Wednesday, December 08, 2010

Mike Mandel and The Jobs Opening Paradox

The chart above shows that job openings have been increasing nicely since the recession ended, according to two different measures, one from the BLS (job openings) and another from the Conference Board (online advertised vacancies).  In contrast, the unemployment rate has barely moved from its peak a year ago of 10.1%. What's going on here?  

Mike Mandel offers three possible explanations for why the jobless rate hasn't improved much, despite the significant, ongoing improvements in job openings: Mismatch, offshoring, and lags.  

1. Mismatch says that companies would like to hire, but can’t find the right people. 

2. Offshoring says that companies have openings, but they are filling them overseas. 

3. Lag would say that companies have openings, but it’s taking them time to pull the trigger, given the overall uncertainty.

I’m going to vote for a combination of offshoring and lag. I’m sure that some job openings are going overseas. But the statistics also suggest that hiring pressure is building up in some sectors of the economy. If that’s so, 2011 may be a better year for the labor market than people expect."

MP: After looking at jobless rates by educational attainment, I would offer some support for the mismatch explanation for the following reason: the jobless rates for the highest and least educated workers have continued to rise and reached all-time highs in November.

1. The jobless rate for workers with less than a high school degree was 15.7% in November, the highest in BLS history back to 1992 for this data series.

2. The jobless rate for workers with a bachelor's degree or higher reached an all-time record high of 5.1% in November.    

On the other hand, the jobless rate for workers with a high school degree has fallen by almost one percentage point from its 10.9% peak to 10% in November, and the rate for those with an associate's degree has fallen almost a half percentage point from its peak of 9.1% to 8.7%.  This might suggest some mismatch in the labor market between the education requirements of job openings and the educational attainment of job candidates? 

Further, there are sectors like construction that still has a stubbornly high jobless rate of 18.8% and leisure and hospitality that has a jobless rate of 12.4%, and there are probably very few of those jobs that are being offshored. In contrast, the jobless rate in the manufacturing sector, maybe the sector most likely to have jobs outsourced, has come down to 9.9% in November, just slightly higher than the 9.3% rate overall (not seasonally adjusted).

In any case, I do agree with Mike that there are many indications that 2011 might be a better year for the U.S. labor market than many people are probably expecting.

Update 1: Thanks to Morganovich for pointing out in the comments section a fourth explanation - the troubles in the housing market make workers less mobile than in past post-recession periods, which would be a variation of the mismatch explanation.  And yes, it would be interesting to see a geographical overlay of job openings and unemployment rates.

Update 2: Thanks to Westywildcat and Scott Lincicome for another explanation, or variation of the mismatch theory: The historically unprecedented 99 weeks of government unemployment insurance benefits, which would create disincentives to work even though job openings are available and increasing. 

89 Comments:

At 12/08/2010 4:12 PM, Blogger morganovich said...

another factor worth considering is that our labor force is less mobile right now than it has traditionally been.

with so many home owners underwater on loans, a great many people cannot move to where the jobs are as they have in the past.

it would be interesting to see a geographical overlay of openings and unemployment.

 
At 12/08/2010 4:32 PM, Blogger westywildcat said...

What portion of the job openings is due to extended unemployment benefits? Why work when the government will pay you to not work?

 
At 12/08/2010 4:34 PM, Blogger Scott Lincicome said...

Wouldn't the unprecedented 99 weeks (and soon-to-be 13 months more) of government unemployment insurance also feed into the "mismatch" theory, i.e., that people whose higher-paying jobs have disappeared are choosing to accept UI instead of "lesser" work?

 
At 12/08/2010 4:35 PM, Blogger Scott Lincicome said...

Westywildcat beats me by a nose!

 
At 12/08/2010 4:58 PM, Blogger tywheatley said...

is there a non-conspiracy theory explanation for the polarization of the BLS and CB's estimates; the timing is a little eerie given that post 2008, one seems to be overly pessimistic/optimistic, respectively

 
At 12/08/2010 5:23 PM, Blogger Buddy R Pacifico said...

OK, another theory:

The economy is not robust enough for strong hiring at this point BUT will be in 2011. So, the statistics for Jan 2011 and forward will be plus-sized for employment. Hiring budgets are being set for "11", influenced by an optimistic end to "10".

 
At 12/08/2010 5:31 PM, Blogger Buddy R Pacifico said...

Qiick add to comment:

Job openings and interviews taking place now for 2011 hiring budgets.

 
At 12/08/2010 7:55 PM, Blogger Hydra said...

Unemployment benefits are not high enough to encourage anyone not to work.

When I was unemployed I wanted nothing more than to go back to work.

My nephew has been unemployed for 14 months (heating and air conditioning mechanic) working temp for fedex. Would like nothing more than the job he is trained for. Willing to move and leave his house and family if necessary. (Wife is still employed, and anchoring the family. ) Sends regular resumes, but no local prospects.

He would not be collecting unemployment if he could find work.

Unless you are lazy as Susan unemployment benefits are no substitute for gainful employment.

 
At 12/08/2010 8:11 PM, Blogger Ron H. said...

"My nephew has been unemployed for 14 months...working temp for fedex...

He would not be collecting unemployment if he could find work.
"

How is he able to work for FEDEX and collect unemployment benefits at the same time?

 
At 12/08/2010 8:34 PM, Blogger James said...

MP, with all due respect, I am not buying the mismatch explanation. This is an excuse not a rational explanation. It is used by Bill Gates to take jobs to India and Ivory Tower types like Robert Reich and Alan Greenspan use it often but I do not buy it. Here is why:

Macro View

On of the first technological achievement of this country was the Erie Canal. In the mismatch view it would have never been built. You would have put an ad in the newspapers for a civil engineer with canal building experience. At the time there were no papers and it would not have mattered because there were no civil engineers with or without canal experience. Bill Gates would have boogied off to India, Robert Reich and Alan Greenspan would have thrown up their hands and said it could not be done. Fortunately for the economic development of our country the people in charge were made of sterner stuff. The men in charge, James Geddes and Benjamin Wright, were judges whose connection to civil engineering was that they had settled boundary disputes involving surveying. Unqualified (mismatched) as they were they got the job done.

Much the same thing occurred with the development of railroads, the Panama Canal, the atomic bomb, and putting a man on the moon. All of which involved getting things done with people of limited experience doing the job.

Micro View

For any computer system consider the time period between the first commercial implementation and that time when the HR department can do a search for someone with one year of experience using that system and have an 85 percent probability of finding someone willing to accept employment. This time period is physically going to be at least one year and most likely 3-5 years. The first computer language FORTRAN was invented in 1957 but it was rare to find a university course in the language until 1962. Under the mismatch theory no new computer system could ever get launched. During this initial time period no qualified workers exist. New systems are DOA. Where did employers get the workers to make such systems work? They accepted less that ideal candidates for the job. The same thing that made the Erie Canal and the moon shot possible.

The mismatch theory is most often used as an excuse for outsourcing jobs or insourcing foreigners. Few employers are willing to stand up and say they are depriving Americans of jobs because they are greedy. Not hiring because there are no qualified candidates is more socially acceptable.

Politicians and lobbyist I hear tell me business is not hiring because of taxes, regulations, and uncertainty. When I see real business people they never mention any of those things. Rather they uniformly say what they need to hire are customers. Mark Haines of CNBC’s Squawk on the Street says he always hears the same thing. Given customers all other problems preventing hiring are solvable.

