Tuesday, June 16, 2009

As Euro Zone Unemployment Spikes; Job Saving Measures Emerge - Completely UnAmerican

It's remarkable with all the green shoots that abound we are still getting this sort of news out of Europe. Especially when you account for the fact that many of these countries are starkly "socialistic" and try to protect their workers ....
  • The number of people employed in the 16 countries that use the euro fell by 1.2 million during the first three months of the year, the largest decline since records began in 1995, data showed Monday.
  • The number of active workers in the euro zone fell 0.8% in the first quarter, according to data released by the European Union statistics agency Eurostat. It was the third-straight quarter in which employment fell, and marked a substantial pick-up in the rate of job losses. (2nd derivative NON improvement)
  • The unemployment rate was 8.6 percent in April, up from 6.8 percent a year earlier.
  • Of those euro-zone members for which numbers are available, Spain suffered the largest drop in employment, down 3.1% on the quarter and down 6.4% on the year. (another housing bubble country - welcome to the club)

Ah yes... old news. Employment is a lagging indicator - what happens to Main Street is inconsequential to recovery. [May 26: NYT - "Official" US Jobless Rate Likely to Pass Europe's] As we wait for China* to save us all ....let's see how the "socialists" with their inflexible business interests roll. Via New York Times.

*excluding the fact both their imports and exports fell 25%+ year over year as of the latest data

  • Rising European unemployment has business and government looking to offset the pain, and some of the solutions belie the region’s reputation for inflexibility.
  • ... analysts and labor experts say the figures would have been even starker without some of the job-saving measures used to combat the worst recession in decades.
  • Many countries have short-time compensation programs, tailored for the manufacturing sector, under which employers can apply for temporary state assistance to top up the wages of workers working reduced hours.
  • France has a publicly financed partial unemployment scheme, allowing companies experiencing difficulties to temporarily lay off staff and draw on state monies to pay those workers during those periods.
  • In the Netherlands, 223 companies had taken advantage of a similar program by mid-January.
  • Germany also has several measures to reduce working time, many of which are specifically framed as employment-saving measures. The federal “Kurzarbeit” system, which translates as “short work,” provides a state-supported backup for companies resorting to short-time working outside the provisions of collective agreements.
  • In France, as in other European countries, employers are not normally allowed to lower contracted salaries without employee consent. But if a business with operations in France has “serious grounds” to consider that its economic viability is in danger, and employees refuse a reduced salary, then a company could proceed to layoffs, according to Paul-Albert Vaillant, a lawyer at the Paris office of the firm Landwell & AssociĆ©s. Details like severance would have to be decided by a tribunal, he added. To avoid this kind of situation, some companies have tried to negotiate salary reductions.
  • The Finnish carrier Finnair announced in December plans to temporarily lay off 1,700 cabin crew members on a staggered basis this year to cut costs. The layoffs will last two to three weeks per worker. The move came after staff had rejected an offer of voluntary wage cuts of 5 percent or a freeze in previously agreed pay increases for 15 months to avoid the definitive cutting of 400 jobs.
It is quite a striking contrasts between the 2 continents... domestically it appears life is here so we can work; there they seem to work so they can live life. In return for the domestic ethos, workers here can boast of record profits at their company, supporting CEO pay at nearly 300x median worker (vs 7 to 20s overseas) and a booming stock market to reflect it all ... errr, ok scratch that last part. Overseas it appears workers could care less about having the most innovative, profitable companies on Earth - they just want a way to have a stable wage, raise a family, and then go enjoy the 6 weeks of vacation. (insert "lazy" chant here) Just different ideologies I suppose.

