In March 2023, the U.S. labor market continued its rock solid push forward, with 303,000 more jobs and the unemployment rate back down to 3.8%. Are there cracks below the surface? Not really.
Today’s clearly good news is the first time I’ve heard major news outlets attribute increased immigration numbers as a net positive to filling those persistent underemployment numbers and contributing positively to job growth and low unemployment trend. Thank you for also illustrating this positive trend.
Even forgetting immigration, unemployment tends to rise a bit in a recovering job market as word gets out that there is more opportunity and folks on the sidelines jump back into the labor force. That's why u-6 and the participation rate is good to watch. Thanks for your update!
Yes, immigration is not the only source of the rising labor force and those time to find jobs. Women are another big group that have entered the workforce among others. The strong labor market is drawing in people from the sidelines.
One group that is often only getting part time hours are waitresses not enough hours and relying on tips. Also someone could do a documentary on how immigrants saving us from inflation!
Agree. Another group of part-time workers that have had long standard stresses are those with variable schedules at their employer's discretion and little advance notice. There is still much to improve, even if this recovery has been remarkable.
An issue for another post, but the perverse US system that encourages employers to purchase health insurance (at a fixed per capita cost) means that it is less costly to have the same number of hours performed by multiple part-time workers than the same number of hours performed by full-time workers. And this is is most important at low wages.
Immigration is great for raising real incomes (of both immigrants and residents) and for making for a more lively, diverse and interesting country.
It does NOT however reduce inflation. The Fed is responsible for both good over target inflation that facilitates adjustment in relative prices and thereby raises real income as well as bad over target inflation that just annoys people and (when really bad) causes maladjustment in relative prices and thereby reduces real income.
In a negative sense, that large deficits do not lead to inflation. [Deficits show up as higher interest rates/less private investment/more dollar devaluation (fall in price of tradable goods wrt non-traded goods).]
Uber under a job guarentee and a skills based immigration policy.
Importantly you need to send out higher skilled individuals from the US to the rest of the world to balance those you take in. Otherwise you are stealing skills from other nations which THEY need to develop internally. That is a ‘beggar-thy-neighbour’ attitude and morally unacceptable. Immigration should be more of an informal exchange process than a capitalist ‘free market’.
The rise of Uber and their ilk represent a challenge to the way job markets are arranged in modern democracies and how work is viewed. Innovation must be allowed to proceed so that processes can be improved, however people still have to work to live. Yet, if this entire sad saga has shown anything, it’s that the present system isn’t serving either side very well at all.
The problem with employment legislation is that it is based around the paternalistic assumption that businesses are like community centres, there to provide warmth and cosy chats while supplying a wage. It’s the old job for life attitude where you work for the same firm for 40 years, climbing the ranks from floor sweeper to chairman. It was never true in the Victorian era and it certainly isn’t true today. It stifles innovation and flexibility and prevents competition from doing its job.
Corporates love the idea though. Not only do they lock workers in, but every time there is a crisis they can play the “what about the jobs” card and get panicky politicians to sign off on the necessary bailout. They may get a direct subsidy or, more likely, indirect employment subsidies in the form of tax credits to prop up substandard wages.
According to some, if we force firms to pay enough to live on without state subsidies then they won’t bother employing anybody at all, and that would be terrible. But mostly, prices may go up for people like them, and that’s actually what they are really bothered about.
All of the problems we have stem from one source: the belief that people should work in private sector jobs with specific firms and nothing else. Yet a systemic analysis shows that there is always insufficient work to be had and private provision can never be enough.
It comes from the belief that humans can be moved around the economy like ignots of steel. That there is always a private sector employer with the cheque book open ready to hire the unemployed. That today they are driving a taxi and tomorrow they are a doctor.
Let’s see how this case would have turned out with a Job Guarantee in place and a skills based immigration policy.
Firstly Uber would have struggled to attract sufficient drivers since people would prefer the 9-5 Job Guarantee work close to home. To attract drivers, rates of pay would have to rise so that the capital costs of being an Uber driver were covered and the work paid more than the basic living wage paid by the alternative guaranteed job. Either Uber drivers would have earned enough from their cab work for Uber, or they’d be supporting their families doing a nice job near where they live and Uber would be short of two drivers.
In other words, Uber would have had to compete for labour at a living wage, net of costs, as they should have to.
All the arguments about Uber being the ‘last chance for employment’ fall away, and we no longer care if they ‘employ no one at all’. That means that the firm can be subject to the full force of Capitalist competition. If it dies, nobody cares except the shareholders. And if we are to have a Capitalist system then we shouldn’t care whether any particular business lives or dies. The market has to be sufficiently competitive, with sufficient alternative options, so that businesses disappearing has no effect overall - other than to drive innovation forward.
