Unemployment and Populism

[Malice]

“One of the great mistakes is to judge policies and programs by their intentions rather than their results.” ― Milton Friedman ·

"I can't imagine how it could be a bad thing." This kind of mentality is a large part of the reason why populism/leftism has the support it does today, particularly among the youth. It simply sounds good, the mentality of these people isn't particularly complex.

Let's examine Europe via two good articles illustrating the very real harm these policies can have:

Why France Has So Many 49-Employee Companies

http://www.businessweek.com/articles...oyee-companies

Here’s a curious fact about the French economy: The country has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones. “I can’t tell you how many times when I was Minister I’d meet an entrepreneur who would tell me about his companies,” Thierry Breton, chief executive officer of consulting firm Atos and Minister of Finance from 2005 to 2007, said at a Paris conference on April 4. “I’d ask, ‘Why companies?’ He’d say, ‘Oh, I have several so that I can keep [the workforce] under 50.’ We have to review our labor code.”

While polls show job creation and the economic crisis are the top issues for voters in the May 5 second-round vote for president, neither President Nicolas Sarkozy nor Socialist challenger François Hollande are focusing on Breton’s concern. Companies say the biggest obstacle to hiring is the 102-year-old Code du Travail, a 3,200-page rule book that dictates everything from job classifications to the ability to fire workers. Many of these rules kick in after a company’s French payroll creeps beyond 49.

Tired of delays in getting orders filled, Pierrick Haan, CEO of Dupont Medical (not to be confused with chemical company DuPont (DD)), decided last year to return production of some wheelchairs and medical equipment to France. The 150-year-old company, based in Frouard in eastern France, created 20 jobs making custom devices at a French plant—and will stop there. Faced with France’s stifling labor code, Haan probably will send any additional production of standard equipment to what he calls “Near France”—Tunisia, Bulgaria, or Romania. “The cost of labor isn’t the main problem, it’s the rigidities,” Haan says. “If you make a mistake in your hiring plans, you can’t correct it.”

There are now 2.9 million people out of work in France, almost 10 percent of the workforce and the most in 12 years. “For the 100 employees we have in France, we have 10 employee representatives, for whom we have to organize weekly meetings even when there is nothing to discuss,” Haan says. “Every time a social security contribution changes, which is frequently, we have to update software and send our HR people for training. We can’t fire anyone without exorbitant costs.”

The code sets hurdles for any company that seeks to shed jobs when it’s turning a profit. It also grants judges the authority to reverse staff cuts years after they’re initiated if companies don’t follow the rules. The courts even deem some violations of the code a criminal offense that could send executives to jail.

Software maker Viveo Group, an arm of Geneva-based Temenos Group, began the required talks with the workers’ council in February 2010 because it wanted to cut about a third of its 180-member staff, according to court records. Viveo offered employees a voluntary departure plan in June of that year as the council dragged its feet on evaluating the earlier proposal, court records show. The workers’ council then went to court to block the cuts. It won a ruling against the original plan in January 2011 on the grounds that Viveo was forecasting an 18 percent increase in sales, meaning its future didn’t depend on the layoffs. France’s highest appeals court is reviewing the decision and is expected to rule on May 3. “What holds back hiring in France is the lack of clarity on how to legally cut jobs,” says Déborah David, a labor lawyer at Jeantet Associés in Paris who has followed the case. If the decision is upheld, Viveo will have to take back the workers and hand over two and a half years in back pay, she says.

When courts don’t intervene, politicians often do. After the owners of the Lejaby lingerie factory in Yssingeaux won court approval in January to fire about half their 450 employees in France and shift production to Tunisia, the company found itself thrust into the center of this year’s campaign. Sent by Hollande to visit the plant, Socialist legislator Arnaud Montebourg told the workers they “symbolized the situation of the country.” He promised his party would work to bring back jobs that have gone abroad over the past decade if it won the election. Sarkozy vowed to save the plant and took credit for orchestrating its takeover by LVMH Möet Hennessy Louis Vuitton (MC), which is converting it to leather goods production.

Hollande makes no mention of labor regulations in his platform, which seeks to generate jobs through tax incentives and government hiring, such as creating 60,000 new teacher posts. He said on April 25 that if elected he would act to counter “a parade of firings” expected after the election: Companies may be holding back job cuts until then to avoid drawing political heat.

Worker groups say the code itself isn’t the issue. “If the code is complicated, it’s because our society is complicated,” says Bernard Vivier, director of the Higher Institute of Labor in Paris, which studies labor relations for unions and companies. “Cars are much more complicated today than they were 40 years ago. Why shouldn’t the labor code be?”

