What’s Wrong With the Jobs Market?
by Llewellyn H. Rockwell, Jr.
The terrible job market has vexed an entire generation. It
shows no hope of improving anytime soon. Young people are shut out.
College students are taking refuge in matriculation without end.
Thirty-somethings are zoning out in their parents' basements and attics.
Despair for the future has become a theme of American public
life.
The question we must ask is: why is unemployment stuck at 10% in the
narrowest measure and as high as 30% for some demographics?
The usual answer is that the broad economy is not recovering. That’s true
but superficial; it explains nothing. We have a problem of a specific
kind with the jobs market. To see it as just a symptom of slow growth is
an excuse for politicians and central banks to resort to reckless
policies in the name of fixing the big problem without addressing the
reality on the ground.
Some new data
reported
by the Wall Street Journal helps get to the core of the
problem in greater detail. In the current environment, which the National
Bureau of Economic Research (NBER) laughably calls a recovery, business
start-ups of job-creating companies have not kept up with
closings.
As compared with other recession aftermaths, new businesses are not
hiring as they once did. The number of companies with at least one
employee continues to fall at a rate we’ve not seen in 18 years. Everyone
speaks of this as a recovery, but the numbers don’t add up. New jobs in
new companies are appearing a rate 15% less than the last recovery.
Let’s try to understand what is going on here. In boom times, companies
tend to bloat up in every area, especially in their staffing.
Unemployment is always a feature of the bust because businesses shed jobs
and expect more efficiency and productivity out of the remaining staff.
Many businesses close and lose all employees.
Whereas workers once had no problem finding jobs and naming their price,
there is now a surplus of workers and a job shortage, at least at the
wages that the unemployed are demanding.
What usually fills the gap here are new businesses. In recovery times,
entrepreneurs initiate new projects and hire the unemployed workers to
staff them. The unemployed are usually willing to work for less and are
willing to learn new skills in a new business environment. These new
businesses become a major source for economic growth and rising living
standards.
Without new businesses, there would be no net job growth at all. In
post-bust economies, it is these new businesses that are responsible for
soaking up the excess labor. That’s because the older and larger
businesses are not willing to take on the risk of new employees and have
already adjusted to doing business with fewer.
Until these businesses come along, unemployment will likely persist. And
this is precisely what is happening right now. And so, now that we have a
better idea of the mechanics of the high unemployment rate, we have a
better idea of what question to ask and how to solve the
problem.
Where are these new businesses and why are they not starting as we might
expect?
Let us count the ways.
New businesses need to depend on a stable legal environment and a bright
outlook for the future. These are both missing. The supposed recovery has
been phonied up in every conceivable way: nationalizations, bad debt
swept under the carpet, money creation by the Fed, make-work jobs paid
for by the taxpayer. No one really believes all the hokum. The question
is not whether the recovery is phony; it is: what is real and what is not
real? No one knows for sure.
Despite every attempt by the Fed to provide oceans of free credit, banks
are still extremely reluctant to lend when the payoff is not there and
the risks of lending are extremely high. This means that prospective new
businesses have to raise their own capital from a massively depleted
capital stock.
Looking at the risks, it makes far more sense to hire no employees beyond
temporary contract workers. Consider the payroll tax, the largest burden
on both employees and employers. It does not benefit either party at all.
It is sheer robbery that vastly increases the cost of hiring.
The problem of health-care mandates is very intense. Employees who expect
these benefits are mostly going to choose between obtaining them and
getting a job. But for certain firms and under some conditions, they are
unavoidable and unpayable.
Business taxes are all too high and probably going higher. Regulations on
all businesses in every sector of life have been intensifying for
decades. No industry is free of them. Even formerly frontier sectors like
software are becoming legal thickets of patents, protections, and scary
mandates.
The minimum wage is way too high to encourage new job growth among new
businesses. And given all the legal mandates and potential lawsuits,
everyone knows that once you hire employees, you are pretty much stuck
with them for some period of time. You can test the waters. But you have
to be sure. And no one is sure.
Businesses thrive in an environment of freedom. But enterprise is no
longer free in any area. In boom times, the consequences are less
obvious. In the bust, the regulatory thicket, the taxes and mandates, and
the legislative threats all become decisive in a way they were not
before.
None of these problems are intrinsic to the business cycle. They are all
imposed by government. The same problem afflicted the economy during the
Great Depression, but back then the central planning was newly imposed.
Now is different: the old central planning is killing us day by day, even
without dramatic new legislation.
It could all be changed. Congress and the president and the courts could
reverse it all tomorrow, restoring an environment of freedom and free
enterprise. Jobs would recover quickly. Hope would be back in a matter of
weeks and months. The economy would genuinely recover.
What is keeping that from happening? The lack of political will and the
insatiable desire of the State to keep eating away at our liberty and
property.
It isn’t complicated. The State is living parasitically off our living
standards and hopes for the future. It must die, if we are to live well
again.
http://www.lewrockwell.com/rockwell/job-market162.html
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