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Structural Unemployment for “Dummies”

Articles & Blogs - Canadian Commentary

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Let me preface this piece by first telling readers that the “dummies” to whom this commentary is addressed are not yourselves. Nor am I trying to infringe on anyone’s trademark. No, the “dummies” to whom this piece is dedicated are our “leaders” and our “experts”.

It is frustrating to the point of madness to see media talking-heads parrot the phrase “structural unemployment” over and over again while quoting these illustrious individuals, and yet not one of them has the tiniest clue as to the actual meaning of the term. The fact that this situation persists despite having covered this topic several times in my own writing demonstrates one of two possibilities (perhaps both?). Either global leaders and market experts are not (yet) subscribers of my work, or, they read it but couldn’t understand it.

This piece is dedicated to explaining the concept of structural unemployment in such painful simplicity that each and every person who reads it will, in turn, be able to explain it to our esteemed leaders and experts.

No treatise for “dummies” would be complete without starting with a simple definition. In the case of “structural unemployment”, the definition is the epitome of simplicity: structural unemployment is unemployment caused by a faulty structure of the labour market. Before my critics accuse me of circular reasoning, or simply semantics, let me defend myself.

With any simple term, we cannot define it without encountering the trap of needing to define it in terms of itself – or simply borrow a close synonym, and do the same thing. Thus, anyone trying to define “big” would inevitably find themselves forced to use terms like “large”, or “greater than”, and be subject to identical criticisms.

With a term like structural unemployment, which is literally self-explanatory, we cannot possibly create a definition which does not involve “a problem with structure”. Such a definition may seem pointless, and yet even this simple step is beyond our leaders and experts.

Consider this: we know what that none of these charlatans are capable of understanding the definition of structural unemployment any/every time we hear one of them attempt to formulate a “solution”. These exercises in ineptitude fall into two categories: “job retraining” and/or “improving economic performance”.

With respect to defining structural unemployment, let’s take one more step down our road of simplicity. When I say that our labour markets have “faulty structures”, we can instantly identify the precise nature of that structural problem (by definition): our economies are now structured to provide far too few jobs in comparison to the total number of workers. This may also seem maddeningly self-evident, but it too is beyond the grasp of the leaders and experts.

In an economy which, in absolute terms, simply produces far too few jobs, job-retraining by itself is nearly irrelevant. When you shuffle a deck of cards, you haven’t “restructured” that deck, in any meaningful sense. All you have done is changed the order, with respect to which cards come to the top of the deck first.

It does no good to simply “retrain” large numbers of workers when (for the most part) pushing one of these “retrained” workers back into the job market merely takes away the job of a current worker (who then goes to “the discard pile”). If we are not doing something to radically increase the total number of jobs then we are merely pretending to address the problem (something at which our “leaders” excel).

Equally idiotic are those “experts” who claim that improved economic performance can solve our problems. Again, I fall back on simple definitions. “Improving economic performance” is a cyclical change. We can “improve the economy” for a while (exclusively by piling more debt onto our economies), but that is only a solution for “cyclical unemployment”.

The entire reason that our leaders and experts put the word “structural” in front of the word “unemployment” is that this is not cyclical unemployment. By definition, this is unemployment which can never be solved through a cyclical up-cycle.

Up to this point, I have defined what “structural unemployment” is, what it is not, and how not to fix it. With three quarters of my task accomplished, this only leaves me with the solution. In keeping with the theme, my solution is the epitome of simplicity: we need to re-structure our labour markets.

This time critics could rightfully accuse me of circular reasoning, and semantics – if not for one point: we already have 200 years of economic history which tells us exactly how to re-structure our labour markets. We must reduce the length of the work week.

I can already hear the clamor from business leaders and right-wing (i.e. brain-dead) economists: “it won’t work”, “it’s too expensive”. I don’t even have to be psychic to know exactly what they will they say, because it’s exactly what business leaders and right-wing economists were saying two hundred years ago, when the “standard work-week” was seven days a week, twelve hours a day – or roughly 80 hours per week, and our economies were suffering from (you guessed it) “structural unemployment”.