The bottom line: With 2.9 million people out of work—the worst joblessness in 12 years—France may need to overhaul its rigid labor laws.

The Systemic Siesta

http://mises.org/daily/6052/The-Systemic-Siesta

With victories over the Germans in the 2008 European Football Championship and during the 2010 World Cup, there is little doubt that the Spaniards have the upper hand on the soccer field. Yet while Spaniards have had much to cheer about in the soccer world over the last five years, the economic situation is a world removed.

Spanish unemployment is now hovering around 23 percent, with over 50 percent of youths jobless. Only around 6 percent of Germans are without work, almost the lowest level in the country since reunification. This divide solidifies Spain's position among the worst-performing economies of the continent, and Germany's vaunted position as among the best.

Yet such a situation might seem paradoxical. One could, for example, look at the wage rates of the respective workers and find that low-cost Spaniards are much more affordable. Profit-maximizing businesses should be expanding their facilities to take advantage of the opportunity the Spanish crisis has provided and eschew higher-cost German labor.

While fixating on nominal labor costs might provide a compelling case for a bright Spanish future, delving into the details provides some darker figures.

One of the main differences between Germany's and Spain's labor markets is their minimum-wage rates. A Spanish minimum-wage worker can expect to earn about €633 per month. Germany on the other hand enforces no across-the-board minimum wage except in isolated professions — construction workers, roofers, and electricians, as examples.[1]

German employees are free to negotiate their salaries with their employers, without any price-fixing intervention by the government in the form of wage control. (This is not to imply that the German labor market is completely unhampered — jobs are cartelized by industry each with its own wage controls. While this cartelization is not perfect, it does at least recognize that a one-size-fits-all minimum-wage policy is not optimal for the whole country.)

As an example of the German approach to wages, consider the case of a construction worker. In eastern Germany this worker would make a minimum wage of around €9 per hour. His counterpart in western Germany would earn considerably more — almost €11 an hour.[2] This difference allows for productivity differences to be priced separately or local supply-and-demand conditions to influence wages. Working for five days at eight hours a day would yield this German worker anywhere from €360 to €440.

It is obvious that the German weekly wage is almost as high as the monthly Spanish one. What is less obvious is why Germans do not move their facilities to lower-cost Spain.

As the old saying goes, "the more expensive you are to fire, the more expensive you are to hire." If a Spanish company decides to lay off an employee, the severance payment for most labor contracts (a finiquito in Spanish) will amount to 32 days for each year the employee has worked with the company. Although this process is not simple in Germany either, there is no legal severance requirement that companies must pay to redundant workers. The sole requirement is for ample notice to be given, sometimes up to six months in advance. If a Spanish company hires a worker who does not work out as intended, a substantial cost will be incurred in the future to offload the employee. Employers know this, and when hiring workers they exercise caution accordingly, lest this unfortunate and unplanned-for future materialize.

These factors make the perceived or expected cost of labor at times higher in Spain than in Germany, despite the actual monetary cost being lower in euro terms. This effect has been especially pronounced since the adoption of the common currency over a decade ago. As we can see below, the average cost of German labor is largely unmoved since 2000, while Spanish labor has increased about 25 percent over the same period.



When hiring a worker, the nominal wage is only half the story. The employer also needs to know how productive that worker will be. Even after we factor for the extra costs on Spanish labor, a German worker could be more costly. A firm would still choose to hire that worker if his or her productivity was greater.

As we can see in the two figures below, over the last decade a large divergence has emerged between the two countries. While German productivity has more or less kept pace with its small increases in wage rates, the Spanish story is remarkably different. Productivity has lagged, meaning that on a real basis Spanish laborers are much more costly today than they were just 10 years ago.



In his book The Tragedy of the Euro, Philipp Bagus mentions a similar phenomenon. Bagus points to the combination of (1) the rising labor costs that result from eurozone inflation and (2) divergent productivity rates between the countries as a source of imbalance. Indeed, inflation has been one driver of rising (and destabilizing) wages in the periphery of Europe, and especially in Spain. Others include, as we have noted here, minimum wages, regulatory burdens, and severance packages that increase the potential cost of labor.

In either case the effect is the same: wage rates do not necessarily reflect the labor itself, but rather the regulation surrounding it. In Spain, this translates to noncompetitive wages. It is important to remember, though, that this does not imply that the labor itself is necessarily uncompetitive — it is price dependent after all.

