Is Santa Coming This Year?

With the end of 2010 upon us, we would like to think that Santa, or some other magical figure is going to come and spread a good economy on the country. Actually, despite the high levels of unemployment, we are probably in a good economy right now, at least the economy we are going to have to get used to.

Corporate profits are booming, consumers are starting to spend again, and those with marketable skills are actually in short supply. What we don't have is an economy that will put our manual labor workforce to work.

For much of our history, we had a great need for workers who might not possess much more than a willingness to work hard. Our manufacturing, mining, farming, construction and similar industries needed and utilized these workers, training them just enough to do the job that need to be done.

Well, those jobs while not completely gone are in short supply, considering the labor force we have available.

The replacement jobs are those in various service industries, but even those jobs are disappearing.

There are a lot of factors that contribute to this and barring some more bubbles in construction or some other industry, the number of workers needed is simply not going to absorb our unemployed. Companies are outsourcing or automating as many of these jobs as they can, especially since turning off a machine in slow times is a lot less painful than laying off workers.

I might be short sighted, but the future I see is simply going to continue this trend. If you fit into this category, and are over 45, you are facing a tough competitive job market. Retraining is often brought up, but let's be honest. Even if they have the temperament, they will be competing with younger workers who grew up in a world where interacting with machines and computers was second nature to them.

I do think the problem will most likely take care of itself in the future as these workers age more and leave the workforce, but they will create a tremendous drain on social services and other resources for years to come. Looking at our deficits and national debt, the country is ill prepared to support this group.

We need to put them to work rebuilding America. There are so many things we need that will help this country thrive. The Government can't be the employer of these people, but Government policies need to support the projects we need that will rebuild the country and employ our people. Clean energy credits for homeowners, incentives for cars that run on Natural Gas, yes, Government funded projects to rebuild highways, bridges, railways and airports that will prepare us for the future. Each of these needs to be truly beneficial, we don't need bridges to nowhere, but much of our infrastructure is old and needs to be repaired or replaced.

On the way into work the other day I was looking at the results of American labor from the last century. We as a country need to get the spirit of America back and do the work we need to do. It will pay for itself as employment increases and efficiency improves, making the country a better place to work, and live.

The Republican Party has managed to be the party of big deficits while pretending to be fiscally conservative. They accomplish this by attacking federal revenues and they complaining about spending. Of course they are also responsible for a tremendous increase in the spending on Defense and in turn demand that the Government cut spending on major social programs such as Social Security and Medicare.

Now, of course they don't stop their sleight of hand there. They maintain that they don't want to cut those particular programs but instead want to root out waste and abuse in the rest of the Government budget. Of course, in order to cut enough from the budget if you exclude Defense, Social Security, Medicare and Debt Payments, you almost have to eliminate the rest of the Government. The programs mentioned as well as other mandatory safety net programs account for about 80% of the total budget.

So, in some fictional world, we can reduce 20% of the budget enough to eliminate the deficit while not raising taxes. Of course no one who looks at the numbers realistically believe this is possible and I doubt very much that even the people who propose such a thing could possibly believe it, so we are faced with typical political disinformation in order to gain office and perhaps a future advantage.

By presenting an impossibility to the President, they hope to portray him as ineffectual because his liberal agenda prevents the country from addressing its problems. One would like to think that the country would be better served if all our elected officials actually focused on finding a real solution to our issues.

I guess that is my own unrealistic dream with no chance of actually happening.

Jobs and the Health Insurance Blues

The United States is faced with a lack of jobs for people who are willing to work but are no longer economically viable. Demand around the world is starting to pick up and there is increasing manufacturing activity in Asia and Europe. However, while we see a small increase in this country, it is probably pure fantasy to believe that we will create anywhere near enough jobs to reduce our unemployment rate significantly in a structural way.

There may very well be some spurts in employment if we see the housing market hear up again (not desirable) or if we get smart enough to use our tax dollars to rebuild the country's infrastructure. However these measures are not going to restore the private sector manufacturing jobs we are losing to overseas competitors unless we address the fundamental affordability problem.

If you hire someone in the United States you are generally expected to provide a benefit package that includes health insurance, especially if you are a large company. This makes the cost of health insurance an economic factor in the hiring decision. In our competitors, health insurance is provided by the Government and whether it is better or worse, cheaper or more expensive, becomes a non-factor in the hiring decision.

I recently was reviewing numbers related to health insurance costs for the upcoming year and we find costs approaching $10,000 a year or greater for family coverage. Even requiring employees to pick up 25% of the premium leaves a cost of approximately $7,500 to be borne by the employer. This is of course on top of the payroll tax for social security and any pension cost, but let's just consider the implications of that $7,500 cost to the hiring of lower level employees (the ones having the most trouble finding jobs).

Suppose you want to operate a manufacturing or service business and have a choice about where to locate your primary production facility. If you locate it in the United States, you have to pay a competitive salary, let's put the entry level at $20,000. At that rate the real cost to you is that amount plus the payroll tax of about 7% and the cost of health insurance as well as any other benefits you offer. Now, $7,500 increases that cost by 37.5%.

Now suppose you compare that to a location such as England, or China. The amount that you have to pay in salary will vary of course but a lot of that variation may be offset by the logistical problems of dealing with their tax structures and cultural differences. However, the cost of health insurance can easily change the dynamics of that analysis, in favor of locating that job elsewhere.

Currently we see a reaction to the inadequate health reform bill that actually failed to address this very problem via some misguided belief that a National Health Insurance plan would be less effective. Of course that is debatable, and certainly under a National plan, some could buy supplemental plans anyway but those who bought into the idea that such a plan was anti-capitalist or socialist, are creating a situation that will create a permanent unemployable class that will be dependent on the Government for their very survival. Not sure what is more socialistic that that.

Making health insurance a marginal cost of employment instead of something paid for out of general taxation, is exporting jobs. Those unemployed who oppose a national health insurance plan have been fooled into doing the one thing that almost ensures they will become a permanent underclass. While you can't fool all of the people all of the time, you can fool some of the people most of the time.