I'm old and generally pessimistic. But I've seen enough recessions to know that when you've read the seventeenth article about the never-ending bottom (as I did during the reagan era, during the early 90s when Germany and Japan were going to destroy the US economy, and post dotcom collapse), I can't help but think it's time that the pundits will all be contradicted on the upside. Just like they were on the downside.
Nations that have demographics and immigration policies that promote population growth are going to succeed comparatively over the next 20 years. The US isn't at the top of the heap there, but its close.
immigration policies that promote population growth
It's more subtle than that, and to a certain extent it's zero-sum. Countries compete to attract skilled immigrants, and there is a finite supply of doctors, engineers etc willing to relocate per year. As we see in the UK there is a much larger supply of people who simply shop around for the best welfare then claim "asylum". The brutal truth is that it's in no country's best interest to admit people who are unable or simply unwilling to contribute to their economy.
I think countries often inflict these problems on themselves. For example, systematic unemployment/underemployment isn't a particularly natural phenomenon (above a minimal level when people shift workplaces and so on), but is a known consequence of certain economic systems and policies. These countries decide to pursue policies where idle hands aren't offered anything to do. Despite their desire to work.
Further, higher-level professions tend to have obstacles to decrease the supply of their practitioners.
Immigration problems are also often self-inflicted. France is in the news for having them, but clearly many immigrants came from countries they invaded. When France invaded, they sent soldiers who alter society through violence and intimidation; whereas immigrants typically want to achieve better lives for themselves and families, and ideally participate in a functional society.
I find this 'welfare scrounger' outrage coming from britain laughable. Britain has the least generous welfare system of any rich european country, yet you get the most compaints from there.
It's because we're the most accomodating. Seriously, try speaking to the Swedish or French government in anything other than the national language. Only the UK will automatically hire a translator. Generous welfare is no use if you can't claim it. That's the secret of most European countries.
Why do you think all those people already in a safe country, France, are trying to get from Sangatte to Dover? It's not "asylum" once you're already safe!
France/Germany restricted entrance from the enlarged EU; whereas upper estimates of 500,000 new migrants entered the UK.
From an economic perspective the backlash has been undeserved:
broad agreement that immigration is likely to have reduced the natural rate of unemployment ... By 2006Q3, only 353/2328 applications for income support; 859/5154 applications for incoming based jobseekers allowance;
("The Impact of the Recent Migration from Eastern Europe on the UK Economy" Monetary Policy Committee, Bank of England.)
On the other hand, for certain groups the last thirty to forty years have been a long, slow slide from the top of the economic heap to the bottom. Specifically, conditions for white men without college degrees have gone from great to exceedingly poor. It's had an enormous, perhaps defining impact on modern politics, and will continue to be one of the most important influences in the future.
My initial reaction to your comment is that specifically, conditions for white women with college degrees have gone from exceedingly poor to not too bad.
Conditions for almost everyone who's not a working-class white man have improved. But it doesn't change the fact that there is a large group of people who have done very poorly and tend to vote for people who pander to their grievances. The fact that the economic crisis made things markedly worse for these people doesn't bode well for politics in the next few years, if history is any guide.
Which is my point. The perception of "really bad times" is at least somewhat driven by the fact that a few older white males perceive that their cohort is doomed.
According to that graphic, the previous highest peak of long-term unemployed in the US was in the early 1980s, with around 3m unemployed. The current high peak in 2010, which looks like it may be decreasing now, is just over 6m.
According to the US census, the number of people living in the US at that point was in the low 200ish million, maybe ~230m.
As of right now, in early 2010, it's somewhere around 305-310 million. That number includes a lot of baby boomers (70+ million people, born between 1943 and 1960) who are getting very close to retirement age, especially those whose age and skill set make them unattractive to hire.
Taking into account the nearly 50% increase in US population and the rapid ageing of 70+ million people, many of whom possess skills that aren't necessarily well-suited to the information economy, the chart isn't all that shocking.
right it is a different world now, the 80's had a technical revolution to pull them up where as today there is nothing revolutionary in sight. Nothing that somone is saying holy crap that is going to change the world, no automobile, no plane, no personal computer. Currently we only have evolutionary stuff like shrinking a computer down to a phone, etc. Something will come along but right now it's looking a lot more like the 70's than it is the 80's personally I think a lost decade is at hand unless something comes out of left field.