 
At 12/08/2010 9:31 PM, Blogger morganovich said...

james-

that is a very unpersuasive argument.

you are oversimplifying greatly.

hiring a software engineer or a civil engineer is not always going to be nearly so precise as you make it out to be. if someone has adjacent knowledge, you can hire them. but if they don't even have a GED, they they don't have a prayer of being trained in a short period.

you hire the guy closest to your requirements if you can find one who is close enough and if you cannot, you keep looking.

your computer theory example makes no sense at all. you hire those with some knowledge in programming or in adjacent fields, and you grow an industry and create a technology. again, you are pretending that only a perfect match fits. it just needs to be close enough to do the work.

mismatch occurs when you need a programmer, and all you have are roofers. at that point, you simply cannot fill the position. but if you had a logic designer, or someone who has worked with other languages, well, maybe it fits.

your argument that no change can ever occur according to the mismatch theory hinges entirely on needing a perfect fit to do anything, a clearly ridiculous premise.

if you can sells cars, you can sell timeshares or office equipment. if you can build a bridge, you can build a canal. if you can design a computer or write in another language, you can learn fortran.

but this does not mean you can write fortran if you can sell cars.

 
At 12/08/2010 9:43 PM, Blogger morganovich said...

you are also leaving out another key factor that creates mismatches: wages.

business owners are free men in a free country, free to run their business for a profit (and required by law and fiduciary duty to do so if they have shareholders)

it's more difficult to put your call center or software development in india. it's more difficult to put a factory in china. the logistics of doing this are formidable.

american workers have the inside track. it is much easier to hire them.

but you want to excoriate a business for hiring cheaper overseas labor. why? it is the american workers who have overpriced their labor relative to the global market. global markets are more competitive. get used to it. it's not going away.

if caddilac came to you furious that you decided to drive a honda and paid less for your car, you'd think they were insane when they demanded that you buy their more expensive product and tried to force you to do so.

why do you think you can do this to US companies that chose to buy cheaper labor?

it is precisely the same thing.

if you are going to go around calling a privately owned industry greedy for getting the best price for what it buys, you'd best be ready to pay full price all the time for everything you ever buy. never get 2 quotes for auto-body or home repair again, just pay it. you are just as greedy when you choose the cheaper plumber.

 
At 12/09/2010 1:06 AM, Blogger PeakTrader said...

More job openings are needed just to absorb population growth, i.e. 125,000 to 150,000 new jobs per month.

After three years of recession, there are 15 million people out of work and millions more wanting full-time work.

I read somewhere that over the past 12 months the U.S. created 50.8 million jobs, but lost 50.1 million jobs or had a net gain of 700,000 jobs.

If the economic stimulus plan being proposed in Congress doesn't generate a lot more jobs, the economy may become locked-in a depression or "lost decade."

 
At 12/09/2010 8:41 AM, Blogger Walt G. said...

I have to agree with morganovich. His first posting to James is more simply called transferrable skill-sets. The second on wages is almost right-on, but it should be figured on total compensation instead of wages alone. Wages currently look flat until you count the other costs associated with labor and operating a business in the U.S. (e.g., corporate tax rate).

All those who wish to get ahead and prosper in life are (and should be) greedy whether they are workers or consumers. I know that can sound unethical/immoral, but hard work, greed, planning (scheming?), and recognizing and acting upon all of your current advantages and opportunities are not all bad attributes to have. You can’t take care of others unless you can take care of yourself first. I am a plumber, but I am not cheap :)

 
At 12/09/2010 10:22 AM, Blogger Sean said...

I think some people here are conflating "greed" with "motivation". Most people are motivated by the desire to achieve, the desire to profit. There's nothing wrong with that, but in most contexts "he was too greedy" refers to being so focused on short term gain that a long-term loss is realized.

What is valid about James's post is that under "normal" conditions, a successful company should be focused upon hiring good people, not merely "skill sets". "Mismatch" often occurs because companies are unwilling to take upon themselves the cost of assuming any responsibility for training employees. Who among you has never seen a job ad asking for almost as many years of experience in a computer language as that language has been around?

American job creation in the rock star industries is still suffering because American companies are afraid to invest in the future here. The gold rush of emerging economies is too attractive.

 
At 12/09/2010 10:41 AM, Blogger Walt G. said...

Sean, you can't assume companies hire for the long-term like they did in the past. There is no "normal" anymore.

How much time would you want to spend training an employee for a one- or two-year assignment? The people who can quickly add value to the bottom line will work while those who can't, won't. Nobody said life was fair.

The best way to think about it is to think work and not think jobs. I have four contracts for work, but I only have one job, and I don't plan on getting another job when I leave. That is the way the labor market is evolving. You can fight it and lose, or you can play the game and win: It's your choice.

 
At 12/09/2010 12:09 PM, Blogger morganovich said...

sean-

companies routinely hire those with skillsets that are below what they advertised for.

it is no "greedier" for a company to demand skills than it is for a prospective hire to demand high wages for low relevant skills.

i doubt you have any supporting evidence that US companies are failing to invest here. further, it really doesn't matter. if a company can get what it needs more cheaply overseas, that is what they should do. they have no requirement to train you and more than you have a requirement to use the plumber in your town who does not understand radiant heating when you can hire one from the next town over who does. are you excited to pay him to "learn" on your house? isn't that you failing to invest in his training?

 
At 12/09/2010 1:23 PM, Blogger Sean said...

Walt G.,

I play the market as it is. But in an industry with a future, you plan and hire for the future. If that's not currently paying, that's a sign of disease, not "the new normal".

 
At 12/09/2010 1:29 PM, Blogger Sean said...

morganovich,

"it is no "greedier" for a company to demand skills than it is for a prospective hire to demand high wages for low relevant skills."
I agree. Someone with low relevant skills is worth less and should be paid accordingly until the situation changes. And there's nothing wrong with a company asking for a little more than it wants, but if they set the bar too high, they shouldn't complain about the lack of interested and qualified candidates.


if a company can get what it needs more cheaply overseas, that is what they should do
If that also aligns with long term interests, that's correct. But those costs are not always factored in. I've seen my company pay for laying off my design group to staff a debacle in India.


they have no requirement to train you and more than you have a requirement to use the plumber in your town
Agreed, but that doesn't mean hiring locally isn't often the smart move.

are you excited to pay him to "learn" on your house? isn't that you failing to invest in his training?
I've hired local contractors starting out on lesser jobs. I get a better price, I'm investing in my community, and the quality risk is small.

 
At 12/09/2010 1:37 PM, Blogger Mike said...

"with so many home owners underwater on loans, a great many people cannot move to where the jobs are as they have in the past."

Morganovich, Thank you. I've been saying this for a year and everyone keeps looking at me like I'm an idiot.
In no way am I implying that I'm not an idiot, but I think I was right on this one.

 
At 12/09/2010 1:42 PM, Blogger Walt G. said...

Sean,

There will probably be a limited number of core workers in most companies; however, the cyclical ups-and-downs will be filled increasingly with temporary and contract workers.

I don't know how you plan for the future if you can't survive the present by being adaptable. I've been with the same company over 37 years, but I don't think that will be normal or healthy for the generation entering the workforce today.

I tell my students they should be able to write down a dozen diverse things they can do well enough that other people would be willing to pay them for. Most people will not find a job by accident in the “new normal” labor market. I hope that I am proven wrong, but there are just too many alternatives today for it to be otherwise.

 
At 12/09/2010 1:43 PM, Blogger morganovich said...

sean-

that seems to be a logical fallacy.

you equate planning for the future with hiring the untrained and training them.

how is that a good idea when there are people who already know how to do what you need available?

that's not preparing for the future, it's preparing to be uncompetitive.

there will always be benefits to training a new generation of workers and teaching the promising ones new skills. there is plenty of that going on now. however, the move to a global labor market and a shortening of project means that you can bring talent along overseas as well. just because you employee is not in the US does not mean they are not your employee. if you don't care if the work is done in boston or boisie, why should you care if it's bangledesh? it's still yours. you have the employee and the fruits of his/her labor.

as i said before, american workers have the inside track here. they are easier to manage and work with because they are in the same place you are, same timezone, easy to communicate with, and culturally similar.

the jobs are theirs to lose, but if they don't have the skills or fail to accept similar wages to their global peers, well, they are not going to get hired and more than you would hire the unskilled plumber i mentioned above just to keep work in your town.