Every good has its price, even labor. When prices are hindered from fluctuating to clear markets, imbalances occur. In labor markets those imbalances are unemployed people. Policies such as a one-size-fits-all minimum wage and high mandated severance packages keep the price of Spanish labor above what it needs to be to clear the market.

Until something is done to ease these policies, Spanish labor will remain uncompetitively priced. Until Spanish labor costs can be repriced competitively, Spain's masses will need to endure stifling levels of unemployment.

Unfortunately most people are basing their views and thoughts on what should be done from a position of ignorance. "I don't know much about economics, but I think Obama's gonna turn this country around." What an astoundingly idiotic viewpoint. As if there are only two sides to every issue, what the angelic leftists think and what the demonic "conservatives" like George Bush claim to think. You should be supporting things on the basis of evidence, not whether you like the people that claim to hold those views (they usually don't and only spout them to pander to their base and misdirect people from learning what they're really doing, or they don't understand them ).

[Tachosomoza]

Jesus, Malice, you're worse than Mitt Romney. I can imagine you spouting some economic bullshit to a single mother who's been laid off and has been looking for a job for 7 months and ends up punching you in the face.

[Malice]

How is that relevant? I'm saying that these leftist, statist, and neoconservative policies are not helping people, they are the source of problems. What I would tell that mother is to stop voting for Obama and read a good book for once in her life.

[DestroyedMatter]

[Malice]

Originally Posted by DestroyedMatter

Summary: Leftism=bad

[Tachosomoza]

Originally Posted by Malice

How is that relevant? I'm saying that these leftist, statist, and neoconservative policies are not helping people, they are the source of problems. What I would tell that mother is to stop voting for Obama and read a good book for once in her life.

And reading a book about how she doesn't deserve a fair wage and deserves to be treated like shit is going to help her how? Like I said, economic theory doesn't put food on the table.

[Malice]

No, but the employment of good economic theory will certainly help people help themselves.

[Tachosomoza]

Malice, don't ever go into politics.

[Malice]

I'm going to turn this country into a right-wing paradise.



New national holiday: Marxist book burning day.

[Lanny]

Lol, I like how the articles in OP reduce the entirety of two major European economies to petty differences in wage laws. We could also blame the Spanish economic hardship on Spain's lower capital gain tax, supporting a liberal position. Or maybe we should chalk it up to the german sausages giving CEOs better decision making powers through all that protein. The fact is that none of OPs copy pasta shows significant evidence that higher wages cause Spanish economic problems.

[Miley Highrus]

Originally Posted by Tachosomoza

Jesus, Malice, you're worse than Mitt Romney. I can imagine you spouting some economic bullshit to a single mother who's been laid off and has been looking for a job for 7 months and ends up punching you in the face.

Throughout the history of the world the weak have died off. That goes from animals all the way to humans.

[thereactionsite]

And the star of this thread? Your wonderful OP Malice, the lazy, unemployed, government handout collecting libertarian!

[crazzyass]

Originally Posted by Malice

I'm going to turn this country into a right-wing paradise.



New national holiday: Marxist book burning day.

You should start by getting off of welfare.

[crazzyass]

Originally Posted by Unwires

Throughout the history of the world the weak have died off. That goes from animals all the way to humans.

We should start with people that abuse the economic system for their benefit. They're too stupid and weak to make an honest living, so they gamble the health of the economy to get wealthy.

[Akagi]

The problem is essentially too many people competing for too little resources.

Overpopulation.

The world has gone from 1 to 7 billion people in less than 2 centuries. We've seen the population of the planet double 3 times over within the lives of people born during the depression era. That's an 800% increase in population that people have seen just in their lives alone. The world will not make it to 8 billion. We're approaching multiple tipping points - both economically and ecologically.

There is an overabundance of labor & a scarcity of resources. People are willing to work more for less. It's a race to the bottom that the Chinese & Indians will win.

[crazzyass]

Originally Posted by Akagi

The problem is essentially too many people competing for too little resources.

Overpopulation.

The world has gone from 1 to 7 billion people in less than 2 centuries. We've seen the population of the planet double 3 times over within the lives of people born during the depression era. That's an 800% increase in population that people have seen just in their lives alone. The world will not make it to 8 billion. We're approaching multiple tipping points - both economically and ecologically.

There is an overabundance of labor & a scarcity of resources. People are willing to work more for less. It's a race to the bottom that the Chinese & Indians will win.

Except not. We've already seen the labor gap closing. Chinese are wanting higher wages and some companies are moving back to the US. It'll balance out, there won't be a race to the bottom.

