be real careful about the agreements we enter into. Sure, the whole world will gang up on us and bully us into giving away our jobs (see 2.2 billion dollar "fine" that the EU and others want to impose on the US for steel tariffs) because they have figured out we are likely to give them away.

The government could help US companies compete by giving tax breaks/incentives (not subsidies) to companies (especially manufacturers) who employ US workers. They could make compliance with IRS/Labor/Osha/EPA regs easier to follow and adopt a cooperative role as opposed to an adversarial. We all know some kind of tort reform needs to take place and I think this will help US businesses as well. And I am all for a serious reduction in these big handouts of taxpayer money for economic assistance and some good old fashioned protectionism against unfair competition.

I guess Nafta is kind of passe but this conversation made me think back to when all of that was going on. In my opinion, very little was done to ensure that "free trade" would happen in a fair manner. Also, I am pretty sure this NAFTA retraining program has been extended to cover job losses to China. It is a pretty sorry program as it is but the thought put into it could have been better used in thinking about the migration of jobs.
 

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James has it right...

"there is the sad fact that the United States is an overly litigious society with very little protection for the party being sued"

This is a fact that goes unnoticed far too often. As a society, we have become very lazy, and often look toward the legal system to make up for our lack of ambition, shortcomings, an childish irresponsibility. Individuals see a big payday, while our businesses, economy, and way of life suffer. Some folks abuse the law as if it were a controlled substance.:mad:

Sorry, this is a real sore spot with me.

Be well!
 
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