 
At 12/09/2010 1:49 PM, Blogger morganovich said...

to simplify what i am saying:

part of the "mismatch" is that our unskilled workers demand wages (to say nothing of all in comp) similar to those of skilled workers offshore.

if you can hire skilled at unskilled prices, well, that's a no brainer.

add in the difference in corporate tax rate, and it's pretty hard to say no.

calling companies greedy for doing what you do every time you buy a cheap asian dvd player instead of an expensive US one seems a pretty flimsy argument.

why are you allowed to shop based on price and features, but they are not?

 
At 12/09/2010 3:28 PM, Blogger PeakTrader said...

"Mismatch, offshoring, and lag" ignore the elephant in the room, i.e. a lack of liquidity (higher lending standards), household debt, consumers paying for TARP instead of taxpayers, states raising taxes, more regulation, uncertainty, etc.

There are still too few job openings compared to the unemployed and underemployed, although there's higher job growth.

 
At 12/09/2010 3:46 PM, Blogger Sean said...

morganovich,

that seems to be a logical fallacy.
you equate planning for the future with hiring the untrained and training them.

Depending on what you mean by "untrained", I do. This is because the job I work in, and most of those I'm familiar with, have relatively small overlap with the classes and credentials required to get hired in them. For a plumber, a physician, or an electrician, that's not the case. But for most skilled jobs I am aware of, the on-the-job-training is really what matters.


if you don't care if the work is done in boston or boisie, why should you care if it's bangledesh? it's still yours. you have the employee and the fruits of his/her labor.
If you are ok with the culture, the laws, and the IP protection in Bangladesh, there's a lot of truth to what you say.

the jobs are theirs to lose, but if they don't have the skills or fail to accept similar wages to their global peers
I don't know about you, but I can't survive on the $15K an Indian engineer can live well on. Quality is hard to measure: price is easy. That's one of the reasons why company bonuses a few years back were based on the percentage of the organization that could be moved overseas.
Those bonuses disappeared once our presence in those locations allowed us to do both cost *and* quality measurements. We're still hiring overseas, but we're still hiring a bit here too.
Again, many companies are being "greedy" by acting on a price tag without being able to do a full cost-benefit analysis.

why are you allowed to shop based on price and features, but they are not?
Why do you answer what you're used to hearing rather than what I'm actually saying? They're allowed to, but many do it in a dumb way.
And hiring locally (and advertising it) produces goodwill that s often underestimated. Most companies sell the fringe benefits of their presence: contribution to local charities, among other things. Location is another factor to consider.
I can tell you that I look at where a business hires before I buy products from produce to electronics to computer games (overseas presence isn't bad, but local presence is good). People around the globe think that way: my company's presence in India and China engenders a lot of goodwill in those locations: presence in the US can do the same.

 
At 12/09/2010 4:21 PM, Blogger James said...

Morganovich, would you have hired this guy?

R.T. Jones (1910-1999) attended the University of Missouri in 1927 and 1928, dropping out to work as a mechanic for a flying circus and, later, as a designer for an aircraft company. He attended graduate courses in aeronautical engineering at Catholic University in Washington, DC, but never completed his degree. He joined NACA Langley Aeronautical Lab in 1934 and remained there until 1946, when he transferred to the Ames Aeronautical Lab. In 1944, he invented the swept wing, which is used on most modern civilian and military aircraft as well as the Space Shuttle. He remained at Ames, working on the concept of the oblique supersonic wing, which later became the basis for the Concorde supersonic aircraft, until 1963 when he went to work for AVCO Everett Research Laboratory. He returned to Ames in 1970 and continued to work on wing design until his retirement in 1988. ("R.T. Jones," biographical file, Lek 1/10/2 #001147, NASA Historical Reference Collection, NASA History Division, NASA Headquarters, Washington, DC.)

 
At 12/09/2010 4:38 PM, Blogger sethstorm said...


What portion of the job openings is due to extended unemployment benefits? Why work when the government will pay you to not work?

An oft-cited fallacy. If not unemployment benefits, they simply move to another government benefits system.


but you want to excoriate a business for hiring cheaper overseas labor. why? it is the american workers who have overpriced their labor relative to the global market. global markets are more competitive. get used to it. it's not going away.

Not if those US citizens rightfully remove that influence from power. Unlike some other nations, our nation has the interest in saving our nation, versus selling its soul.

Your faith in the ability of our government to keep on making that Faustian deal is misplaced. Second, you think that it's a good thing to take the US down a peg in your use of some overused canards like "competition" and "global markets". Thirdly, to compare it to micro-level transactions(your auto shop example) is to ignore the costs of traveling between nations. Businesses can move faster than the individual can find work, which you fail to recognize.

 
At 12/09/2010 4:42 PM, Blogger Sean said...

WaltG,

Most people will not find a job by accident in the “new normal” labor market. I hope that I am proven wrong, but there are just too many alternatives today for it to be otherwise.

It's true that you need to research and be aware of where the jobs are, and then chase the ones you are interested in and have some capacity to do.

But if it takes 4 years of training to get a job you can keep for 2 years... that's obviously not going to work for anyone unless you can leverage the hell out of those two years of experience for the next job.

If "mismatch" is happening because employers are too picky... they're shooting themselves in the foot as well as harming the unemployed. There's room for adaptation from employers and labor, but the idea that people should switch fields (not just narrow unskilled "jobs") every few years simply won't work.

 
At 12/09/2010 4:44 PM, Blogger morganovich said...

i am not arguing that on the job training is not a key issue. in many fields it is. (certainly in mine) but why would you train someone if you can hire someone else who already has the skills?

the only reason to hire and train is because it's cheaper, or you want a specific skillset/talent that you do not feel is available.

if neither is the case, then go with the guy who can already do it.

i still take issue with your notion of "greedy". it's no greedier for them to hire at $15k than it is for you to demand $100k. it's all about the scarcity and value of the commodity, be it jobs or talent.

what you can live on is irrelevant. they do not owe you a living. that's up to you. what matters is your value proposition and productivity relative to other options.

i'm not trying to put words in your mouth. you are the one calling them greedy for looking to get a good deal on labor.

arguing that is is lower quality is both specious and irrelevant. lots of offshore work is as high a quality as anything that can be done here. look at firms like TSMC. absolutely, some of it is lower quality and harder to manage or less productive, but productivity only matters relative to payscale.

if i am half as productive as you are, but get paid 25% as much, it makes excellent sense to just hire 2 of me.

US hires wind up being crappy too. overseas has no monopoly on that.

did a lot of firms have to learn lessons about how difficult it is to have overseas teams, yes, absolutely. that's a part of capitalism. you make mistakes and you learn.

companies that sacrifice to much quality will fail, but so too will companies that do not make their costs globally competitive. that argument cuts both ways.

there are lots of US stereo companies. they make the highest quality stuff in the world. but few people are willing to buy a $25k pair of talon khorus speakers. they are interesting in a different part of the cost/quality curve. that is where most of the market will always be. to try to compete with samsung or pioneer without being able to match their costs is futile.

 
At 12/09/2010 4:46 PM, Blogger morganovich said...

sean-

your idea that employers are too "picky" seems flawed. if a firm is too picky, it will be out competed by one that is not. that is a self correcting problem. such a situation will never persisit.

 
At 12/09/2010 4:49 PM, Blogger morganovich said...

seth-

that was incoherent even for you. precisely how are we supposed to "rightfully remove that influence from power".

what is it you propose? to ban the purchase of foreign goods or tax them to make americans poorer in terms of purchasing power by raising the prices of the things we buy?

you may as well try to repeal the law of gravity as escape global competition.

the only "cure" for it is twice as bad as the disease.

read about smoot hawley to get an idea of how that works.