Because Uber would have to compete for labour, they would be more likely to invest capital in driving forward their plans for automated vehicles, leading to more investment and higher-paid, higher-skilled jobs. This accelerates the transformation of low-level drudgery jobs into higher-skilled engaging jobs. Society gains a higher standard of living overall as we finally break the productivity trap that has been holding the country back.
Cab/private hire competition would now be fair and that would control how far Uber could push prices. Even then we wouldn’t care if the alternative shrank, because ex-drivers would be able to get a guaranteed job on the Job Guarantee.
Ultimately, if there is no further innovation to be had and fierce competition drives all the profit-seeking firms to the wall because Capital can add no extra value, or they form an oligopoly to try on push prices, then the social entrepreneurs can step in and use Job Guarantee labour to provide the service on a non-profit basis. With a Job Guarantee we no longer care whether profit-seeking firms provide any particular service.
Even then, if a profit-seeking operation suddenly discovers a new way of running the service, all they have to do is hire the people away from the non-profit operation by offering better wages and better conditions, paid for from their new productivity MacGuffin. The non-profit cannot respond because the Job Guarantee wage is fixed and automatically backs off to make space for new innovation.
It’s time to reject both the forces of Paternalism and the forces of Corporatism that try to prop up dying business models for their own benefit. They are the two sides of the same coin.
Let’s have a default job option with decent terms and conditions that pays a living wage, then turn market competition up to 11. We will all be better off by doing so. It’s not as if the corporatists could object. After all, competition is good isn’t it?
Open borders and keeping an army of unemployed just to control inflation does not fix any of the above. Boasting that " look at the immigration and how it boosted GDP " doesn't fix any of it either. Just reduces productivity and creates less competition and makes the " core" problems worse.
So yes, there are plenty of cracks under the surface. The same ones that have been their for decades.
The neoclassical Keynsian, monetarist and Austrian view still believes that the economy tends to fix itself. If we just sit back economic growth will go back to its maximum.
Unemployment will drop to 2% what we consider full employment but it might need some help now and then. The Paul Krugman mainstream view. That There are no business cycles. Remember that when the globalist neoliberal UK Parliament claimed the business cycle is dead.
However, the truth is you could have the purist free market economy in the world but still have big unemployment numbers because the system tends to move towards breakdown.
Why ? Why does the system tend to move towards breakdown ?
Why can’t it be that higher wages force firms to invest in better management techniques and the most advanced technologies in order to get the most out of their higher cost labour?
That’s known as the paradox of productivity. Productivity improvements just lead to falling prices, so firms try to avoid doing productivity improvements and prefer to try and obtain monopoly power instead. That’s what a ‘market niche’ is.
Oh boy have we seen this monopoly power as the public sector was transformed into rent seeking monopolies. Energy companies for one during the supply side constraints. I will go into that in more detail later.
Higher wages will lead to some firms failing, which releases people onto the labour market, driving down wages. If you try to hold those jobs up, and force losses onto the other side you end up with an investment strike and the whole house of cards collapses into stagflation. Remember when privatised companies tried to hold the government to ransom by refusing to invest during the pandemic.
Failing to match higher wages with higher product must result in both investment capital and the demanding wage earners taking a cold bath. The economic system is a referee. It must not favour either side in the football match.
And why would firms in a competitive capitalistic system ever try to avoid productivity improvements?
Compare the cost of a concert violinist to a loaf of bread in the 19th century vs today. That’s what productivity increases do over time – because it takes less human time to produce an item, and time is really what everything ends up being priced in.
That’s the paradox of productivity. Productivity improvements ultimately leads to cheaper prices not increased profits. Because that’s what competition is there to do. The profits can go further – in that they can buy more stuff. But capitalists like to accumulate units of account.
In essence the dynamics of pure competition leads to an oversupply in the market which brings prices down until firms start to go bust to eliminate the oversupply. Therefore market players try to stop competition happening by constantly seeking a monopoly perch on which to extract rent.
Oh boy we have we seen this happening time and time again. With a big 2 or 3 in each sector rigging prices between themselves.
The myths of free market beliefs say it all sorts itself out. It clearly doesn’t. The system has to force competition onto essentially reluctant players, and eliminating the clarion call of “what about the jobs” is one way of doing that – let bad firms go bust.
A company that can produce more with the same inputs (costs) is going to do that if there is a market for their product.
That’s the HUGE problem. Because the costs is the income that is used to buy the products ( in aggregate).
