Wednesday, January 16, 2008

Interesting Human Economic Toll Piece in NY Times

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I found NY Times story to be quite interesting. Nothing new, coming from Michigan, but perhaps of interest to some readers in booming states. It also puts a human face on "statistics". As an economist at heart I truly am interested to see this great US experiment play out the next 2 decades - an economy which creates less and less to sell to others (outside the country) each decade, but instead is reliant on credit and transferring of the same dollars amongst ourselves through the "service" economy. Much of the past decade's growth has been through "home construction", and "credit creation", but I wonder at what point passing around the same dollars (or more dollars if you look at what the Fed is creating each year through M3) starts losing it's effect.

While many might dismiss this story as a "Rust Belt" issue, again we are losing more 'production' each decade - you could repeat this story for steel makers in PA in the 70s, textile makers in NC in the 80s, and now the auto industry in the '00s. Yes we are moving to a knowledge based society but I am unclear if there are enough jobs for 200M in that society. Hopefully some advent of alternative energy or some other thing we have not thought of yet creates a new boom. It cannot be healthcare causing the boom because while it creates a plethora of jobs, each new jobs add a layer of cost - which is paid for by the same Americans.

Further this story is just a simple example of why I find the "unemployment" rate to be laughable - here in the Rust Belt we have many very educated types with college degrees working the night shift in retail... so they are "employed" per the jobs reports... but underemployed in a massive way. Short of a massive migration to other states (to do what?) I don't know what the solution is. I suppose we can all work in the oil industry or coal mining.

Once again, this will take many years to play out but the equalization of wages on a global scale for the blue collar, combined with persistent inflation in a 'world of shortages'... if it plays out as I envision... does not bode well for many in the country. If this is an outlier event or a canary in the coal mine... I will let you make the determination. However, more and more of this country seems reliant solely on service jobs and I don't know if bartenders, cashiers, bank clerks, and Walmart greeters are going to be paying quite the same for the many who once held very different jobs. But, I suppose my views are biased by where I live as well, so I could be over exaggerating the national scope. I'll check back on this thesis in 2028. :)
  • After 30 years at a factory making truck parts, Jeffrey Evans was earning $14.55 an hour in what he called “one of the better-paying jobs in the area.” ...he recently described how astonished and betrayed he felt when the plant was shut down in August after a labor dispute. Despite sporadic construction work, Mr. Evans has seen his income reduced by half.
  • So he was astonished yet again to find himself, at age 49, selling off his cherished Harley and most of his apartment furniture and moving in with his mother.
  • Middle-aged men moving in with parents, wives taking two jobs, veteran workers taking overnight shifts at half their former pay, families moving West — these are signs of the turmoil and stresses emerging in the little towns and backwoods mobile homes of southeast Ohio, where dozens of factories and several coal mines have closed over the last decade, and small businesses are giving way to big-box retailers and fast-food outlets.
  • Here, where the northern swells of the Appalachians lap the southern fringe of the Rust Belt, thousands of people who long had tough but sustainable lives are being wrenched into the working poor.
  • Slammed by the continued decline in the automobile and steel businesses, Ohio never recovered from the recession of 2001-2, and blue-collar families who had made it partway up the economic ladder find themselves slipping back, with chaotic effects on families and dreams.
  • “These younger workers should be the backbone of the economy,” said Shiloh Turner, study director for the Health Foundation of Greater Cincinnati, which conducted the surveys. But in parts of Ohio, Ms. Turner said, half or more “are barely making ends meet.”
  • One consequence is an upending of the traditional pattern, in which middle-aged children take in an elderly parent. As $15-an-hour factory jobs are replaced by $7- or $8-an-hour retail jobs, more men in their 30s and 40s are moving in with their parents or grandparents.
  • “A lot of major employers have left, and the town is drying up,” Ms. Thiessen said of Jackson. “We’re starting to lose small shops, too — Hallmark, the jewelry and shoe stores, the movie theater and most of the grocery stores.” Shari Joos, 45, a married mother of four boys in nearby Wellston, said, “If you don’t work at Wal-Mart, the only job you can get around here is in fast food.
  • In late December her husband landed a new job, driving a fork lift at a Wal-Mart distribution center, a shift that ends at 2:30 a.m. It pays a little less than he used to make and is an hour’s drive away, so gasoline soaks up a painful share of his wages.
  • Darrel McKenzie, 44, was also a maintenance man at Meridian and grossed more than $60,000 a year. Now he has restarted at the bottom as a union pipe-fitting apprentice and expects to make $20,000 this year. His family just “does less,” Mr. McKenzie said. His mother, Shirley Sheline, 73, had worked 28 years at the same auto parts plant, and shares his dismay. “Can you believe it, a grown man forced to move back with his mother,” she said.

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