 
At 12/09/2010 4:50 PM, Blogger sethstorm said...


calling companies greedy for doing what you do every time you buy a cheap asian dvd player instead of an expensive US one seems a pretty flimsy argument.

The problem is that no such US product exists at this time. Provide a current example of a complex product like that that is indeed built in the US instead of trying to say "but, but the US is too expensive". You're comparing real apples to virtual oranges.



Second, why does it take fraud and deception to go offshore? Gag orders, intentionally being deceptive with the public, using fraud via guest worker programs. For such a "good policy", it has no real honesty for which to stand.



There will probably be a limited number of core workers in most companies; however, the cyclical ups-and-downs will be filled increasingly with temporary and contract workers.

The one thing from Europe that should never have been able to take root here. Unless you give those workers solid footing(e.g. more permanent work), they have given up ground. You're giving employers too much power and the people seeking work too little ability to choose.

 
At 12/09/2010 4:54 PM, Blogger morganovich said...

james-

i have no idea. never met the guy.

i am pretty unimpressed with academic credentials when i hire. i have has too many ivy league MBA's turn out to be worthless.

we look for specific personal and intellectual attributes when we hire and cultural fit is paramount.

i know lots of incredibly intelligent and successful people who did not finish their education. ( i also know lots who did)

i'm not sure what point you are trying to make.

 
At 12/09/2010 5:03 PM, Blogger sethstorm said...


you may as well try to repeal the law of gravity as escape global competition.

You seem to want to make it sound as it is on par with something proven in a hard science.

At least Sean will acknowledge the damage you're wanting to cause and your callousness to the people doing the work. You want to give the businesses more power to lord over people in the name of flexibility.

Just be over with it and say you want a feudalist system that gives divine right to dispose workers without objection.



companies that sacrifice too much quality will fail

Not if there are too many of them, as there are in many places outside the First World.

 
At 12/09/2010 5:08 PM, Blogger morganovich said...

seth-

as i said to sean, lots of audio equipment is made in the US. it's pretty much all i buy.

bel canto in minneapolis makes my favorite amps, but they are $3000 per monoblock and then that much again for the preamp. the look and sound absolutely gorgeous. however, $10k is more than most will spend on an amp.

talon in murray utah makes the best speakers i have ever heard, but their reference speakers will run you more than a mustang GT.

cal audio and meridian make fantastic CD transports, but again, they are several thousand dollars, and that's without a DAC.

there are tons of US electronics manufacturers, but they are all forced on the high end because you cannot produce low end stuff here and be competitive with asia.

 
At 12/09/2010 5:13 PM, Blogger morganovich said...

seth-

"You seem to want to make it sound as it is on par with something proven in a hard science."

it is. there is an incredible, uncontested amount of evidence that if your costs are higher than your competitors for an equivalent product, you go out of business.

the course you advocate will make us all poorer.

you act as though basic economics is witchcraft because you do not understand it.

much of this business doctrine is every bit as well proven as newton.

 
At 12/09/2010 5:15 PM, Blogger morganovich said...

"companies that sacrifice too much quality will fail

Not if there are too many of them, as there are in many places outside the First World."

now this is just stupid seth. if all these products suck, then no one will buy them. we will all flock to any competitor that makes one we like. people vote with their money.

if every product sucks, there is tremendous incentive to make a good one and take over the market.

 
At 12/09/2010 5:19 PM, Blogger morganovich said...

seth-

allowing private individuals who own private companies to make their own decisions about what is in their best interest is feudalism?

that's insane. that's freedom and free enterprise.

you still seem to want to be able to require someone to hire you and willing to make everyone worse off and impose some kind of fascism/communism to do it.

they can't tell you what to do with your assets, why should you be able to tell them what to do with theirs?

demanding that they hire you is precisely equivalent to them demanding that you buy their products.

 
At 12/09/2010 6:07 PM, Blogger Walt G. said...

Sean,

That's why they are called "transferable" skill-sets that you continually build upon. You have to be able to adapt to the current labor market as it exists now and not as you wish it to be.

The world labor-market genie is not going to go back into the U.S. labor-market bottle. I hope I am wrong, but I fear I am not.

 
At 12/09/2010 7:15 PM, Blogger sethstorm said...


allowing private individuals who own private companies to make their own decisions about what is in their best interest is feudalism?


The massive imbalance you want isnt exactly allowing private individuals to be able to freely choose. It's fine that businesses have flexibility over non-business individuals, but not fine if non-business individuals wield it against business. Thus my claim about feudalism.

 
At 12/09/2010 8:02 PM, Blogger PeakTrader said...

Small businesses say tax-cut extension won't spur hiring
Dec 8, 2010

"They've got a noose around small business," said Schulman, founder of Northbrook, Illinois-based Green Planet Bottling..."I've got no money to reinvest."

Foremost, there must be substantial moves to improve small companies' access to capital at a time when banks are still reluctant to lend...he won't be enticed to hire new employees now based on the prospect of better tax returns in the future.

Schulman agrees there are still too many moving parts in the current economy to prompt significant capital outlays for his business. The value of his home - among his largest assets - dropped 30 percent during the recession. Meanwhile, Green Planet Bottling is facing higher healthcare costs and the first of his two teenage children is set to head off to college next year.

"Why would I want to invest money in a down market unless I know it's close to being an up market?" said Schulman. "I'm still not hiring anybody. They got to take the noose off of me."

"We're focused on the long term in terms of growing the business, so a change in the tax rate is not going to alter what I need to do for competitive and strategic reasons to grow the business," said Bolotsky, 47, who declined to share financials.

John Jordan, a long-time Washington-based publicist...said paying higher taxes would not have influenced his business decisions in the coming year.

"I don't gain or go after clients, or try to reach retainers with an eye toward marginal tax rates. You do what you gotta do. You don't worry about running the tax numbers."

Weltman, herself the owner of two small businesses, favors longer-term solutions that will remove the uncertainty plaguing many small companies. She supports making permanent extensions of the tax relief at all income levels and longer-term tax reform.

 
At 12/09/2010 9:14 PM, Blogger morganovich said...

seth-

you have to be kidding. a decision to hire is mutual.

a company decides they like you to work for them and you decide that you would like to do it. you agree on compensation etc.

if you take away either side's ability to choose, then you have abridged their freedom.

the best way to have leverage over an employer is to have useful skills.

what exactly is the remedy you propose? it sounds tome like you want to require companies to hire when they don;t want to.

that's called fascism/totalitarianism.

you would never put up with a landscaper demanding that you pay him to mow your lawn if you didn't want him to or if you had a cheaper bod from another guy.

so how can you demand that a someone else do the exact same thing by hiring when they don't want to or would rather hire someone else?

 
At 12/09/2010 9:23 PM, Blogger morganovich said...

"It's fine that businesses have flexibility over non-business individuals, but not fine if non-business individuals wield it against business. Thus my claim about feudalism."

this does not even make a tiny bit of sense. i truly have no idea at all what you are trying to say.

what does any of this have to do with feudalism? do you understand what feudalism is?

and since when is it not fine for individuals to wield leverage on businesses? they do it every time they make a purchasing decision. you exert leverage every time you refuse to buy something. it's ultimately the buyer who makes the choice. business cannot make you buy their products. they can encourage you to with high quality and low price, but they cannot make you buy. why do you feel like you should be allowed to make them buy your labor?

you can encourage them with your useful skills and ability to be productive, but you cannot make them hire you without being totalitarian.

highly skilled and productive employees have tons of leverage over employers. that's how we get better jobs and pay raises.

your problem is that you want people without desirable skills to be hired as though they have them by forcing companies to do it to their own detriment.

companies are not charities. they do not owe you a job and you are not entitled to one. you can make the case that you are useful and get them to hire you just as they can make the case that their products are desirable and get you to buy them.

 
At 12/09/2010 11:40 PM, Blogger sethstorm said...


you have to be kidding. a decision to hire is mutual.