If you expand output then you are selling to the same income which implies that the price must go down to shift the increased amount of stuff. Theoretically their competition will eventually learn to do the same and the excess profit will disappear.
Not theoretically. This is exactly what happens. The dynamics of market share maintenance kicks in and prices go down. You get a short uplift and then a nose dive. When you have been in business long enough you know it is better to find a niche than run up and down this escalator. Because items are ultimately priced in a person’s time used to make them. When it boils down to it actual demand must match actual supply at the point of EFFECTIVE demand.
The job guarentee fixes that and ratches competition up to mach 10. By flattening the Phillips curve.
Open borders doesn't fix any of that and it only makes the problems worse. A skills based immigration policy does, along with a job guarentee as it forces competition onto reluctant players.
A better price anchor is the labour hour, since that cannot be hoarded. Once labour hours can be sold at a fixed price to the currency issuer, simple competition sorts the relative value of everything else out.
The best system is a Full Liquidity policy with a labour hour price anchor and floating exchange rates. That guarantees the most physical output while keeping prices stable as well as the maximum policy space for the elected rulers of the nation.
MMT - Job Guarantee.
Regarding immigration it is a productivity play - Doing more with less and being more productive. Remembering the paradox of productivity.
Why does the UK import Labour ? What with x unemployed, y inactive but want a job, and z part timers wanting full time work, why do we need any more?
It’s relatively straightforward. The British Labour market suffers from the ‘British disease’ — a vestige of Imperialism. We find it easier to steal resources from other countries than to create our own.
There is about 10% of the working population unutilised in the workforce one way or another. And that’s before we get onto people over 65, who are automatically excluded despite the state pension age creeping ever higher.
None of these match the vacancies on offer.They don’t match for several reasons:
a) The job role demands a skill set that is not available at the price offered.
b) The job is in the wrong geographical location from the people who could do it
c) The job has physical requirements that are not available at the price offered
So the process of filling a job goes something like this:
1. Business advertises for a person to work very long hours for a pittance, often somewhere ridiculous like London.
2. Nobody appropriate applies for it.
3. Business goes running to nanny shouting ‘skill shortage’ and demands visas.
4. Government gives in to business because businesses are treated like pets, not cattle.
5. The job is advertised abroad.
6. Foreign nations, exporting their people like cargo, welcome the visas and encourage people to leave rather than sort the social problems out at home.
So the elite class in both countries get what they want.The poor country gets rid of their "peasants" that are competing for what little resources there are and who may send some foreign currency back which the elites can appropriate through taxes, financial discounting or even occasionally producing goods for people.
The rich country gets cheap labour that will stack high in tenement blocks and work all hours for a lower wage. The elite cream off the surplus and socialise the losses onto the school system, the health system and the social services who then advertise for people to expand and find that there aren’t any skilled staff to work in those areas. The public sector then asks for visas, advertises abroad…
What you get, in effect, is the same process at a country level that we had initially in the industrial revolution at a city level. 1840’s Manchester followed the same process, but with the surrounding rural areas rather than areas thousands of miles away in a different country. Birmingham, Glasgow and others followed the same process.
It will end up in the same way it always does — the rich living in gated wonderlands while the poor live in slums squashed in like sardines. Shanty towns are what happen when you allow market forces free rein. The UK had the first shanty towns, and the way it is run at the moment it will be the first shanty country.
It’s not just at the low level this process happens. Agriculture is notorious for it, but it also happens in IT. The larger firms put pressure on the government to let them import ‘skilled staff’ just as soon as the British workers develop any pricing power.
In reality they just want to pay less, and the prevailing economic orthodoxy uses a ‘reserve army of the unemployed’ to keep wages under control. In their belief system, inflation control has to be done on the labour side of the equation, never on the capital side. That why we have concepts like NAIRU, but never a NAIRC (non-accelerating inflation rate of competition).
When you look at a country with a different approach — Japan — you find, that even with a declining population and GDP relatively static overall, the GDP per capita is rising. That’s because they are automating and treating their elderly with respect. Fast food places are closing because they can’t get the staff. People get their cars washed by machines and their coffee from machines. All that drives forward productivity which then maintains and improves the standard of living — because they have to.
It’s not all perfect. The Japanese elite are gripped with neoliberalism like everywhere else. There is unnecessary unemployment and unhappiness. There are strong pushes for more ‘guest workers’. But the language, writing barrier and general culture stops them throwing open the doors. They have developed a different way for an island nation to bumble along relatively happily but with a net migration rate of about zero.
When you read any of the immigration literature put out by economists have a look and see if you can find Japan mentioned. You won’t find them in there — because it doesn’t fit the prevailing narrative.