That ever eternal American carrot of one in every few hundred thousand reaching the summit in income strata seems to be enough for the other 90%+ to take the downsides (day to day stress, lack of job security ex government work, being considered a slacker if you take the full two week of vacation, ever larger proportion of people without benefits and being "temps", fretting if you get sick at the wrong time, lack of stability in retirement, et al). But Americans are finally starting to catch on - latest ABC poll
  • 51 and 50 percent respectively, think job security and their ability to afford a comfortable retirement will remain worse than before the downturn began.
  • Equally as many expect a diminished ability to afford things they want and need in general, and, in one particular, anticipate greater difficulty paying for health care.
Welcome to the Pooring of America... one day people will look back at my post here and see Nostradamus like features ;) [Dec 8, 2007: Do the Bottom 80% of Americans Stand a Chance?] Since the bottom 20% have been in a state of disrepair for a very long time, I'll assume most of that 50-51% seeing the light is in the 25-75th percentile. Lower, Middle, and bottom tranches of Upper Middle Class who are seeing the walls slowly but surely close in on them, and not really sure why. The first generation who are worried their kids won't have the same chances to "do better than their parents" like they did. They've been duped by (supposed) asset inflation replacing income inflation for about a decade now - and spending as if asset inflation is permanent. But their income has gone somewhere, trust me... see chart below.

Meanwhile - how the "socialist" sods overseas somehow struggle living the good life without 2.3 SUVs and 2800 sq foot homes is beyond me; don't they realize how many Coach bags the female in our homes has is the definition of success?... must be an unhappy scene over there in socialist land. [Feb 18, 2008: Denmark is the Happiest Place on Earth?] I will just be so interested what happens when the US eventually hits a level of taxes akin to "the socialists" to pay for our obligations while providing little of the same benefits for said tax rates. Should be an interesting discussion about how we've "transformed" a version of capitalism that worked for much of the middle class (although prone to boom bust cycles) since the 1970s to this new paradigm of 1920s like income and wealth distribution.

What's the name of this paradigm? Reverse Robin Hood... working hard (and longer) as a collective to give to a few at the top - it's strong and growing stronger here. It used to be called "feudal society" in the old days but in the US at least the serfs have ownership rights - and a 1 in 400,000 shot at becoming a lord, so they play along - we love our lotteries :) This chart clearly shows how trickle down economics has been "working" like a charm since the early 80s. I'm not sure if it accounts for inflation - let's pray it does.

(click to enlarge)

Hard to find the most recent statistics but we're catching up to even the Japanese who were the supposed slaves to work. (this is where I say "We're Not Japan" to fit the dogma of the day)
  • Pulling from government statistics, Time Day proponents say that Americans, on average, work 350 hours more each year than Europeans. That's 9 weeks of labor. "Europeans have made a tradeoff between quality of life and hours worked," said De Graaf. "We Americans have chosen to trade all our increases in productivity for more stuff. And to pay for it, we need to work even more."
  • "I would never try to pretend that our system doesn't cause us to have the highest production in the world," said De Graaf. "But it's also created a lot of very stressed out, unhappy people"
Just wait until they are taxed ever more on their long hours....

....and to those say this is the American Puritan ethic you lazy blogger, I ask... why then have hours worked jumped 13% since just the 1970s? Perhaps we lost our Puritan way in the 60s and 70s ;)

Working Class Heroes
Annual average hours worked in 2002, selected countries.
Country Avg. hours
South Korea 2,447
Japan 1,848
Australia 1,824
United States 1,815
Canada 1,778
Ireland 1,668
Sweden 1,625
France 1,545
Germany 1,444
Norway 1,342
Source: International Labor Org. (UN)

So more hours worked in return for little more pay (if any) for most, less stability, safety net seemingly working mostly for those who permanently stay there ("it's a lifestyle"), and massive gains for the tiny sliver of society at the top via the collective.

Anyhow off to the mall to support our dynamic economy - while I think about the root causes. (there's a joke in that statement) ;)

[Feb 23, 2009: WSJ - Elderly Emerge as As New Class of Workers - and the Jobless]
[Sep 1, 2008: Laboring Longer is Growing Trend for Americans]

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