The point of the article is more that an entire generation is going to be scarred by this recession. The author cites research showing that people who enter the workforce during a recession never catch up the lost wages. They always lag behind their more fortunate peers.
Uh, duh. I graduated in 1983, the peak of Reaganism/Thatcherism. Life is long, and over the 40 years of a typical career, if you work your ass off, and get a little bit of luck, things balance out. You end up making a little bit less than the people who graduated two years later, and a lot more than the people who don't work as hard.
isn't the need for population growth decline with the rapid rise in productivity and automation, and at some point population growth becomes a liability?
The thing that has always amazed/disgusted me is how our education system trains people to be passive consumers, and to leave school "looking for a job", as if jobs somehow grew on trees and would eventually fall when ripe.
Until people learn from the cradle that they're not owed a job by anyone, but have to create value of some sort, either for someone else, or for themselves, we'll have this same sad situation.
Someone "stuck at home" is in the perfect situation to start creating value that other people are willing to pay for: mowing lawns, baking bread, making furniture/simple machines in their home workshop, using whatever raw materials and machinery their forebears have amassed and are freely available, but, most of all, using their brains and their willpower.
My view is that the article is on the optimistic side.
It accurately describes the best case. It admits that nobody knows how bad it will be. But it fails to talk about known structural problems that we still face.
We have coming credit crunches in commercial real estate when ARM loans reset, prime home mortgages when ARM loans reset, private equity when principal comes due on a ton of LBOs, local government as their tax base continues to decrease, unfunded obligations increase, and they continue struggling under a major load of debt, and local governments as well as their pension funds suddenly lose large amounts of money due to overexposure to the private equity debacle.
Of course we have bright points like bank profits, right? Wrong. The only reason that banks are recording a profit is that during the credit crisis they were allowed to stop marking debt to market. The major banks are all sitting on a ton of future losses that are not properly accounted for. But since their unrealistic accounting recorded a profit, they are paying themselves enough money that the bankers (if not their employers) will ride out the coming crises.
I could say more but I'll stop. I'm depressing myself.
I could not have said it better myself, it seems like no one is talking about the commercial real estate market just like no one dared say it on the eve of the housing crash. I have been watching commercial rent plummet in the last few months and cant help but feel that it is starting.
I'd love to see the ideas generated by a Y Combinator RFS for harnessing millions of unemployed/underemployed workers.
Amazon Mechanical Turk is one part of the picture, and it opens up the door to more. Anything that makes it cheaper to create work, hire employees/freelancers, or find jobs is valuable in this economy. Or ways for people to earn money besides the mainstream labor economy. Or something that can generate value from activities that people do with their idle time while they're unemployed - whether it's constructive like Wikipedia or entertaining like Farmville.
That's an excellent idea. One of the things that I really would like is a way to earn money without screwing over a transitional employer by jumping ship the soon as a real job comes along.
Ideally it would be open to anyone and everyone all the time commitment free. At 3 AM, I have no idea how this magical service would work. Ask me after some sleep and coffee ;-)
There must be a template article out there for journalists. When it's a slow news day you fire it up, fill in the blanks, and a few minutes later you've got an article about how 20 somethings live with their parents, have no self direction, and feel of sense of entitlement.
I think the same template has been in use for generations.
I wonder if there is a way to profitably exploit this?
Presumably bad news in the hiring market for new graduates is good news for YC: when the alternative to YC is picking up the phone and having Google and Microsoft getting into a bidding war over you, startups look insane, when the alternative is being a "parasite single" (wonderfully evocative Japanese English coinage for "lives with Mom and Dad"), having your ramen paid for for a few months must look pretty attractive. Granted, the vast majority of people capable of starting startups are probably much more employable than the average college graduate or the average inner-city dropout.
Is there anything the rest of us can do? "10% discount on lifetime wages if you hire during a recession" seems like it would matter if I were hiring, but I'm not. Does anybody have any other clever ideas?
I've got one: I can't offer anybody full-time employment but if somebody could vastly decrease the friction of employment I'd love to have employment available as a service. Something like what the India/Philippines virtual assistant companies perform, except with a more consistent level of quality.