So there is another way to improve standard of living rather than going around nicking resources from other nations. But it means treating business like cattle rather than pets. It means elites having to address local problems and innovate rather than sweeping them under the carpet.
But to do that you have to dump the neo-liberal economic attitude and the bizarre focus on people overseas ahead of people here who actually may vote for YOU.
Leaving the EU. We have been freed from the straitjacket. Asking for it to be put back on, because the new movement in your arms and legs is scary, looks a bit bonkers to anybody outside the echo chamber.
The growth strategy of the UK has been for many years “import cheap labour to keep the middle classes in their delusions of grandeur”. It’s actually called The British Growth Model. But we didn’t reject New Labour to have it replaced by Cheap Labour.
Our future must lie in improving productivity and increasing investment so that we can do more things with a stable population and a sustainable ecology. And a constraint on the labour supply is one of the ways that gets done. Employees should always be reassuringly expensive to force the capitalists to invest and innovate.
Our international strategy must be to encourage other nations to follow our lead in pushing productivity and increasing investment, and solve their unemployment problem at home rather than exporting it. That means that activity needs to move to where the people live.
Bizarrely we appear to be focussed upon national GDP figures and international people, when, in a nation, the focus should be the other way around — international growth figures and the local people who actually vote for you. It shouldn’t matter where the work gets done as long as it is more productive and less resource intensive than before.
But to do that you have to have an immigration system that works. Here’s a precis of one that will (but remember that the devil is in the detail):
An immigration system that excludes immigrants that wouldn’t otherwise get a work visa instantly removes all those people who come here and compete with the UK working-class sub-median wage earners. These were the people who voted in the largest numbers for Brexit. These people have paid the heaviest price for EU membership.
Reintroducing a work visa system that is on same lines as every other civilised advanced nation outside the EU, solves that problem.
Then only higher waged, higher skilled individuals come into the country from all over the world, but they compete with a different class of people in the UK and compete less because they are in areas with GENUINE skill shortages.
From the point of view of the UK sub-median wage earner, immigration has ended. So they are happy.
And importantly you need to send out higher skilled individuals from the UK to the rest of the world to balance those you take in. Otherwise you are stealing skills from other nations which they need to develop internally. That is a ‘beggar-thy-neighbour’ attitude and morally unacceptable. Immigration should be more of an informal exchange process than a capitalist ‘free market’.
This is a civilised solution that addresses all the concerns. Eminently reasonable and fair to all who believe in sovereign nations and borders. A win-win all round.
3.8% sounds small but that's around 12 MILLION People! More people need to read Dr. Pavlina Tcherneva's book explaining the MMT prescribed National Economic stabilizer, that is True OUT OF THE BOX Thinking & has been Field Tested, & would create ZERO Unwanted Unemployment, #TheFederalJobGuarantee!
The people you read online talking about how things are just so rough out there are often not even the people for whom it’s rough. They use a lot of straw-man arguments that lack basis in data.
Does a strong labor market mean that you are getting closer to accepting the Fed's reluctance to lower rates as prudent? Or do you still feel that since interest rates are restrictive and inflation appears relatively tame that the Fed should ease to a more neutral rate?
You probably want Claudia's better informed opinion rather than mine :) but it is hard to see the downside of having started to explore lower rates with one or more 0.25% cuts.
No mention of the Census Bureau and CPS survey of households? And maybe we need a sample size increase to get state and lower level unemployment estimates?
The only one "taking peoples jobs" is the Fed! Immigration is doing a lot of the heavy lifting to reduce inflation, while the Fed continues its focus on creating unemployment and worker wages. The Fed is rapidly increasing debt deflation problems for the non-government sector, including the external sector. The Fed is hellbent on a crash landing. We have a problem when the Fed sees good employment numbers as a reason to throw more gravel in the bearings of the economy with high interest rates which are contributing inflationary pressures.
The US economy is reliant on private sector debt (Bank credit money) for employment. The increase in compounding interest paid on non-government sector debt as a result of Fed policy is going to cut demand from the US economy long after the Fed starts cutting rates.
Today’s clearly good news is the first time I’ve heard major news outlets attribute increased immigration numbers as a net positive to filling those persistent underemployment numbers and contributing positively to job growth and low unemployment trend. Thank you for also illustrating this positive trend.
Even forgetting immigration, unemployment tends to rise a bit in a recovering job market as word gets out that there is more opportunity and folks on the sidelines jump back into the labor force. That's why u-6 and the participation rate is good to watch. Thanks for your update!
Yes, immigration is not the only source of the rising labor force and those time to find jobs. Women are another big group that have entered the workforce among others. The strong labor market is drawing in people from the sidelines.
