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You're right... I ran out time for going into details.

I think outsourcing is the key - what's apparent is that they've moved more workers into the unstable part of the economy.

There is some evidence that more economic activity than before takes place in "zone 3" however, but I'll have to try and look up the details before I make any particular claims.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Nov 14th, 2008 at 11:52:48 AM EST
[ Parent ]
I think outsourcing is the key - what's apparent is that they've moved more workers into the unstable part of the economy.
I believe that the term used in US business is "core and ring."  It is a concept that applies to both sector 2 and 3.  In sector 3 small companies have a core of vital employees that the companies protect during down turns, to the extent they can.  In good times they hire more people to perform the additional work; these are "ring" employees. When there is less work they can shed the ring employees as required.  For unionized contracting companies the union hall serves as a source and destination for "ring" employees.  Normally, laying off an employee who then draws unemployment insurance benefits causes an increase in the employer's contributions to the federal unemployment insurance fund.  I am not certain whether this is affected by being signatory to a union labor contract.

On the scale of sector 2 enterprises, the sector 2 enterprise is the core and sector 3 enterprises serve as the ring.  This system relies on federal unemployment insurance to see the "ring" employees through downturns while fobbing costs of increased unemployment contributions off onto the sector 3 corporation.  This further enhances the profitability and resilience of the sector 2 enterprise, which contributes to their "blue chip" status in stock markets.  The outsized salaries and bonuses for the occupants of the executive suite provide them with the resources for major political contributions that further reinforce their incumbency advantages.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Nov 14th, 2008 at 02:41:08 PM EST
[ Parent ]
That's a very interesting analysis, and incidentally illustrates why it's important that unemployment benefits are financed by the public purse.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Nov 15th, 2008 at 06:37:07 AM EST
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