Mainly because we're already there. People talk about the planet becoming overloaded in the future, but when the majority of the world lives in abject poverty, I'd say we're already pretty damn overloaded.

[Akagi]

Problem is, if the Chinese & Indians want to enjoy anything resembling the standard of living we haver here in first-world nations, we'd need another 3 unmolested earth-sized planets chock full of resources to exploit in order to see that come to fruition. But the fact of the matter is that we only have 1 planet and most of the easily accessible, cheap, & abundant energy sources that enabled us to have have our halcyon days have already been exploited. So all they're going to do is increase demand for resources, bid up the cost of living, & lower the standard of living for everybody since even the best alternatives we have can only replace a fraction of the phenomenal utility, material, & energy we're getting from fossil fuels.

[Struwwelpeter]

I think the rise of newer forms of power generation will enable for massive abundant energy production in the future. Things like concentrated solar power, wind/geo-thermal, biomass, etc. These would theoretically replace the old, nasty forms of power generation... Gasoline, natural gas, nuclear, etc. However, even if the new power grids appear, society will be changed dramatically. There will be no more "class." Everything will revolve around music and dancing. But there will be no home ownership, no vehicle ownership, no private property, etc. It's going to be some kind of techno-enviro-communism. And it's technically a necessity. This is all assuming that things don't break down before hand and billions of people just die off quickly, with the few remaining humans living in wretched squalor.

[Lanny]

Originally Posted by Jim "fuck latinos" Carrey

I think the rise of newer forms of power generation will enable for massive abundant energy production in the future. Things like concentrated solar power, wind/geo-thermal, biomass, etc. These would theoretically replace the old, nasty forms of power generation... Gasoline, natural gas, nuclear, etc. However, even if the new power grids appear, society will be changed dramatically. There will be no more "class." Everything will revolve around music and dancing. But there will be no home ownership, no vehicle ownership, no private property, etc. It's going to be some kind of techno-enviro-communism. And it's technically a necessity. This is all assuming that things don't break down before hand and billions of people just die off quickly, with the few remaining humans living in wretched squalor.

Woo! Go song and dance socialist technocracy!

[Malice]

Originally Posted by Lanny

Lol, I like how the articles in OP reduce the entirety of two major European economies to petty differences in wage laws. We could also blame the Spanish economic hardship on Spain's lower capital gain tax, supporting a liberal position. Or maybe we should chalk it up to the german sausages giving CEOs better decision making powers through all that protein. The fact is that none of OPs copy pasta shows significant evidence that higher wages cause Spanish economic problems.

Yes, which is why you need a theory to be able to interpret the data. Economic theory should be pretty clear on the negative effects these policies will have, although, as always, there will be stupid arguments against it.

For example: I recall someone stating that a study had found a positive correlation between higher wages and employment. Well jesus shit, does that include third world countries? If so, is that supposed to be surprising? Yes, wages and labor laws aren't the only thing, but in this case they are very important.

Originally Posted by thereactionsite

And the star of this thread? Your wonderful OP Malice, the lazy, unemployed, government handout collecting libertarian!

Originally Posted by crazzyass

You should start by getting off of welfare.

I can do whatever the hell I want. I'm not a libertarian, I don't abide by the non-aggression principle, but that doesn't mean I can't recognize the validity of their ideas and what a pile of garbage leftism is.

Originally Posted by Lanny

Woo! Go song and dance socialist technocracy!

That's so Bay Area of you.

[crazzyass]

I just want to know how you're going to be taking over the world while on welfare.

Are you enjoying my money? Buy yourself something nice with it.

[DJ Meaty Cheeks]

Yeah because endless exploitation and wage slavery are so fucking great. Unless you are rich yourself you're a total fucking tool.

[crazzyass]

Originally Posted by Alpheus

Yeah because endless exploitation and wage slavery are so fucking great. Unless you are rich yourself you're a total fucking tool.

lol no. Malice is on welfare. That's the best part of all of this.

[Tachosomoza]

I'm not taking malice seriously. Ron Paul spits on him.

[Malice]

Originally Posted by crazzyass

Are you enjoying my money? Buy yourself something nice with it.

Oh, I did. I bought myself some Vsonic GR06 in ear microphones. They're quite highly rated at head-fi. Seems you won't find anything better for under $100, maybe a bit more than that. Shame they ran out in their US warehouse, I'l have to wait until they arrive from Singapore.

