It is impossible to understand job creation without understanding value creation and labor/overhead costs. People hire other people when their labor creates more value than it costs to hire them.
When labor costs are high, the value created must also be high; it makes no sense to hire someone if doing so generates a loss.
When labor is cheap, the bar of value creation is lowered, and so the risk of hiring a worker is also lower: they don't have to add much value to be worth their wage.
This is why you see many low-value jobs in developing-world countries. There are night watchmen on duty in virtually every parking lot and building in urban Thailand, for example; these workers are providing a fundamental value, "eyes on the street," but it is a low-value proposition: no special skill is required other than being a light sleeper. The cost of their labor is equivalently low, but in a low-cost basis economy such as Thailand's, a very low wage is still a living wage.
In a self-employment example, many vendors in urban Thailand set up their informal food stall (a cart or a tent) for a few hours a day. Their net income is low, because what they provide--readymade food and snacks--is available in abundance, i.e. there are many competitors.
Nonetheless, because the cost basis of life is relatively low, modest earnings from a low cost, low-profit enterprise make the enterprise worthwhile.
Compare that with the typical government job in the U.S. or Europe. It is difficult to measure the true cost of government pension costs, as local governments do their best to mask their pension costs and inflate their pension funds' projected returns. But a back-of-the-envelope calculation yields about a 100% direct labor overhead cost for the typical government job with full healthcare, pension and vacation benefits. So an employee earning $50,000 a year costs $100,000 in total compensation expenses.
Many local government employees on the left and right coasts earn close to $100,000, so their total compensation costs are roughly $200,000 per worker.
How much value must be created by each employee to justify that compensation? Government needn't bother itself with that calculation, as the compensation is not set by market forces and the revenue stream can be increased via higher taxes, junk fees, tuition, licences, permits, etc.
As the legacy costs of healthcare and pensions for retirees become due, local government operating budgets are being gutted to pay these ballooning legacy costs.
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19 comments:
I could be wrong , but , I've noticed that the older people are getting screwed with taxes , unfair raises in medicare , health care , food and car prices.
We have a fixed income and in the past four years we have gone way down hill. I'm making about 20% less now than 4 years ago.
Is this the socialist plan that we support illegals and welfare and unemployment?
I've noticed that most of the welfare people in the projects are driving gas eating machines such as Escaldes , Saburbans and the like.
I don't like what I see , it's VERY disturbing and it provides me with undesirable ideas.
I was at the food lion on Nanticoke road and a lady paid with 2 food stamp cards and jumped into a new Mercedes sport.
I know that others realize this , what the hell is going on?
Do we need a reverse Rodney King wake up? When I say reverse , I mean the whites must stand up for their rights and stop this crap.I was born in Africa and my family moved away to get relief from the killing and unlawful activity.
We now have a full blown socialist state and soon military rule.
I can only laugh when BO preaches that we must give students the education and the knowledge they need to succeed.... blah blah blah.
Education with little or no hope of finding a job is worthless.
At this point in time the investment of higher education isn't worth it's return. Even the few jobs that are or become available the salaries are substancially lower now due to the high demand and low supply.
LOL, can you get the grown ups who follow facts to discuss this issue?
" most of the welfare people in the projects"
-laughable "welfare queens in caddy's" narrative
"must give students the education and the knowledge they need to succeed"
-look at what business leaders have been saying for more than 5 yrs. now. The lack of skilled labor hinders hiring in many industries, so yes, education is key to job creation. Guess you might be one of those folks pissed off because you can't make 80k simply turning a wrench anymore.
From a family member in the service who tipped me off: "You were right, we laughed at you and called you a nut. We are now training a younger generation of kids who do not understand freedom, take an oath to something they do not understand or have even read. Now are trained from day one for domestic deployment missions to both urban and residential areas. These kids will obey orders to kill US citizens if needed!" Marshall Law is coming. It will not be called that but boy is it close. I used to be a staunch R voter but after the false flag by the bankers on 911 I realized the right and let both work for the same sick individuals. Most military members who are still in understand we have been under a two party dictatorship and the owners will stop at nothing to fullfill their dreams of a one world technical dictatorship with them in charge.
while i'm not sure about the extreme view of 724, I will emphatically state that the American people need to get out from under the grip of the "two party dictatorship". You guys who blindly vote for either side of the aisle need to get a grip and open your eyes.
8:01 makes a great point. The two party system has failed us from both sides of the aisle. Extremists in both parties are dividing this nation.
If we can't work together, it's not going to work at all.
7:17 says-"look at what business leaders have been saying for more than 5 yrs. now. The lack of skilled labor hinders hiring in many industries, so yes, education is key to job creation. Guess you might be one of those folks pissed off because you can't make 80k simply turning a wrench anymore"
LOL-What's a wrench? I'll have to ask my farm manager to show me one. $80,000? I think I may tip more than that a year. It's not hard when your net worth is well into the 8 figures.
Keep on falling for the shortage of skilled workers in the US and other such propaganda and the middle class will continue on in to extinction.