Hot market. It keeps on surprising me with its persistence.
Great article. 👏🏽👏🏽
One group that is often only getting part time hours are waitresses not enough hours and relying on tips. Also someone could do a documentary on how immigrants saving us from inflation!
Agree. Another group of part-time workers that have had long standard stresses are those with variable schedules at their employer's discretion and little advance notice. There is still much to improve, even if this recovery has been remarkable.
An issue for another post, but the perverse US system that encourages employers to purchase health insurance (at a fixed per capita cost) means that it is less costly to have the same number of hours performed by multiple part-time workers than the same number of hours performed by full-time workers. And this is is most important at low wages.
Immigration is great for raising real incomes (of both immigrants and residents) and for making for a more lively, diverse and interesting country.
It does NOT however reduce inflation. The Fed is responsible for both good over target inflation that facilitates adjustment in relative prices and thereby raises real income as well as bad over target inflation that just annoys people and (when really bad) causes maladjustment in relative prices and thereby reduces real income.
303,000 jobs added
unemployment rate 3.8%
39 straight months of labor market expansion
26 straight months of unemployment under 4%
Yes, good immigration policy will be a solid boost for the US economy. That said, today's report is yet another win for big fiscal.
In a negative sense, that large deficits do not lead to inflation. [Deficits show up as higher interest rates/less private investment/more dollar devaluation (fall in price of tradable goods wrt non-traded goods).]
Uber under a job guarentee and a skills based immigration policy.
Importantly you need to send out higher skilled individuals from the US to the rest of the world to balance those you take in. Otherwise you are stealing skills from other nations which THEY need to develop internally. That is a ‘beggar-thy-neighbour’ attitude and morally unacceptable. Immigration should be more of an informal exchange process than a capitalist ‘free market’.
The rise of Uber and their ilk represent a challenge to the way job markets are arranged in modern democracies and how work is viewed. Innovation must be allowed to proceed so that processes can be improved, however people still have to work to live. Yet, if this entire sad saga has shown anything, it’s that the present system isn’t serving either side very well at all.
The problem with employment legislation is that it is based around the paternalistic assumption that businesses are like community centres, there to provide warmth and cosy chats while supplying a wage. It’s the old job for life attitude where you work for the same firm for 40 years, climbing the ranks from floor sweeper to chairman. It was never true in the Victorian era and it certainly isn’t true today. It stifles innovation and flexibility and prevents competition from doing its job.
Corporates love the idea though. Not only do they lock workers in, but every time there is a crisis they can play the “what about the jobs” card and get panicky politicians to sign off on the necessary bailout. They may get a direct subsidy or, more likely, indirect employment subsidies in the form of tax credits to prop up substandard wages.
According to some, if we force firms to pay enough to live on without state subsidies then they won’t bother employing anybody at all, and that would be terrible. But mostly, prices may go up for people like them, and that’s actually what they are really bothered about.
All of the problems we have stem from one source: the belief that people should work in private sector jobs with specific firms and nothing else. Yet a systemic analysis shows that there is always insufficient work to be had and private provision can never be enough.
It comes from the belief that humans can be moved around the economy like ignots of steel. That there is always a private sector employer with the cheque book open ready to hire the unemployed. That today they are driving a taxi and tomorrow they are a doctor.
Let’s see how this case would have turned out with a Job Guarantee in place and a skills based immigration policy.
Firstly Uber would have struggled to attract sufficient drivers since people would prefer the 9-5 Job Guarantee work close to home. To attract drivers, rates of pay would have to rise so that the capital costs of being an Uber driver were covered and the work paid more than the basic living wage paid by the alternative guaranteed job. Either Uber drivers would have earned enough from their cab work for Uber, or they’d be supporting their families doing a nice job near where they live and Uber would be short of two drivers.
In other words, Uber would have had to compete for labour at a living wage, net of costs, as they should have to.
All the arguments about Uber being the ‘last chance for employment’ fall away, and we no longer care if they ‘employ no one at all’. That means that the firm can be subject to the full force of Capitalist competition. If it dies, nobody cares except the shareholders. And if we are to have a Capitalist system then we shouldn’t care whether any particular business lives or dies. The market has to be sufficiently competitive, with sufficient alternative options, so that businesses disappearing has no effect overall - other than to drive innovation forward.
Because Uber would have to compete for labour, they would be more likely to invest capital in driving forward their plans for automated vehicles, leading to more investment and higher-paid, higher-skilled jobs. This accelerates the transformation of low-level drudgery jobs into higher-skilled engaging jobs. Society gains a higher standard of living overall as we finally break the productivity trap that has been holding the country back.