Originally Posted by Alpheus

Yeah because endless exploitation and wage slavery are so fucking great. Unless you are rich yourself you're a total fucking tool.

Why Marx's Exploitation Theory Is Wrong (Joseph Salerno explains Böhm-Bawerk) - YouTube

Why Marx's Exploitation Theory Is Wrong (Joseph Salerno explains Böhm-Bawerk) - YouTube
Video: click to display

Marx was wrong. Really, learn some economics. It's been over 120 years since he died, you think some of the things he said may have been disproved during that time?

Wage slavery? You may as well call it work slavery. As if without the evils of capitalism subsistence would simply fall from the sky.

http://archive.frontpagemag.com/read...px?ARTID=20016

7. The term "wage slavery" is generally associated with Marx’s prediction that wages under capitalism would eventually fall to rock bottom, so that the worker, much like a slave, would be laboring for subsistence — hence, "wage slavery."

Economic ignorance.

[crazzyass]

Good, good. It's going to be lulzy when you inevitably get kicked off and you have no skills or ability to survive whatsoever.

[DJ Meaty Cheeks]

Originally Posted by crazzyass

lol no. Malice is on welfare. That's the best part of all of this.

Lol, what a retard.

[FON]

Originally Posted by Jim "fuck latinos" Carrey

I think the rise of newer forms of power generation will enable for massive abundant energy production in the future. Things like concentrated solar power, wind/geo-thermal, biomass, etc. These would theoretically replace the old, nasty forms of power generation... Gasoline, natural gas, nuclear, etc. However, even if the new power grids appear, society will be changed dramatically. There will be no more "class." Everything will revolve around music and dancing. But there will be no home ownership, no vehicle ownership, no private property, etc. It's going to be some kind of techno-enviro-communism. And it's technically a necessity. This is all assuming that things don't break down before hand and billions of people just die off quickly, with the few remaining humans living in wretched squalor.

Originally Posted by Lanny

Woo! Go song and dance socialist technocracy!

Technocracy just got its new definition for the 21st century

[Cory]

I'm starting to think Malice seriously believes he has been sent by providence to save the world for Anarcho-Capitalism. He seems to revere Mises.org and Ron Paul as prophets from above, who have come to guide him on his eternal mission.

[Iehovah]

Originally Posted by Tachosomoza

Malice, don't ever go into politics.

Always hilarious - a violent bigot advising someone else not to go into politics.

[Tachosomoza]

Violent bigot? Who, me? I'm a harmless little fella.

[Iehovah]

Originally Posted by Tachosomoza

Violent bigot? Who, me? I'm a harmless little fella.

Yeah, not according to your "let's kill the white supremacists" post in the other thread.

[vovka351]

Originally Posted by Malice

Why Marx's Exploitation Theory Is Wrong (Joseph Salerno explains Böhm-Bawerk) - YouTube

Marx was wrong. Really, learn some economics. It's been over 120 years since he died, you think some of the things he said may have been disproved during that time?

Wage slavery? You may as well call it work slavery. As if without the evils of capitalism subsistence would simply fall from the sky.

http://archive.frontpagemag.com/read...px?ARTID=20016



Economic ignorance.

https://secure.wikimedia.org/wikiped..._gratification


which, for your intellectual level, translates to:
You have to be mentally retarded or economically exploited to take out a loan.

[Malice]

Oh wow, really? There are no good instances when you should take out a loan?

[ChargerCarl]

Malice, you're pointing out structural issues which should be adressed on the supply side. This can explain why certain countries have more productive workers, or why some countires are richer etc, but it doesn't explain why in 2008 a sudden gap between current and potential output opened up. It doesn't explain mass unemployment.

[Malice]

Well, it sure isn't due to aggregate demand, let me tell you. Need I bust out the clear overwhelming evidence against Krugman and DeLong?

[ChargerCarl]

Originally Posted by Malice

Well, it sure isn't due to aggregate demand, let me tell you. Need I bust out the clear overwhelming evidence against Krugman and DeLong?

In your own words could you explain to me what you think aggregate demand is?

[The Pat-Man]

Originally Posted by Malice

“One of the great mistakes is to judge policies and programs by their intentions rather than their results.” ― Milton Friedman ·

i mean at least this is true

[Malice]

Originally Posted by ChargerCarl

In your own words could you explain to me what you think aggregate demand is?

Total demand for goods and services. Lump it all together.

[ChargerCarl]

Thats one component of it yes. It's not just consumption though, which is a mistake many internet contrarians make.

More specifically, what does "total demand" mean?