In my circles parents are sending their graduates abroad to work because the jobs are not here. These parents are the business leaders, those with 10 figure yearly incomes, you know the ones the liberals love to hate.
The most recent a graduate of Vassar College (It's in NY you've probably never heard of it, 7:17) just left for a job in the United Arab Emirates. I know several who have gone there to seek employment. Others in several European countries and several in Asian countries. Vanderbilt U has even stepped up it's graduate job seekers program and has focused much more on jobs abroad.
Don't be so naive 7:17 unless there are some major changes (even then doubtful) in regards to business and industry the jobs are not coming back to the US and will continue to close, move off shore, outsource so as to be able to downsize, eliminate postions and so on.
Do you really think that companies such as GE that now make all their products in countries such as Mexico and China moved there due to the lack of educated US workers 7:17? It wouldn't have anything to do with the cheap unskilled labour, which outnumbers the skilled (degreed) workers involved would it 7:17? Wouldn't have anything to do with saving these companies billions would it?
You are the propagandist's dream person. They say it, you fall for it hook, line, and sinker and repeat it without an inkling of critical or foward thinking involved.
When I read the above comments, thought maybe they were posted to the wrong article. What does race relations and our two party system have to do with value added v. compensation levels? The article is a testament to why our jobs are going overseas and why unions are in a fight for their existence. I don't believe I've ever read it put so succinctly. A great analysis.
908 cut the anecdotes and come with some facts. I could spend all days posting economics studies, actual company briefs, and data on market trends. Alas, thats a waste of time seeming as you could find the same in 30 seconds on google. Guess its just easier to spout whatever makes you feel good intellectually.
To 6:05 am Did you stop to think that the person using 2 food stamp cards might be an employee for dependant care home? Both wbite and black people work in the dependant care field along with otber employment.She might be worki.g hRd for that bucketlist car. We should put more effort into not assuming what feeds our personsl bief system.
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ha ha ha 9:26 in the time you just spent writing your comment you could have copied some of this data you claim is out there-But it's not and you know.
Even that bastion of liberalism Huffington just the other day quoted research that found 1/2 of all college graduates are working in jobs that do not require a degree-pay scale reflects so not at all a wise return on one's investment.
You ARE quite the propagandist's dream.
The "lack of skilled (including those considered professionals") has always been a mere excuse the business world has used to increase profits. Why should Proctor and Gamble hire a US citizens in their toxicology labs when they can hire Asian or Indian nationals on a Visa program and not have to pay SS or Medicare? And especially why not hire a US citizen when they can use the excuse that Asians are better educated and people like you fall for it?
It's called the Golden Rule-the gold rules and all that matters is profits and any and all excuses will be made to make people think otherwise. This is how it works in the real world and not the imaginary fairy tale Obama thinks everyone lives in.
"In 2010, 39.3 percent of adults between the ages of 25 and 34 had a post-secondary degree, up from 38.8 percent in 2009. While the rate has creeped up steadily since 2008, underemployment has kept pace, according to Vedder's research -- the report found that the number of college grads will grow by 19 million between 2010 and 2020, while the number of jobs requiring that education is expected to grow by less than 7 million."
"the report notes that there's no shortage of talent and no guarantee that a diploma is a golden ticket. Researchers said students should focus their education on workforce demand until the economy can create jobs requiring special skills at higher rates"
""Maybe we should incentivize colleges to more accurately counsel students," Vedder told the Chronicle of Higher Education. "If you get a degree in business administration, you may not necessarily walk into a middle-class life. There's a good chance you may end up being a bartender.""
"The report, from the Center for College Affordability and Productivity, concludes that while college-educated Americans are less likely to collect unemployment, many of the jobs they do have aren't worth the price of their diplomas."
You still think for the average person a college degree is a wise investment and that they will surely see a return 7:17?
If so please do not ever even think about a career in money management.
7:17 You say the lack of skilled workers is hindering hiring? If that's the case then we should have a shortage in the educated qualified workforce which is hardly the case and not a shortage of jobs for the skilled worker.
The facts is that many of the jobs that depended on certain fields of study such as engineering are gone. Many many of these jobs were in the steel industry, coal, automotive. Same goes for accounting, marketing, and on and on. 100 of 1000's of these jobs were lost to overseas. Are they going to come back?
I guess someone could gamble and spend close to a hundred grand on a college education and then sit around and wish and wait for the "business leaders" to decide to open up shop on US soil again.
The old saying comes to mind here~Wish in one hand and crap in the other and see which one gets filled quicker.
The fact of the matter is that Trade deals made by both parties, starting with Nixon in China have destroyed this country and western civilization. They should all be tried and hung for treason! Our government no longer represents us. The two party system is actually one party or two sides to one coin.
It will take another civil war or revolution to finally get things back to a representative form of government. Hope people are starting to wake up. The government is arming themselves against its citizens. That's why they want to restrict the sale of assault weapons to protect themselves when the monetarily system finally fails.
Westinghouse has quite a few job openings for college grads if anyone is interested in moving to Belgium. None in the US though.
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