Yet you forget all of the background information that gets them to that point. That is, the decision may represent a point of agreement, but you forget how tilted things are towards the businessfolk.


The point where it becomes feudalism is when you tilt things to be lopsided towards business. Doubly so if this lopsided nature is maintained by business's reactions. They don't need to be charities, just not be allowed to be able to set such lopsided terms.



it would be interesting to see a geographical overlay of openings and unemployment.

The one point I'd agree with you on is this one. If there was a reasonable, accurate, and impartial way to get at that data.

 
At 12/10/2010 9:35 AM, Blogger morganovich said...

how are things slanted toward business seth? i have never felt that way in my life. my skills have always been in high demand.

there is nothing lopsided going on. you are just lamenting that you lack the skills to make a strong case to be hired. that is not a company's fault, it's yours.

labor is just another product to be sold based on its perceived value.

you want to retain you ability to decide whose labor to hire, but take it away from others. that is what is lopsided.

so what is all this lopsidedness you are talking about and what is it you propose to do to remedy it?


and seriously, do you have any idea what feudalism is? i think you should look it up. nothing you have said has anything to do with feudalism.

 
At 12/10/2010 9:36 AM, Blogger morganovich said...

"be allowed to set such lopsided terms" is a sinister phrase. "allowed"? allowed by whom? who will be your arbiter of fairness? on what will they base their decisions? from where will they draw the authority to compel private actors into private transactions they do not wish to engage in?

that sounds like fascism to me.

can they come to your house and tell you you did not pay enough for your blender and demand that you pay more and buy more kitchen goods?

 
At 12/10/2010 11:09 AM, Blogger Paul said...

This comment has been removed by the author.

 
At 12/10/2010 11:09 AM, Blogger Sean said...

WaltG,

The world labor-market genie is not going to go back into the U.S. labor-market bottle. I hope I am wrong, but I fear I am not.
No, you're right about that. I'm just hoping that with some time and a little economic growth, the ratio of poor and desperate people to those that are not willing to hand a company all 16 waking hours in a day just for the opportunity to see a new one will drop.

 
At 12/10/2010 11:11 AM, Blogger Paul said...

"That is, the decision may represent a point of agreement, but you forget how tilted things are towards the businessfolk."

By this Sethstorm means he thinks it's unfair he cannot just walk into a particular business he likes and announce, "I'm going to be working here now. I will take that corner office over there."

So he sits in his mother's basement, freeloading off the taxpayers.

 
At 12/10/2010 11:30 AM, Blogger Sean said...

morganovich,

i still take issue with your notion of "greedy". it's no greedier for them to hire at $15k than it is for you to demand $100k.
It is wise for them to want it. It is not wise for them to get so excited about it that they forget to factor in hidden costs.

what you can live on is irrelevant.
Not in the larger sense, no. If someone in a foreign country is really 3-6x more economically efficient by any measure, I want to know why. No amount of cost-cutting on my part could bridge that gap, and H1Bs I've met haven't shown any enlightening frugality: the cost differences are structural. To compete, we must address them one way or another.

they do not owe you a living. that's up to you. what matters is your value proposition and productivity relative to other options.
That statement is both true and useless. It doesn't illuminate anything: it's just an abrogation of the responsibility for figuring out the deeper story.

arguing that is is lower quality is both specious and irrelevant.
Not in any sense is that true. The important metric is value per cost: being unable to measure the numerator breaks your ability to make a good decision.

to try to compete with samsung or pioneer without being able to match their costs is futile.
Yes, but why can't we match their cost efficiency? Why can't we make the super-duper-efficient factory tech that narrows the wage discrepancy. Retreating to niche markets that it isn't worth it for the Samsungs of the world to chase is a loser's game.
The long-term consequence of that paradigm is that we give up and accept poverty except for the top few percent. Is that your position?

 
At 12/10/2010 11:42 AM, Blogger Walt G. said...

I agree with most of what morganovich says, but I can see another side, too.

Why should hundreds or thousands of capitalists pool their money together with all the economy of scales politically, socially, legally, and economically and labor not be allowed to do the same thing with their capital (which is their work)?

Most of the problems I have seen with labor unions have been strategic and not philosophical. And, yes, I see where the NLRA needs to be altered to reflect 21st century realities but not eliminated because it would cause an imbalanced elitist power structure.

 
At 12/10/2010 12:03 PM, Blogger Paul said...

"..and labor not be allowed to do the same thing with their capital (which is their work)?"

They should be allowed. What they should not be allowed to do is use government coercion on their behalf.

 
At 12/10/2010 12:24 PM, Blogger Walt G. said...

Paul,

What you see as coercion other people see as a counter-balance power and risk-pooling strategy through numerical clout. Ask a Delphi salary retiree if he wished he belonged to the UAW.

Do you invest in insurance to cover your financial losses? Do you consider insurance to be a good investment to protect your assets? Why not just go it alone and take your chances like unorganized workers do with their assets (labor)?

 
At 12/10/2010 1:19 PM, Blogger Sean said...

WaltG,

Most of the problems I have seen with labor unions have been strategic and not philosophical.
Actually I would say that their philosophy about what a labor union should be is problematic.
I think labor unions have played an important positive role in American history, but they don't tend to understand that their role ought to be twofold:
1. To increase the value of labor
2. To increase the bargaining position of labor so that it it is paid for its productivity.

Unfortunately, unions have not clearly understood that "getting the best possible bargain for labor" can be self-defeating without the benefit of a lot of foresight. They got "greedy", and globalization has undermined them as well.

 
At 12/10/2010 2:14 PM, Blogger juandos said...

Nice of you to put that unbiased Reuters article PT...

Tax Cuts Proposal: Business Groups Generally Pleased With

Economy needs more than tax cut extension: SBA economist

 
At 12/10/2010 2:17 PM, Blogger Walt G. said...

Sean,

I meant philosophical in the sense that labor unions should indeed exist, but strategically flawed in how that power was used without adapting to the 21st century labor market.

I see no reason that an average working person should not have a bargaining agent/lobbyist when everyone else is allowed to have one. You can have an insurance agent to protect a $50,000 house, so why should you not have a bargaining agent to protect a $50,000 per year income? I realize that the only real job protection is from a profitable company, but it never hurts to have the numbers and clout to be politically relevant given the way our society operates.

Would you argue your own case in front of the Supreme Court? Let's hope you realize that is a bit out of your league. I will send my expert to Washington D.C. the same way everyone else sends their expert.

 
At 12/10/2010 2:24 PM, Blogger morganovich said...

sean-

we cannot match their costs because we are richer. it's as simple as that. we are an increasingly post industrial society.

industrialization is an important step in economic development, but is is a fairly early one. manufacturing jobs are not actually very good jobs and never have been (apart from the 20 years after WW2 in the US when we had the only industrial base remaining and the rest of the world needed everything we could build). manufacturing jobs are not good jobs. look around the US. where are the wealthy regions and where are the poor ones? which regions do the most manufacturing? i think you'll see my point.

the reason we "cannot" compete is that there are too many better opportunities for our workers. the guy who made your burger at McDonalds gets paid a great deal more than the guy who made your iphone.

the real issue is that manufacturers cannot compete with mcdonalds for workers.

it's not that we are not capable, it's that we are too rich to do such low value ad work. (at least in the case of things that can be shipped)

this goes right to the heart of the "what you can live on" issue you raise, and where you misunderstood my point. a company hires you based on value you can create. they don't care if you can put an addition on your house or buy a big TV, they pay for value and productivity. if they cannot get enough output/wage $ from you or if they pay too little and lose their workers, those are both just ways of saying that they are not competitive.

you will seek the best capture of that value that you can find in terms of your own wages. if you compete in an industry that cannot be traded overseas (meals, landscaping, etc) then you are insulated form competition by less wealth foreigners. but, if you make something tradeable, like cd players or cell phones, then you face the full brunt of their competition, and they can raise their standard of living while working for much less than you do and much less that you could earn elsewhere in the US.

so long as there are those willing to manufacture for less than US minimum wage, it's going to be very difficult for us to compete in labor intensive industries of tradeable goods.

add in our higher corporate taxes, tougher regulation, more expensive insurance and higher non wage costs (including energy) and we are looking awfully uncompetitive.

blaming companies for being "greedy" because they respond rationally to costs varying by geography seems silly to me. US manufacturing workers are victims of US relative success.

