Expendables and Ponzi Schemes

From the Wall St Journal:

'The betting is that the Labor Department's Friday snapshot of the job market will show that employers added workers in April, perhaps even that the unemployment rate fell.

That would be good news, but not good enough. It's hard to exaggerate how bad the job market is. Here's one arresting fact: One of every five men 25 to 54 isn't working.'

These numbers are from the US of course (things aren't quite so dark here), but the real kicker comes a couple of sentences later:

'Even more alarming, the jobs that many of these men, or those like them, once had in construction, factories and offices aren't coming back. "A good guess…is that when the economy recovers five years from now, one in six men who are 25 to 54 will not be working," Lawrence Summers, the president's economic adviser, said the other day.'

One in six men in their prime working lives will be permanently unemployed under this scenario. I've read enough sci-fi to have seen the hypothetical outcome of advanced tech and post-industrial development, and the fact is that we've a surplus of people for our productive needs. With the shift to public sector jobs, women have taken the bulk of them, so the burden of unemployment falls on the segment of the population least psychologically suited to bearing it.

Men need to work, whether they like it or not. Unemployed males are also unappealing as prospective mates, so we're looking at c. 17% of men being both unemployable and having dismal marriage prospects. No good can come from this.

Fixing that of course is difficult, as employment is a zero-sum game and to give them jobs would mean taking jobs from women. I will state bluntly that the I believe that the results of that for the stability of society would be positive; it's not gangs of housewives that turn to crime, and there are only two more (partial) solutions to this that I can think of.

War works, especially one with conscription and a high death rate. Historically these have been good for our economy too, but it's a different story when they're fought on your territory. Finding a war like this that would involve us, ramp up slowly enough to draft and train that 17% and then kill enough of them that they're off the employment books is exceptionally unlikely, and in any event miserable and tragic.

The other option which doesn't depend so much on the public teat is to reduce efficiency and give to a big middle finger to the "stockholders". And no, I have not suddenly turned into a Marxist. The practical result of globalizing free trade is that capital moves to where it can be most profitably employed. That is, stuff gets made where it's cheapest to make it. Some of this has to do with tax and regulatory regimes, but mostly it comes down to who will work for the least money.

You will occasionally hear of business owners who hang onto the the old facilities and employees, accepting some societal responsibility toward the community. This is the exception of course, as most people with the drive to get a business off of the ground are more interested in the bottom line, and once they go public it's largely out of their hands as the interests of the stockholders take over.

Private industry is not a charitable institution, but the role government can play here is to make employing more people less of a burden, thus making it a viable choice for more ethical Capitalists. This can be done through changes to business taxes and regulations as well as tariffs. Bringing back apprenticeships, reducing credentialism, all of these things can make business and labour more partners than antagonists, and do it without coercive regulation. Open up possibilities rather than attempt to engineer outcomes, and you avoid the entitlement ponzi trap that Greece is currently reaping the results of.

It takes taxes for governments to pay for anything, and if there is more going out than coming in, you can only kite the cheques for so long. Less people on the dole (or Public Service) is critical to the long-term health of a society. In the end our economic system is all in our heads but the longer we can put off the day of collective realization that it's all a house of cards, the longer we'll have to adjust to the economic and demographic changes we're facing. In the meantime, there are still all of those unemployed guys...