Cab/private hire competition would now be fair and that would control how far Uber could push prices. Even then we wouldn’t care if the alternative shrank, because ex-drivers would be able to get a guaranteed job on the Job Guarantee.
Ultimately, if there is no further innovation to be had and fierce competition drives all the profit-seeking firms to the wall because Capital can add no extra value, or they form an oligopoly to try on push prices, then the social entrepreneurs can step in and use Job Guarantee labour to provide the service on a non-profit basis. With a Job Guarantee we no longer care whether profit-seeking firms provide any particular service.
Even then, if a profit-seeking operation suddenly discovers a new way of running the service, all they have to do is hire the people away from the non-profit operation by offering better wages and better conditions, paid for from their new productivity MacGuffin. The non-profit cannot respond because the Job Guarantee wage is fixed and automatically backs off to make space for new innovation.
It’s time to reject both the forces of Paternalism and the forces of Corporatism that try to prop up dying business models for their own benefit. They are the two sides of the same coin.
Let’s have a default job option with decent terms and conditions that pays a living wage, then turn market competition up to 11. We will all be better off by doing so. It’s not as if the corporatists could object. After all, competition is good isn’t it?
Open borders and keeping an army of unemployed just to control inflation does not fix any of the above. Boasting that " look at the immigration and how it boosted GDP " doesn't fix any of it either. Just reduces productivity and creates less competition and makes the " core" problems worse.
So yes, there are plenty of cracks under the surface. The same ones that have been their for decades.
Of course The paradox of productivity.
The neoclassical Keynsian, monetarist and Austrian view still believes that the economy tends to fix itself. If we just sit back economic growth will go back to its maximum.
Unemployment will drop to 2% what we consider full employment but it might need some help now and then. The Paul Krugman mainstream view. That There are no business cycles. Remember that when the globalist neoliberal UK Parliament claimed the business cycle is dead.
However, the truth is you could have the purist free market economy in the world but still have big unemployment numbers because the system tends to move towards breakdown.
Why ? Why does the system tend to move towards breakdown ?
Why can’t it be that higher wages force firms to invest in better management techniques and the most advanced technologies in order to get the most out of their higher cost labour?
That’s known as the paradox of productivity. Productivity improvements just lead to falling prices, so firms try to avoid doing productivity improvements and prefer to try and obtain monopoly power instead. That’s what a ‘market niche’ is.
Oh boy have we seen this monopoly power as the public sector was transformed into rent seeking monopolies. Energy companies for one during the supply side constraints. I will go into that in more detail later.
Higher wages will lead to some firms failing, which releases people onto the labour market, driving down wages. If you try to hold those jobs up, and force losses onto the other side you end up with an investment strike and the whole house of cards collapses into stagflation. Remember when privatised companies tried to hold the government to ransom by refusing to invest during the pandemic.
Failing to match higher wages with higher product must result in both investment capital and the demanding wage earners taking a cold bath. The economic system is a referee. It must not favour either side in the football match.
And why would firms in a competitive capitalistic system ever try to avoid productivity improvements?
Compare the cost of a concert violinist to a loaf of bread in the 19th century vs today. That’s what productivity increases do over time – because it takes less human time to produce an item, and time is really what everything ends up being priced in.
That’s the paradox of productivity. Productivity improvements ultimately leads to cheaper prices not increased profits. Because that’s what competition is there to do. The profits can go further – in that they can buy more stuff. But capitalists like to accumulate units of account.
In essence the dynamics of pure competition leads to an oversupply in the market which brings prices down until firms start to go bust to eliminate the oversupply. Therefore market players try to stop competition happening by constantly seeking a monopoly perch on which to extract rent.
Oh boy we have we seen this happening time and time again. With a big 2 or 3 in each sector rigging prices between themselves.
The myths of free market beliefs say it all sorts itself out. It clearly doesn’t. The system has to force competition onto essentially reluctant players, and eliminating the clarion call of “what about the jobs” is one way of doing that – let bad firms go bust.
A company that can produce more with the same inputs (costs) is going to do that if there is a market for their product.
That’s the HUGE problem. Because the costs is the income that is used to buy the products ( in aggregate).
If you expand output then you are selling to the same income which implies that the price must go down to shift the increased amount of stuff. Theoretically their competition will eventually learn to do the same and the excess profit will disappear.
Not theoretically. This is exactly what happens. The dynamics of market share maintenance kicks in and prices go down. You get a short uplift and then a nose dive. When you have been in business long enough you know it is better to find a niche than run up and down this escalator. Because items are ultimately priced in a person’s time used to make them. When it boils down to it actual demand must match actual supply at the point of EFFECTIVE demand.