Working for it wouldn't be the most fulfilling existence in the world, but it would pay for rent, food, and loan payments while folks look for more permanent opportunities, and the virtualized nature of it would make it more conducive to that than e.g. trying to get a job in food services. Plus, unlike your local On The Border, I'm not going to ask "So Joe, are you going to be available in 3 months or will you be going back to school?" because I have no particular need for Joe to be personally available in 3 months -- I don't have to train Joe, so it doesn't matter to me if I'm working with a new Joe come fall.
Currently I do a wee bit of this via freelancing, but freelancing requires friction from me -- I need to find freelancers, supervise them, pay them, find replacements when they flake out, file tax documents for them, etc etc. That's a whole lot of grunt work for something which is supposed to save me from doing the grunt work. I want the API to grunt work.
that was my first reaction, but this article is extremely long. wishing there was a "tl;dr;" section so i could figure out the conclusion in a sentence or two. bookmarked it for now, will come back to it.
Yes, it has. When this article first came round I read it all because it was interesting but it's certainly way above the median length of articles that do well here (and above the median of most online content, I'd argue). I'd certainly bill it as being "rather long," though wouldn't go as far as "extremely."
If you are receiving unemployment, I can't think of a better time to start your own business. Great companies will be born out of this era that were bootstrapped all the way. I think frugality and a focus on the bottom line is a renewed theme. Even if you fail miserably you'll be light years ahead of everyone else.
You would think so, but in fact the unemployment "insurance" agencies of some (many?) states are overtly hostile to using your time to build a startup rather than unsuccessfully seeking a position as an employee.
In Connecticut, for example, the statutes say revenue from self-employment should offset unemployment benefits, but the state agency has chosen the highly creative interpretation of "revenue" to include potential capital gains your efforts represent, and the notional amount of salary you should be paying yourself for the work you do for your startup, including, say, writing a business plan.
It does seem like they are shooting themselves in the foot, but the unemployment "insurance" fund in CT is already living on debt.
Maybe there is a way to make the snake eat it's tail. After your payroll paycheck bounces call up the state employer regulators and see if they will make your paycheck whole.
Then post the whole thing to the web as a performance artwork
Bit of a catch-22 with harnessing the underemployed. The longer the economy maintains large numbers of underemployed, the less consumption in non-essential goods and services, and the less people buying whatever it is you sell, leading to the more underemployed, and the less consumption ... But if consumption increases, right when you can actually use all that labor they start to dissapear to proper jobs.
ojbyrne, you raise a great point. But still, and perhaps naively, I find myself bothered by this recession in particular. In previous recessions the backbone of America -- our immigration policy, culture of competition, education and infrastructure -- made it virtually certain that new indstries, wherever they form, would center in the US.
In our present state our Universities are still the best in the world and our immigration policy, albeit under fire, is still flexible enough to attract the best and the brightest. Yet I know no less than three people (one with two successful exits and a third company in the worlds in Boudler, CO) leaving California because they want a better education for their children and the high schools are a mess. Our infrastructure is extremely old, and as to the culture of competition every year we are more protectionist in policy.
It is not certain to me that we will dominate the next generation of technologies the way we did with automotive, computer, pharma and information in the past decades.
It's the fault of the teacher's unions. 12 years of school gets you no employable skills. If they simply started teaching programming in grade 8 to everyone by grade 12 everyone would be employable (since there's an unlimited supply of programming jobs).
Programming jobs are not unlimited. There's just a big demand for programmers and lack of supply. If every wannabe musician/artist/celebrity wanted to be a coder we'd certainly feel the strain.
marshallp has a point. There is a limit to the demand for food; after a while, you are full. There is no hard limit to the demand for technology, because the value that technology adds is the ingenious solving of problems, and it seems that everyone always has problems.
Programming is fundamentally different to any other activity because it operates at a meta-level, it's about the automation of work. As long as there are people working, programming hasn't reached it's saturation point.
It's the fault of the teacher's unions. 12 years of school gets you no employable skills. If they simply started teaching car repair in grade 8 to everyone by grade 12 everyone would be employable (since there's an unlimited supply of car repair jobs).
Nations that have demographics and immigration policies that promote population growth are going to succeed comparatively over the next 20 years. The US isn't at the top of the heap there, but its close.