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  1.    #1  
    Krugman: On job creation, Germany can teach U.S. a lesson

    By Paul Krugman
    San Jose Mercury News
    Posted:11/13/2009 02:41:14 PM PST


    Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis.

    Don't you think Country A might have something to learn from Country B?

    This story isn't hypothetical. Country A is the United States, where stocks are up, GDP is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a big hit to its GDP when world trade collapsed, but has been remarkably successful at avoiding mass job losses.

    Germany's jobs miracle hasn't received much attention in America but it's real, it's striking, and it raises questions about whether the U.S. government is doing the right things to fight unemployment.

    In America, the philosophy behind jobs policy can be summarized as "if you grow it, they will come." That is, we don't really have a jobs policy: We have a GDP policy. The theory is that by stimulating overall spending we can make GDP grow faster, and this will induce companies to stop firing and resume hiring.

    The alternative would be policies that address the job issue more directly. We could, for example, have New-Deal-style employment programs.

    Alternatively, or in addition, we could have policies that support private-sector employment. Such policies could range from labor rules that discourage firing to financial incentives for companies that either add workers or reduce hours to avoid layoffs.

    And that's what Germany has done. Germany came into the Great Recession with strong employment protection legislation. This has been supplemented with a "short-time work scheme," providing subsidies to employers who reduce workers' hours rather than lay them off.

    In a recent interview, Lawrence Summers, the Obama administration's highest-ranking economist, was dismissive of such ideas: "It may be desirable to have a given amount of work shared among more people. But that's not as desirable as expanding the total amount of work."

    True. But we are not, in fact, expanding the total amount of work and Congress doesn't seem willing to spend enough on stimulus to change that unfortunate fact.

    The usual objection to European-style employment policies is that they're bad for long-run growth that protecting jobs and encouraging work-sharing makes companies in expanding sectors less likely to hire and reduces the incentives for workers to move to more productive occupations.

    But these aren't normal times. Right now, workers who lose their jobs aren't moving to the jobs of the future; they're entering the ranks of the unemployed and staying there.

    And long-term unemployment inflicts long-term damage. Workers who have been out of a job for too long often find it hard to get back into the labor market even when conditions improve.

    Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce a job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.

    The point is that we need to start doing something more than, and different from, what we're already doing. And the experience of other countries suggests that it's time for a policy that explicitly and directly targets job creation.
    What do you think. Attacking problems from multiple angles is usually this administration's forte. Will the jobs summit bring about some of these worker protection methods. Would you rather be laid off or have your work/pay reduced 20%?
  2. #2  
    One of the biggest issues is ... benefits. When you start messing around with hours some companies kill health care plans and other benefits.

    All else the same, of course I'd take a reduction over being laid off... unless unemployment paid me more and I could get a another job before it those benefits ended.

    In some areas, reduced hours bring negative thoughts... like NC where companies would cut hours in the hopes people would "go away."
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  3. #3  
    I watched Glenn Beck about a month ago talking to small business owners. His solution was to bring in more "legal" immigrant workers, because the American worker expected everything handed to them on a platter.
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  4.    #4  
    Quote Originally Posted by palandri View Post
    I watched Glenn Beck about a month ago talking to small business owners. His solution was to bring in more "legal" immigrant workers, because the American worker expected everything handed to them on a platter.
  5. groovy's Avatar
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    #5  
    Its ironic that one of Krugman's suggestions to remedy high unemployment is to pass new employment laws that makes hiring Americans even less attractive. Am I the only one here that doesn't believe corporations will willingly hire more people to do the same job even if it means subsidies that come with ever more strings attached? They will either ship the same jobs offshore or they will squash future projects. Either way, taxes go up and GDP suffers disproportionately to any meager rises of employment that might be seen.

    And why would this increase in corporate welfare be attractive to people who historically despise the idea? Because it props up the workers. So, the news media goes on a rampage about new policies that subsidize big evil corporations while the CEOs are still making "obscene" bonuses.

    Sounds like another government-caused debacle in the making.
    Last edited by groovy; 11/15/2009 at 11:35 PM.
  6. #6  
    Quote Originally Posted by daThomas View Post
    Attacking problems from multiple angles is usually this administration's forte.
    It is? I thought it was: just talk about it from different angles and then just defer to whatever the Congress wants to do.
    Will the jobs summit bring about some of these worker protection methods. Would you rather be laid off or have your work/pay reduced 20%?
    The problem is that these same worker protection methods discourage hiring and will make it more attractive for the companies who can send the work offshore and/or hire illegal immigrants to do more of the same. Personally, I'd rather have my pay reduced to losing my job, but there's no way in hell that they would actually reduce the work load.
  7. #7  
    One of the studies I read months back, there was a disproportionate number of layoffs, compared to what was needed. It was all about the profits for the corp/company/shareholder. Which to me is plain short sighted. Some here would blame the greedy employee, as the bane to corporations. The benefits, the high wages and so on. Then to hear these same corp leaders getting huge bonuses for meeting expected share price as a direct result of laying off 1000s of workers. Fact, most companies best customers are their employees. But hey, laying off thousands, is the way things are done. Gotta keep the share price up.
  8. #8  
    Uh oh - I am from germany (Munich). What looks like Germany was well prepared for the crisis... German national (un)employment agency ist paying the companys that they don't let to many workers go home. Millions actually get support in complement to the their monthly salary from that agency. The companys that have problems simply cut the salarys and that is compensated. Yes, thats the actual receipt in germany to fight unenployment.