The job guarentee fixes that and ratches competition up to mach 10. By flattening the Phillips curve.
Here:
https://m.youtube.com/watch?v=M-8RXC_vY2g&embeds_referring_euri=https%3A%2F%2Fyoursforscotlandcom.wordpress.com%2F&source_ve_path=OTY3MTQ&feature=emb_imp_woyt
Open borders doesn't fix any of that and it only makes the problems worse. A skills based immigration policy does, along with a job guarentee as it forces competition onto reluctant players.
A better price anchor is the labour hour, since that cannot be hoarded. Once labour hours can be sold at a fixed price to the currency issuer, simple competition sorts the relative value of everything else out.
The best system is a Full Liquidity policy with a labour hour price anchor and floating exchange rates. That guarantees the most physical output while keeping prices stable as well as the maximum policy space for the elected rulers of the nation.
MMT - Job Guarantee.
Regarding immigration it is a productivity play - Doing more with less and being more productive. Remembering the paradox of productivity.
Why does the UK import Labour ? What with x unemployed, y inactive but want a job, and z part timers wanting full time work, why do we need any more?
It’s relatively straightforward. The British Labour market suffers from the ‘British disease’ — a vestige of Imperialism. We find it easier to steal resources from other countries than to create our own.
There is about 10% of the working population unutilised in the workforce one way or another. And that’s before we get onto people over 65, who are automatically excluded despite the state pension age creeping ever higher.
None of these match the vacancies on offer.They don’t match for several reasons:
a) The job role demands a skill set that is not available at the price offered.
b) The job is in the wrong geographical location from the people who could do it
c) The job has physical requirements that are not available at the price offered
So the process of filling a job goes something like this:
1. Business advertises for a person to work very long hours for a pittance, often somewhere ridiculous like London.
2. Nobody appropriate applies for it.
3. Business goes running to nanny shouting ‘skill shortage’ and demands visas.
4. Government gives in to business because businesses are treated like pets, not cattle.
5. The job is advertised abroad.
6. Foreign nations, exporting their people like cargo, welcome the visas and encourage people to leave rather than sort the social problems out at home.
So the elite class in both countries get what they want.The poor country gets rid of their "peasants" that are competing for what little resources there are and who may send some foreign currency back which the elites can appropriate through taxes, financial discounting or even occasionally producing goods for people.
The rich country gets cheap labour that will stack high in tenement blocks and work all hours for a lower wage. The elite cream off the surplus and socialise the losses onto the school system, the health system and the social services who then advertise for people to expand and find that there aren’t any skilled staff to work in those areas. The public sector then asks for visas, advertises abroad…
What you get, in effect, is the same process at a country level that we had initially in the industrial revolution at a city level. 1840’s Manchester followed the same process, but with the surrounding rural areas rather than areas thousands of miles away in a different country. Birmingham, Glasgow and others followed the same process.
It will end up in the same way it always does — the rich living in gated wonderlands while the poor live in slums squashed in like sardines. Shanty towns are what happen when you allow market forces free rein. The UK had the first shanty towns, and the way it is run at the moment it will be the first shanty country.
It’s not just at the low level this process happens. Agriculture is notorious for it, but it also happens in IT. The larger firms put pressure on the government to let them import ‘skilled staff’ just as soon as the British workers develop any pricing power.
In reality they just want to pay less, and the prevailing economic orthodoxy uses a ‘reserve army of the unemployed’ to keep wages under control. In their belief system, inflation control has to be done on the labour side of the equation, never on the capital side. That why we have concepts like NAIRU, but never a NAIRC (non-accelerating inflation rate of competition).
When you look at a country with a different approach — Japan — you find, that even with a declining population and GDP relatively static overall, the GDP per capita is rising. That’s because they are automating and treating their elderly with respect. Fast food places are closing because they can’t get the staff. People get their cars washed by machines and their coffee from machines. All that drives forward productivity which then maintains and improves the standard of living — because they have to.
It’s not all perfect. The Japanese elite are gripped with neoliberalism like everywhere else. There is unnecessary unemployment and unhappiness. There are strong pushes for more ‘guest workers’. But the language, writing barrier and general culture stops them throwing open the doors. They have developed a different way for an island nation to bumble along relatively happily but with a net migration rate of about zero.
When you read any of the immigration literature put out by economists have a look and see if you can find Japan mentioned. You won’t find them in there — because it doesn’t fit the prevailing narrative.
So there is another way to improve standard of living rather than going around nicking resources from other nations. But it means treating business like cattle rather than pets. It means elites having to address local problems and innovate rather than sweeping them under the carpet.