 
At 12/10/2010 3:28 PM, Blogger Paul said...

"Why not just go it alone and take your chances like unorganized workers do with their assets (labor)?"

Huh? That's what I do now. I'm not in a union and don't wish to join one.

 
At 12/10/2010 3:41 PM, Blogger Walt G. said...

Good for you, Paul. I hope you don't want to force your choice to self-insure your income on others.

 
At 12/10/2010 7:37 PM, Blogger morganovich said...

walt-

i have no problem with workers organizing so long as it is completely voluntary.

no one should ever be forced to join a union in order to get or keep a job. being required to pay dues to a union despite not being a member because they still "negotiate for you" is de facto the same as being forced to join.

sates with closed shop or union shop laws violate this. if i can be forced to pay a third party to get or keep my job because 51% of my co workers voted for it, that ought to be construed as a violation of my rights, as are the "hiring hall" practices that accomplish the same thing.

further, i don't think that organized labor ought to get any special standing under law. employers ought to be able to hire of fire organized members as they please. to claim that you get "extra" rights in comparison to other employees by virtue of being a union (above and beyond collective bargaining power) smacks of favoritism, political patronage, and a lack of equality before the law.

 
At 12/10/2010 7:40 PM, Blogger morganovich said...

w-

my point above being that it seems a bit disingenuous for you to accuse paul of forcing his choice on others when the organizations you support are so notorious for doing so.

individual workers never seem to force unions to do anything, but in most states, unions certainly do the opposite.

i'd be careful making the argument that you did.

i don't think you can support it from where you sit.

 
At 12/10/2010 8:16 PM, Blogger Walt G. said...

morganovich,

My weekly hours are now 70% union and 30% non-union. I know how to make that 100% either way if I choose. I just want to see the average worker get the same shot at pseudo security that a CEO, tenured professor, contract professional sports player, and numerous other professionals have. Likewise, why should the little guy be denied a professional to bargain their wages and working conditions if he or she so chooses (not to mention the political clout, too)?

 
At 12/10/2010 8:39 PM, Blogger Walt G. said...

morganovich,

Political favoritism cuts both ways, and it usually includes money whether we like it or not. Who yields the most political power: 1 person with a $1 million or 1 million people with $1? I'm pretty sure I would have been powerless during the hearing for GM's loans as one person, but I was sure glad I had my UAW representative there with a place at the big table.

I have a weekly opportunity to talk with Delphi salary folks who lost their GM pension while the UAW Delphi people are paid in full for what they were promised. These people who were some of labor unions' biggest opponents just a couple years ago are now some of its biggest proponents. Getting screwed (or the perception of being screwed) is a big equalizer.

Even saying all that, I still believe people should not use unions as a crutch or have a sense of entitlement. You gotta have a Plan B in this unfair world. Even though I would not like it, I completely understand and accept it may all be gone tomorrow. You win some. You lose some.

 
At 12/10/2010 8:56 PM, Blogger Sean said...

morganovich,


blaming companies for being "greedy" because they respond rationally to costs varying by geography seems silly to me.
If you honestly think that's what I've been saying/doing, then I don't think you've been listening closely enough. I'm saying that in the midst of chasing real value that does exist, there's been a lot of "irrational exuberance" in globalization, and like most bubbles it has done some harm.

industrialization is an important step in economic development, but is is a fairly early one. manufacturing jobs are not actually very good jobs and never have been (apart from the 20 years after WW2 in the US when we had the only industrial base remaining and the rest of the world needed everything we could build).
Look, I know the conventional wisdom here, and there is some truth to it, but it's been applied *way* too widely. As I have said elsewhere, a lot of manufacturing jobs *are* good, require a lot of technology, and are not dependent on low labor costs or uneducated labor. We are giving up on those along with the ribbon staplers and repetitive motion jobs. And there's no reason we should be complacent about that.
This is philosophical, but I think the future lies not just in moving up and out of manufacturing, but moving up in the chain. Germany and Japan are not successful high-end manufacturers because they are poor.

 
At 12/11/2010 9:26 AM, Blogger morganovich said...

walt-

i'm not arguing that workers should not be able to organize or seek out the best contracts they can get. i absolutely think they they ought to be able to.

however, i do not think they should be able to force others into their agreements, extort payments and demand bargaining rights for those who do not wish to participate, or gain any additional legal standing by virtue of being an organization.

apart from the leverage gained by acting collectively, a union should have no more legal standing than an individual worker.

i'm not going to go down the UAW political favoritism and blatant flouting of bankruptcy laws aided and abetted by bought politicians with you again. you've made it clear that you believe in no overriding ethics apart from might makes right and buy whatever politicians you can.

and FWIW, the delphi guys did not "get screwed". they made a bad bet and lost. if you accept a pension as part of your compensation, you take the risk that the company becomes insolvent just as if you accept stock options from a start up, you take the risk that they may be worthless. if they were so worried about solvency, they should have negotiated for a 401k plan where they would control their own money. accepting a defined benefit pension is a risky proposition.

 
At 12/11/2010 9:43 AM, Blogger morganovich said...

sean-

i do understand what you are arguing. i'm taking exception to you notion that all offshoring or foreign hiring is somehow shortsighted. sure, some of it is, and like any new trend or idea, it tends to overshoot, but you can make the same arguments about any number of domestic hiring and management trends as well.

many of these offshoring bets are well conceived and will be effective in the long term. many us "platform" companies (like aaple or cisco) are thriving as a result. my point is that that is rational behavior, not short sighted greed.

companies that repeatedly make will take care of themselves and go away, freeing up assets and labor for others. the problem you cite is self correcting.

regarding "good" manufacturing jobs, if we could afford to have them, we'd keep them. the jobs we are sending overseas are the ones that create less value that the other jobs here. sure, some of the jobs were are losing had good compensation, but we lose them because that market is no global. someone else will do it for less, and shipping is cheap, so the job leaves. you cannot arrest that trend without erecting tariff barriers that will make us all worse off. it's going to be a fact of global life.

emerging markets now have access to all the same capital sources and technical equipment/productivity tools that we do. this levels the playing field.

then, it slants toward the EE's because their wages are lower, their corporate taxes are lower, their regulations and liability law are easier, and their non wage costs are lower. even more frightening, it is now easier to open new plants in china than it is in the US. you can be up and running in china in 4-6 weeks from a green field. you'll still be arguing zoning in the US at that point. there is tremendous demand in the US for new oil refineries, but it is essentially impossible to build one, so now we import gasoline.

our wages are going to be bounded on the bottom by the other opportunities here, but there are a lot of issue there within our control. we can lower taxes and alter our tort law with it our insurance costs. we can reduce regulatory hurdles. all these things will help retain industry.

clearly, not all of them are choices we would want to make. few would be anxious to have pollution like shanghai to keep some steel and chemical jobs, but there is a great deal of room for improvement here in the US.

jobs are like air masses. they flow inexorably from high pressure to low pressure. if we want to staunch their flow then we need to reduce the pressure gradient.

 
At 12/11/2010 9:45 AM, Blogger morganovich said...

3rd paragraph should say "make short sighted mistakes"

 
At 12/11/2010 1:03 PM, Blogger sethstorm said...


Paul said...

You think that I had one. Or at the very least think I want the proverbial "corner office". I don't.