    But someone has to pay - the tax payers!

    We have the same problems all other industrial countries have. Don't take the "german way" as receipt for your country. Every country is different, every country have other problems to deal with.

    And we have mass layoffs too...
  9. Micael's Avatar
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    #9  
    Quote Originally Posted by daThomas View Post
    Attacking problems from multiple angles is usually this administration's forte.
    Usually? Would love to see evidence of that, and maybe some positive results from this "attacking" action at some point would be nice....
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  10.    #10  
    Quote Originally Posted by Micael View Post
    Usually? Would love to see evidence of that, and maybe some positive results from this "attacking" action at some point would be nice....
    National retail sales increase
    National retail sales in October not counting vehicle sales increased for the third-consecutive month, an encouraging sign for the hard-hit industry, according to a Retail Industry Leaders Association report released Monday.

    The bump for October was slight only 0.2 percent. But retail sales are up by 1.5 percent over the past three months and have grown more than 3 percent since December during the worst of the financial crisis, the trade group reported Monday.
  11. #11  
    Here's a comparison of 10 different nations for this year.

    International Unemployment Rates and Employment Indexes, Seasonally Adjusted, 2007-2009

    If you look further down that page, you can certainly be glad that we're not like Spain.
  12. #12  
    A job summit....ROFL. When Obama doesn't know what to do, hold a public meeting and look like you care. Good grief. When he announced it I couldn't help but laugh. All is saved....Obama is having a summit. What we need is a President who has actually created jobs and so knows something about that.
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  13. KAM1138
    KAM1138's Avatar
    #13  
    Hello everyone,

    Interesting. I think it is true that our current administration isn't thinking about job growth. One reason is that the "stimulus" package wasn't designed to stimulate job growth, and was merely a spending bill, which President Obama idiotically stated IS stimulus. No, and I'm saddened that I need to correct the President on this. PROPER Spending CAN be stimulative. Perhaps he never heard the 'all ducks are birds, but not all birds are ducks' thing in his extensive education.

    Anyway, an actual stimulus package would relieve burdens on business, which gives them the opportunity to grow, which increases the GDP AND leads to hiring. Instead what we've got is a bunch of money dumped into public-sector projects (mostly), little to stimulate business and while our GDP did jump...its likely from direct pumping of money, not actual economic growth that will sustain itself.

    An ACTUAL recovery has job growth as a natural extension. A rising stock market isn't an indication of much of anything (and tomorrow can be back where it was) without solid economic growth behind it.

    The hated Private sector is (Again) the only solution to this. Government spending just leads to the need for more government spending, and more debt, and other various problems. It is a fools solution, and one doomed to failure. We've now wasted almost a year where we could have been ACTUALLY recovering, but I think that's likely pushed back, and that's before considering the long-term economic damage we've done starting at the end of 2008 and wildly accelerated in 2009.

    KAM
  14. Micael's Avatar
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    #14  
    Quote Originally Posted by daThomas View Post
    This is good news, however slight. But show me what policy or stim package is responsible. Things can actually improve "in spite" of Washington.

    If Obama caused this, I'll be glad for it. I'm just not seeing how yet.
    The Law of Logical Argument: Anything is possible if you don't know what you are talking about.
  15. KAM1138
    KAM1138's Avatar
    #15  
    Quote Originally Posted by Micael View Post
    This is good news, however slight. But show me what policy or stim package is responsible. Things can actually improve "in spite" of Washington.

    If Obama caused this, I'll be glad for it. I'm just not seeing how yet.
    Don't worry--I'm sure they will tell you exactly how they were the reason that anything good happened, and how anything bad that happens is the fault of the Bush Administration. They've got that covered.

    KAM
  16. #16  
    We just need the government out of the way and let the private sector do what it has done for 200 years. We speak of job creations - we are sure bunches are aware that some of the districts mentioned do not exist (human error) and well, just a bit of searching brings up this: Jobs Saved or Created in Congressional Districts That Don't Exist - ABC News and bunches more.
  17.    #17  
    Quote Originally Posted by Micael View Post
    This is good news, however slight. But show me what policy or stim package is responsible. Things can actually improve "in spite" of Washington.

    If Obama caused this, I'll be glad for it. I'm just not seeing how yet.
    Payroll tax reduction.
  18.    #18  
    Quote Originally Posted by bclinger View Post
    We just need the government out of the way and let the private sector do what it has done for 200 years. We speak of job creations - we are sure bunches are aware that some of the districts mentioned do not exist (human error) and well, just a bit of searching brings up this: Jobs Saved or Created in Congressional Districts That Don't Exist - ABC News and bunches more.
    How many times does it have to be pointed out that this is what lead to the mortgage meltdown?

    Why do you and others just keep repeating this mantra instead of looking honestly at the reality of what lead us to the edge of a great depression?
  19. groovy's Avatar
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    #19  
    Quote Originally Posted by daThomas View Post
    How many times does it have to be pointed out that this is what lead to the mortgage meltdown?
    The mortgage meltdown was caused by "the government getting out of the way"? Or was it caused by the Federal government overstepping its bounds and circumventing state consumer protection laws and then creating a situation whereby lenders were encouraged to lend to bad credit risks?
  20. #20  
    the attempts to reign in FreddieMac/FannieMae in 2003 & 2005 would have helped, but those attempts were blocked.
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