And decades later, when it was proposed that we go from a 70-hour work week to a 60-hour work week, these enlightened pundits said exactly the same thing. And decades later, when we went from a 60-hour week to a 50-hour week, these rocket scientists made the same predictions. And decades later, when we went from a 50-hour week to a 40-hour these intellectual titans boldly made the same prediction. Now, today, decades later than we should have made the change to a four-day work week, I am proposing that we follow a 200-year old “formula” – and yet I am utterly alone in the Western world.

Keeping their two hundred year-old “perfect record” intact, we can count on every business leader and right-wing economist to tell us that moving to a four-day work week (which would increase total job positions in our labour markets by more than 20% after factoring in the “multiplier effect”) is “too expensive” and “will not work”.

For those of you who actually manage to corner one of these evasive “leaders” or “experts”, and who decide to try to explain structural unemployment to them (along with its solution), here are three skill-testing questions. Asking these three questions of the leader or expert present will allow you to determine whether to take the time to complete your explanation, or whether you could use your time more productively by explaining it to your “pet rock”.

1) Keeping in mind that the last change in the work week was more than a half century ago, did the previous reductions in the work week make our economies stronger or weaker?

If your target isn’t aware that our prosperity and our standard of living got somewhat better between 1800 and 1950, talk to your rock.

2) Do you have a better idea to fix structural unemployment?

As I explained before, if your target even opens his mouth to try to answer that question, talk to the rock.

3) Can you count backwards from seven down to four?

We must recognize the distinct possibility that these “leaders” and “experts” are simply not capable of the “arithmetic” necessary to go from a five-day work week to a four-day work week. If your target gets stuck at “five”, talk to the rock.

 

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Jeff Nielson
...
written by Jeff Nielson, December 28, 2010
I'm going to do an entirely separate reply on "pay", since that is an issue that most people would focus upon (LOL!).

To begin with, yes, EVERYONE takes a 20% pay cut. They ALSO get a BIG tax-break, because with 20% more people with jobs, that means 20% more paying taxes - so EVERYONE gets a big tax-cut.

Second, as mentioned above, working less hours should make employees MORE productive (based upon existing empirical evidence). More "productive" employees (and I'm talking about REAL "productivity") translates into a PAY RAISE - based on this efficiency alone.

However, with 20% more people suddenly taking home paycheques, this is a HUGE stimulus for the economy (which doesn't cost one PENNY). So any/every business which relies upon domestic consumption will suddenly become much more profitable - and that should produce ANOTHER pay raise for employees.

Eventually, you get the same thing happening which occurred after all the OTHER reductions in the work week: people work LESS hours, but end up making MORE than before.

The problem: our governments don't WANT "employees", they only want slaves - and thus keeping us poor and oppressed is PREFERABLE to making our economies efficient and prosperous.
Jeff Nielson
...
written by Jeff Nielson, December 28, 2010
Yes, Redrob, this is DEFINITELY a product of technological advancement. Simply, technology ALWAYS eliminates jobs much faster than it creates new employment opportunities - hence the steady progression from 7 days a week/12 hours a day to 5 days a week/8 hours a day. I usually include that when I cover this topic, but wanted to keep it a little simpler this time.

I should also note that there has NEVER been anything "optimal" about working EITHER 5 days or 40 hours in a week.

Employees have been shown to INCREASE productivity if they work fewer than 40 hours. And as for the "five day" week, how idiotic is it that most of the valuable infrastructure in our society sits idle for roughly 30% of every year.

If we go to a four-day week, we could invent a new "semi full-time" status for people who work three days a week - and begin to use our infrastructure on a SEVEN DAY A WEEK basis.

This is just a few of the economic efficiencies available to us through shortening the work week.
redrob25
...
written by redrob25, December 28, 2010
Jeff,

Do you think that the shrinking work week is a product of technological advancement and deflation, or of a flawed economic system that cannot sustain itself which forces people to reduce their standard of living through reduced work schedules.

I would assume that shorter work weeks mean less pay as well. We would be bequeathing 20% of our pay to employ the rest. Unless, technological advancement and natural deflation has caused our standard of living to rise so much as to allow us to work less and leisure more.

Given our debt-based society which has increased our appearance of prosperity while putting claims on future labor, it is very hard to estimate how much impact technological advancement and natural deflation has impacted our lives.

It seems we only have anecdotal ways in which to separate technological advancement and ensuing natural deflation, and the inflating and distortive effects of a fiat based economy.

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