Suit yourself if you'd rather have someone be not productive. Complain a bit less since you want someone on the dole because they don't deserve stable, non-drudgery work.





emerging markets now have access to all the same capital sources and technical equipment/productivity tools that we do. this levels the playing field.

No, it has not. They're simply just slave labor countries that are given them, in a bid to make developed countries suffer.


A question that never seems to be asked or answered
Why does it take fraud to implement offshoring? It is an idea that cannot stand on its own honestly in the face of those who would lose their jobs. If you have to implement gag orders on the people losing their jobs, lie to them about the future of their work, and lie to everyone in the developed world not in support of it, the only thing fit for offshoring is to kill it. Even if it's painful for those who forsake our own country while wanting to live in it.

 
At 12/11/2010 1:13 PM, Blogger sethstorm said...


so long as there are those willing to manufacture for less than US minimum wage, it's going to be very difficult for us to compete in labor intensive industries of tradeable goods.

Not if we make sure they can't.

That doesn't make us poorer, it only allows our nation to fix itself. In every region.

 
At 12/11/2010 1:16 PM, Blogger sethstorm said...


then, it slants toward the EE's because their wages are lower, their corporate taxes are lower, their regulations and liability law are easier, and their non wage costs are lower. even more frightening, it is now easier to open new plants in china than it is in the US. you can be up and running in china in 4-6 weeks from a green field. you'll still be arguing zoning in the US at that point. there is tremendous demand in the US for new oil refineries, but it is essentially impossible to build one, so now we import gasoline.

Except for the fact is that in China, you'll have killed someone through government security action, lack of attention to safety, or pollution of hazardous chemicals. Same goes with about any other hellhole "investment opportunity" country.

 
At 12/11/2010 2:37 PM, Blogger Sean said...

morganovich,


i'm taking exception to you notion that all offshoring or foreign hiring is somehow shortsighted. sure, some of it is, and like any new trend or idea, it tends to overshoot, but you can make the same arguments about any number of domestic hiring and management trends as well.
Absolutely some offshoring makes sense. However, offshoring does more damage to the US labor market than some other fads, so I speak against it more. If I come off more extreme than I intend to, my apologies.

the problem you cite is self correcting.
Most problems are "self-correcting" given a long enough time period. But in the long run, we are all dead...

jobs are like air masses. they flow inexorably from high pressure to low pressure. if we want to staunch their flow then we need to reduce the pressure gradient.
Agreed. You've offered some standard ideas on how to do that, and I'd like to see them applied. I think there's more to be tried, but I guess we ought to go after the low-hanging fruit first.

 
At 12/11/2010 3:03 PM, Blogger Walt G. said...

morganovich,

Getting screwed is a perception which includes viewpoint. Obviously, the Delphi salary folks I speak to believe they would be better off if they were unionized. I believe many or most would go that route given the chance in the future. There's strength to having an organization behind you whether it is your house burning down (insurance) or your job (union).

I can accept a right-to-work law without free riders and choice for representation for everyone. I believe the NLRA should be changed so that can happen along with strict penalties for both sides for violating organizing activities.

I don't see a 50% chance of winning a ULP for being fired for union activities after three to five years and just getting back pay minus any unemployment and other earnings as a penalty. Can I steal your billfold and just pay you back much later if I am caught?

Labor unions will not be relevant if they cannot add value in the 21st century. There are ways where both sides become one and have a win-win situation instead of a win-lose situation. I know this because that is what I do every day. Any organizing will have to accept and promote mutual benefits if they want to be around in the 22nd century. The "enemy" HAS to be your competition and not each other.

 
At 12/12/2010 10:19 AM, Blogger morganovich said...

seth-

"Not if we make sure they can't.

That doesn't make us poorer, it only allows our nation to fix itself. In every region."

and how do you propose to do that? you cannot set wages in other countries.

i presume you intend to erect import barriers.

that makes us a great deal poorer in real terms. the whole point of tariffs is to raise prices. that means we can buy fewer things. it makes us worse off.

read your ricardo. study the smoot hawley tariffs. the evidence here could not be more clear. to save a few jobs, you punish the whole country. that is not the road to wealth.

 
At 12/12/2010 10:30 AM, Blogger morganovich said...

sean-

in the long run we are all dead? what is that supposed to demonstrate? i really don't see what it is you propose to do here. companies are free to make their own choices, good and bad. those that make good choices prosper, those that make bad choices fail. any new idea gets misapplied, then figured out, improved, and made more workable. like any form of evolution, failure is a critical aspect of capitalism. you seem to want to get the fruits without the labor. we can;t know ahead of time exactly what is going to work. we make best guesses and try things and figure it out. you can't just start with the right answer.

i have not heard to actually propose any kind of remedy. what is the course you are propounding?

regarding offshoring making the us labor market worse, that is both a very difficult claim to defend and too narrow a construction of the situation.

offshoring raises competition. that tends to be good for economies, productivity, and wealth. look at the countries with open trade vs those without. see who is getting rich faster. emerging economies are not good comparators because they get the advantages of moving to industrialization and can ride over many grievous flaws until their labor markets get tight. (lewis point)

it's too narrow because offshoring provides 2 key benefits: it allows companies to remain competitive and therefore stay in business. moving manufacturing overseas saves the US jobs in design and sales and finance that support it. if they kept manufacturing here, the whole company might fail when trying to compete with those who can manufacture cheaply. that's a net loss of jobs.

also, offshoring provides lower prices for goods to the whole society. sure, it costs a few jobs here, but everyone gets to buy cheaper goods. it's likely a net gain to the society.

you cannot keep high priced manufacturing here when low priced manufacturing is available elsewhere. it's simply not possible without costing the country a great deal of real welath.

 
At 12/12/2010 10:36 AM, Blogger morganovich said...

walt-

"Getting screwed is a perception which includes viewpoint."

this is absolutely meaningless. delphi guys made a choice. they took a risk, and they are experiencing the consequences.

losing is not the same as getting screwed.

if you play blackjack and the dealer beats you 20 with a 21, you didn't get screwed, you lost.

if you buy a high yield bond from a risky company that then fails, again, you lost, you didn't get screwed.

accepting a DB pension from a company is functionally the same as buying a high yield bond.

the failure of delphi employees to understand this is their fault.

now, on the other hand, when i as a taxpayer or GM creditor as forced to pay for the UAW's losing pension bet at GM, that is getting screwed. the rules were broken.

now the dealer is taking my money on a 20 when he only had 17.

 
At 12/12/2010 10:39 AM, Blogger morganovich said...

walt-

you also dodged my key question-

why should a union be able to force it's representation and/or fees on me?

on what ethical basis is that reasonable?

what gives them the right to tell me i cannot take a job without paying them?

i have no problem with groups of people getting together and bargaining on a collective basis, but if they can force private individuals who do not wish to to abide by their rule, that is extortion.

 
At 12/12/2010 11:07 AM, Blogger Walt G. said...

morganovich,

I said they thought they got screwed and are now union believers. You can use that for whatever it is worth. It's just a real-world example that organizational clout matters in our political society. And, yes, it is not fair, but it is what it is.

I thought I was clear that I felt that the NLRA should be changed. If someone does not want to pay dues AND receive no representation whatsoever, that's the way it should be. By the same token, if they want in, let them ALL in without the present sabotage against representation elections and organizing.

People might be sorry, though, if they opted out using my idea of changes to the NLRA. The Delphi salary folks would have been in the position of turning down or accepting a union. Maybe the only thing worse than having your pension cut is knowing that it was your own fault for rejecting the union representation.

You can think of my position as greedy, unethical, or immoral if you want, but I see the legal union advantage, and it has been determine legal by courts, the same as corporate profit maximization and customers who shop for price and value. Refer to Milton Friedman's stand on corporate social responsibility (CSR) and profit maximization, and apply the same principle to a supplier of labor and see what you think.

 
At 12/12/2010 11:32 AM, Blogger Walt G. said...