But to do that you have to dump the neo-liberal economic attitude and the bizarre focus on people overseas ahead of people here who actually may vote for YOU.
Leaving the EU. We have been freed from the straitjacket. Asking for it to be put back on, because the new movement in your arms and legs is scary, looks a bit bonkers to anybody outside the echo chamber.
The growth strategy of the UK has been for many years “import cheap labour to keep the middle classes in their delusions of grandeur”. It’s actually called The British Growth Model. But we didn’t reject New Labour to have it replaced by Cheap Labour.
Our future must lie in improving productivity and increasing investment so that we can do more things with a stable population and a sustainable ecology. And a constraint on the labour supply is one of the ways that gets done. Employees should always be reassuringly expensive to force the capitalists to invest and innovate.
Our international strategy must be to encourage other nations to follow our lead in pushing productivity and increasing investment, and solve their unemployment problem at home rather than exporting it. That means that activity needs to move to where the people live.
Bizarrely we appear to be focussed upon national GDP figures and international people, when, in a nation, the focus should be the other way around — international growth figures and the local people who actually vote for you. It shouldn’t matter where the work gets done as long as it is more productive and less resource intensive than before.
But to do that you have to have an immigration system that works. Here’s a precis of one that will (but remember that the devil is in the detail):
An immigration system that excludes immigrants that wouldn’t otherwise get a work visa instantly removes all those people who come here and compete with the UK working-class sub-median wage earners. These were the people who voted in the largest numbers for Brexit. These people have paid the heaviest price for EU membership.
Reintroducing a work visa system that is on same lines as every other civilised advanced nation outside the EU, solves that problem.
Then only higher waged, higher skilled individuals come into the country from all over the world, but they compete with a different class of people in the UK and compete less because they are in areas with GENUINE skill shortages.
From the point of view of the UK sub-median wage earner, immigration has ended. So they are happy.
And importantly you need to send out higher skilled individuals from the UK to the rest of the world to balance those you take in. Otherwise you are stealing skills from other nations which they need to develop internally. That is a ‘beggar-thy-neighbour’ attitude and morally unacceptable. Immigration should be more of an informal exchange process than a capitalist ‘free market’.
This is a civilised solution that addresses all the concerns. Eminently reasonable and fair to all who believe in sovereign nations and borders. A win-win all round.
The left has it, the left has it.
"From the archives – my early statements on the need for degrowth and the resistance they received from progressives"
https://billmitchell.org/blog/?p=61664
Excellent from Bill as usual and not sure reading the article above that you have debunked any of it Claudia ?
3.8% sounds small but that's around 12 MILLION People! More people need to read Dr. Pavlina Tcherneva's book explaining the MMT prescribed National Economic stabilizer, that is True OUT OF THE BOX Thinking & has been Field Tested, & would create ZERO Unwanted Unemployment, #TheFederalJobGuarantee!
The people you read online talking about how things are just so rough out there are often not even the people for whom it’s rough. They use a lot of straw-man arguments that lack basis in data.
Does a strong labor market mean that you are getting closer to accepting the Fed's reluctance to lower rates as prudent? Or do you still feel that since interest rates are restrictive and inflation appears relatively tame that the Fed should ease to a more neutral rate?
You probably want Claudia's better informed opinion rather than mine :) but it is hard to see the downside of having started to explore lower rates with one or more 0.25% cuts.
No mention of the Census Bureau and CPS survey of households? And maybe we need a sample size increase to get state and lower level unemployment estimates?
The only one "taking peoples jobs" is the Fed! Immigration is doing a lot of the heavy lifting to reduce inflation, while the Fed continues its focus on creating unemployment and worker wages. The Fed is rapidly increasing debt deflation problems for the non-government sector, including the external sector. The Fed is hellbent on a crash landing. We have a problem when the Fed sees good employment numbers as a reason to throw more gravel in the bearings of the economy with high interest rates which are contributing inflationary pressures.
The US economy is reliant on private sector debt (Bank credit money) for employment. The increase in compounding interest paid on non-government sector debt as a result of Fed policy is going to cut demand from the US economy long after the Fed starts cutting rates.
Do you have an explanation for why BLS does not produce wage indexes instead of (admittedly pretty detailed) unite values indexes of wage payments
And why does Treasury issue a "Trillionth" security if various tenors corresponding to more intermediate tenors of TIPS?
See: [https://thomaslhutcheson.substack.com/p/improvements-in-macroeconomic-data]
Likewise what it is your view of the idea that the labor market is "inefficiently " tight as laid out by https://pascalmichaillat.org/13/?utm_source=substack&utm_medium=email Pascal Michaillat and Emmanuel Saez
I don't know.
Help me keep asking the question. :)