And the more the government gurus come to our aid, the higher our taxes and debts will increase to enable government officials to get their hands on our money, and much of which money our government will spend in an effort to help us. It's the law of unintended and unfortunate consequences at work yet again, and it's help that's not helping. Not a bit.
Welcome to the Well-Educated Barista Economy describes the situation thusly:
"A century ago, Henry Ford startled the world by doubling his workers' wages, with some reaching the unheard-of level of $5 a day. Although accounts of Ford's motivation differ, his decision fit into a larger context: A mass-production economy requires a mass-consumption society. In the absence of broad-based, steadily rising purchasing power, the engine of economic growth will sputter and die.
Fast-forward four decades to the day in the early 1950s that a Ford executive was showing United Auto Workers President Walter Reuther around a state-of-the-art automated assembly plant. The executive pointed to some gleaming new machines and asked Reuther, "How are you going to collect union dues from these guys?" Reuther replied, "How are you going to get them to buy Fords ?" News accounts record no answer to either question; nor do the ensuing 60 years.
This brings us to the present day—to a slow-motion recovery that thus far has left millions of Americans unemployed or underemployed and millions more outside the workforce. One key reason for this sluggish performance is a housing industry that is falling far short of a normal rebound from recessionary lows.
Economists estimate that long-term demand for new housing units should average about 1.5 million a year. After overshooting badly between 2000 and 2006, the market collapsed to barely half a million by 2009. New housing starts have increased since then to an annual rate of just under one million, far below long-term trends. According to Neil Irwin of the New York Times, investment in new residential property today represents a smaller share of the U.S. economy than at any other time since World War II. If it returned merely to its postwar average share, growth would jump by 2%, adding 1.5 million jobs and knocking a full point off the unemployment rate.
So why aren't there more housing starts? Answer: Because new households are forming at less than 40% of the normal rate. Young adults are living with their parents at much higher rates than before the Great Recession. Many cannot afford monthly rental costs, let alone come up with the down payments they need to qualify for mortgages.
This reflects the continuing travails of young adults in a slack labor market. Among recent college graduates ages 20 to 29, the Bureau of Labor Statistics reports, unemployment stands at 10.9%, more than three points higher than in 2007. A study from the Federal Reserve Bank of New York finds that of the recent college graduates who have managed to find work, more than 40% are in jobs that do not require a college degree; more than 20% are working only part-time; and more than 20% are in low-wage jobs.
They are not alone. A recent report from the National Employment Law Project found that low-wage sectors such as food services and retail trade accounted for only 22% of jobs lost during the Great Recession but fully 44% of jobs gained since the bottom. Mid-wage jobs accounted for 37% of losses but only 26% of gains; higher-wage jobs, 41% of losses but only 30% of gains. The wage structure of the entire economy has shifted downward since the Great Recession, and young adults trying to start careers and families have been the principal, but hardly the only, victims.
These developments are jarring. For the past generation we've been telling ourselves and our children that demand for higher-order skills is surging and that a college education is the key to the future. But ... since 2000. . . . "high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers, . . . pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force altogether." Well-educated baristas and unemployed high-school graduates are flip-sides of the same phenomenon."
Discussion and Analysis
We've become more like Europe than we're willing to admit, we're in debt up to our eyeballs, and the young college attendees and graduates are paying the biggest price of all --- lots of debt, no spending money and no good job prospects.
Over 130 years ago, the modern day version of the big government tax and spend administrative state was described as follows:
"As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, what A, B and C shall do for X. . . .
What I want to do is look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who is never thought of....
He works, he votes, generally he prays ---- but he always pays. . . .
William Graham Sumner
1883."
Summing Up
There are far too many Forgotten Men in America today, as represented by the middle class hard working C.
Meanwhile, there are too many (1) direct government employees (federal, state and local), as well as too many (2) government subsidized academic (K-12 and college inclusive) and medical employees, and even too many people (3) classified as "disabled," along with other early government subsidized retirees living off the hard working middle class C these days.
And there are far too many self serving and wrongheaded decisions made by the politicians A and B, for which C must pay.
As a result, the productive tax paying private sector is shrinking in relation to the growing, unproductive and tax taking public sector.
That means the economic base is struggling, and good jobs are harder to come by.
C needs help. He must remain as the "Forgotten Man" of America no longer.
The futures of our young are at stake --- very much so.
That's my take.
Thanks. Bob.
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