"now the dealer is taking my money on a 20 when he only had 17."

Yes. When the government is a dealer, that is very likely to happen. They make the rules, so they just change them so that it is not considered breaking them anymore. You have a few choices when faced with such unfairness: bitch about it, try to change it, or learn to live with it and make it work to your advantage. What you take away from each unfair experience will prepare you on how to deal with the next one because it is going to happen again.

Well, it's time for my monthly union meeting. I will go to the hall and try to solve problems on my own time while other union members sit at home and watch the Lions game (Lions?). These will be the same people who bitch next week that the union is no good because they never do anything.

 
At 12/12/2010 12:47 PM, Blogger morganovich said...

walt-

you repeatedly champion the granting of additional legal privileges to unions by virtue of their unionhood.

on what ethical basis can you defend giving an organization of laborers more rights than individual laborers posses?

how is that in any way fair or just?

it's fine to gain additional leverage by acting as a group, but when i put a tour group together and get a reduced rate from a hotel, i don't get any additional rights by virtue of being a tour group, just more leverage in the pricing negotiation.

why should unions be treated any differently?

i suspect that if organized labor did not demand such additional privileges, it would greatly improve their relationship with management.

 
At 12/12/2010 12:49 PM, Blogger morganovich said...

"They make the rules, so they just change them so that it is not considered breaking them anymore. You have a few choices when faced with such unfairness: bitch about it, try to change it, or learn to live with it and make it work to your advantage"

you are as devoid of ethics as ever walt.

this is just more might makes right thinking and kow-towing to the biggest bully to get him to help you.

 
At 12/12/2010 2:35 PM, Blogger Walt G. said...

"why should unions be treated any differently?"

I don't think labor unions necessarily get any more privileges than other large groups who employ lobbyists, spend money on campaigns, and campaign/support politicians such as corporations, lawyer groups, insurance groups, medical groups, chamber of commerce groups, AARP, . . . . I agree that organizations get more privileges than dis-organizations (individuals). It should not be that way, but it is.

I predict that we will not see the end of special interest groups' political influence in our lifetime, so your choice is to either get one of your own or do without the privileges that come with the membership in the groups. No, it's not fair.

 
At 12/13/2010 9:37 AM, Blogger Sean said...

morganovich,

Given your assumption that we can't compete with emerging economies in manufacturing, then yes, it's better to do those things offshore. And there are many cases where that's the right answer. But there are many that are not, and in those cases the belief that we cannot and should not compete is self-defeating. Don't tell me there's no group-think involved in where to invest.


you cannot keep high priced manufacturing here when low priced manufacturing is available elsewhere
You asked me what my reccommendation was? Take much closer look at the cost gradient. A coalition of American companies could probably make some real headway in doing anaylsys on what it would take to hire here if they were willing to work together to gather data and see what the problem was. This is also something it should be in the interest of a union to help support and pay for.

 
At 12/13/2010 10:56 AM, Blogger morganovich said...

walt-

that's a ridiculous answer. unions have used political patronage to get additional legal standing in comparison to individual workers. claiming that others could have done the same had they organized and hired lobbyists has zero bearing on the ethics of the situation or on the "rightness" of allowing special interests to seize special privileges because they give a lot of money to politicians.

if you view nepotism as a valid business practice, then i'm not really sure what to say to you.

 
At 12/13/2010 11:14 AM, Blogger morganovich said...

sean-

not all of the cost gradient is fixable. a great deal of it has to do with being wealthy.

a mcdonalds burger flipper in the US makes more than the guy at foxxcon who assembled iphones. so long as this is true, it will be very difficult for the US to compete in labor intensive assembly.

also, as a rich country, we choose to consume more "luxury" goods like a clean environment. (i'm not arguing that environment is a luxury, just stating that it behaves like a luxury good.) if you are very poor, you focus on subsistence and damn the trees. once you are comfortable, you start looking at clean air and parks. the fact that we want these makes heavy industry here more expensive.

we could do a great deal to increase competitiveness through tax policy, reduced red tape, and lower liability costs and cleaned up tort law, but that's still not going to level the playing field.

also: the availability of cheap offshore manufacturing does a great deal to increase US quality of life. products are cheap, so we can consumer more of them. consuming more of them opens new markets for our design and sales professionals here. there is a bit of a virtuous circle attached to offshoreing.

 
At 12/13/2010 1:23 PM, Blogger Walt G. said...

morganovich,

I agree that workers who are unionized have more advantages legally, economically, and socially than workers who are not unionized. That's the main point of paying to belong to one. There's a group dynamism synergy where the group is more than the individuals who make up the group.

 
At 12/13/2010 3:43 PM, Blogger Sean said...

morganovich,

not all of the cost gradient is fixable. a great deal of it has to do with being wealthy.
Maybe so, but the more we can do, the better. Otherwise, what will happen is that our wealth will travel that cost gradient, and we will find ourselves more competitive by virtue of not being wealthy (on average: our high end may do just fine)... after a great deal of painful adjustment.
A good company knows that it's better to do cost-cutting while you can control it than to have to do it reactively when you no longer have any choices. We should understand that as a nation, as well.

we could do a great deal to increase competitiveness through tax policy, reduced red tape, and lower liability costs and cleaned up tort law, but that's still not going to level the playing field.
That's kind of been my point. If we do these things, though, we will find more we can do. And we don't need a 100% level playing field because some "home field advantage" does exist in different markets. But the closer we can get to level, the more wealth we can keep. And if we do it right, it'll be good for our trade partners too.


there is a bit of a virtuous circle attached to offshoreing.
I'm not saying there are no benefits: I'm saying we shouldn't be lulled into thinking all is puppies and roses.

 
At 12/14/2010 7:08 PM, Blogger sethstorm said...


there is a bit of a virtuous circle attached to offshoring.

Then why does it require deception to implement it? Surely, an idea that good can withstand open criticism and be welcome to be discussed, promoted, and implemented openly. Offshoring is the lie that doesn't care if the pants are on fire or that their lower half of the body smells like a bad barbecue.

The only virtue happens to be the people who implement it; the people in the US suffer, and the people in the offshored-to country suffer.

The only innovation that offshoring has created is the concept of a jobless recovery.

 
At 12/14/2010 7:18 PM, Blogger sethstorm said...


Maybe so, but the more we can do, the better. Otherwise, what will happen is that our wealth will travel that cost gradient, and we will find ourselves more competitive by virtue of not being wealthy

That sounds like you have no problem tearing down the US, and using offshoring as the vehicle.



That's kind of been my point. If we do these things, though, we will find more we can do. And we don't need a 100% level playing field because some "home field advantage" does exist in different markets.

Except that it comes to the cost of causing multigenerational job losses. The US is not for sale, even though the South has decided to make it look like the nation has made the Faustian deal.

 
At 12/15/2010 10:23 AM, Blogger Sean said...

sethstorm,

At the risk of feeding the trolls, I'll respond.

That sounds like you have no problem tearing down the US, and using offshoring as the vehicle.
Trade can be a plus or a minus. If we make good trades, it's a plus. If we make bad trades, it's a minus. I'd like us to make good trades, so that we don't sell our future productivity in order to live well now.

Except that it comes to the cost of causing multigenerational job losses.
Like so many people I encounter, your reading comprehension is poor. That's exactly what I'm trying to avoid. Competing in a global world is inevitable, but people should not be viewed as enemies simply because they wren't born in the states. The truth is that both economics and morality say that a very high concentration of wealth is not sustainable. People in 3rd world countries will get relatively richer and we will get relatively poorer: we will create jobs overseas. But if we do this in a smart way, maybe we don't have to become poorer in an absolute sense: maybe there's a win-win here somewhere.
I don't think that the lobbyists that say they are selling free trade are thinking from that perspective, though, so we have to keep them honest.

 

Post a Comment

Links to this post:

Create a Link

<< Home