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Migeru:
is Germany about to redefine 7% unemployment as "The new normal" full employment?

It's apparently the "new normal" full employment of highly productive workers.

Are the points presented in the FT article relevant, or of no great interest?

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jan 25th, 2011 at 08:21:27 AM EST
[ Parent ]
I think the FT is adopting the self-serving rhetoric of businesses that there's a lack of qualified workers as evidence of a speeding economy.

European Tribune - Is the German position sustainable?

Underscoring Germany's revival, Ernst & Young, the financial services firm, reported that almost three-quarters of the small and medium-sized companies in the country's industrial Mittelstand were having difficulties finding enough qualified workers.
At barely 2% GDP growth after a deep recession, I'd say the economy is not growing so fast it's run out of workers. I suspect the issue is there are not enough qualified workers at the wage rates being offered, a "problem" that is also chronic in the US. That's why the EU is designing systems of qualified immigrant exploitation such as the blue card.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jan 25th, 2011 at 09:42:19 AM EST
[ Parent ]
So the "solution" is obviously to cut welfare in order to force workers to work for lower rates of pay...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jan 25th, 2011 at 10:47:10 AM EST
[ Parent ]
Growth in the industrial Mittelstand may be higher than in the overall German economy. A mismatch between skills supply and demand has been a problem in Germany for years, as you can see in this graph which shows the position of European countries on the Beveridge curve

While low offered wage rates for skilled workers might be a factor, it is certainly not the only one: cultural preference for non-technical, non-manual jobs is an important factor, too.

"People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them." - Jean Monnet

by Melanchthon on Tue Jan 25th, 2011 at 12:06:19 PM EST
[ Parent ]
In what sectors is that German shortage of qualified workers?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jan 25th, 2011 at 12:13:39 PM EST
[ Parent ]
I didn't find sectoral data. The article you quoted mentions the industrial companies. According to Deutshe Welle: Despite Demand, Germany Attracts Few Skilled Foreign Workers
The crunch is particularly acute in areas such as engineering, the metal and electronics industry and the services sector.
. By the way, I don't find the reasons claimed by Wissing convincing.

"People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them." - Jean Monnet
by Melanchthon on Tue Jan 25th, 2011 at 12:28:11 PM EST
[ Parent ]
particularly acutein areas such as engineering, the metal and electronics industry and the services sector

"particularly acute just about everywhere"

It's not like the skilled workers in the metal industry and the services industry overlap...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Jan 25th, 2011 at 12:55:41 PM EST
[ Parent ]
Melanchthon:
cultural preference for non-technical, non-manual jobs is an important factor

But, supposedly, Germany has strength in that area: ie it better trains highly-skilled technical-manual operatives. It's one of the reasons often given to explain why Germany exports (by those who tend to deny competitive deflation by wage depression).

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jan 25th, 2011 at 12:31:30 PM EST
[ Parent ]
Is not what is reported on Germany same as is reported in the rest of the west, in effect that the young avoid the math-heavy subjects?

If that is true (and not just an attempt to avoid paying the salaries that would attract the young to math-haevy subjects), an interesting question is why. Perhaps it is not the immorality of youth, but a rational response to a society that is de-industrialising?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Jan 26th, 2011 at 07:35:06 AM EST
[ Parent ]
It may be a rational response to the recent Western reality for some of the high paying jobs. Electrical engineering, one of the more difficult subjects, gives you a degree where you're qualified to relocate to the Far East. An MD and about 40 years of slave labor will allow you to pay off your school loans. Law degree, possibly never.

Meanwhile, real estate developers, financial hucksters, and religious zealots are able to bring in the bucks.

by asdf on Wed Jan 26th, 2011 at 07:58:46 AM EST
[ Parent ]
asdf: Electrical engineering, one of the more difficult subjects, gives you a degree where you're qualified to your job will relocate to the Far East.

(Fixed it for you)

by Bernard on Wed Jan 26th, 2011 at 03:49:56 PM EST
[ Parent ]
A lot of factors to take into account there.  Electrical engineering is applicable to a lot of different jobs, as I recall.  Governments are always looking for them, and the pay/benefits are decent.  A lot of private companies had openings for them even when I was job-hunting before the move to DC (when the job market was pretty shitty).

In fact, of the three, I think I might take the electrical engineering degree, given the choice.  No chance of the big payouts down the road, but a lot less chance of financial disaster.

MD -- depends on the field, but, yeah, I agree it's generally not nearly as lucrative as the public perceives it.  But salaries differ enormously by your area of expertise.  You'll probably struggle as a pediatrician, but you'll probably do pretty well as an open-heart surgeon.

Law -- forget it.  It's not worth it anymore.  People bought the idea that a law degree was a ticket to the good life, but unless you're coming out of a prestigious school with a lot of connections to the big boys you're not going to do very well for quite a while.

Real estate is the only one where I'd disagree strongly.  At least in the US, the developers have lost their asses since the bubble burst.  That ship has sailed.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Thu Jan 27th, 2011 at 12:43:32 PM EST
[ Parent ]
Actually, people who can do math are pretty well remunerated in the post-industrial society.

I don't actually believe that young people are avoiding math-heavy subjects to the extent that is usually presumed. It may well simply be that a larger share of youths obtain higher education, and that of the additional "market share" a smaller fraction obtain math-heavy degrees. That would reduce the average as measured against those who obtain higher education, without reduction in the average as measured against the whole population.

This is at least plausible, because the math-heavy subjects have always been associated with academia, whereas many disciplines that used to involve a large degree of vocational (and therefore undocumented) training have recently become associated (more or less nominally, more or less voluntarily) with academic degrees. Whether this development is A Good Thing or not is another story...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 02:27:32 PM EST
[ Parent ]
JakeS:
I don't actually believe that young people are avoiding math-heavy subjects to the extent that is usually presumed.

Thinking about it, I have to agree. As far as I know, the last 20 years Sweden has got many more math-heavy educations, with more students. So it is probably a false, yet common, idea.

JakeS:

It may well simply be that a larger share of youths obtain higher education, and that of the additional "market share" a smaller fraction obtain math-heavy degrees. That would reduce the average as measured against those who obtain higher education, without reduction in the average as measured against the whole population.

That may be it, but looking at my alma mater the last 20 years, I think the percentage of math-heavy students has increased.

I wonder where this idea comes from? The laziness of youth (as always, see Socrates)? The asians are winning because they are morally superior (industrial policy and lack of colonial forces to steal their stuff having nothing to do with it)? An even greater percentage is needed, and the way to get government to increase training is to claim a shift in attitudes?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Jan 27th, 2011 at 11:55:18 AM EST
[ Parent ]
I think the idea comes from the fact that the proficiency of the best math students in secondary education has declined. This is, to the best of my knowledge, indisputable.

There are various reasons for that. Less ambitious curricula; the transition of secondary education from an elite to a mass institution; deterioration of math proficiency of (the best) primary school graduates (which again has a variety of causes); greater uptake in tertiary education forcing institutions of higher education to recruit beyond the very best; and so on. Much can and has been written about the relative importance (and, for that matter, the existence) of these effects. But from the point of view of the institutions of higher education, it boils down to an impression that since the young people they see are less proficient at math, it must mean that young people in general are less proficient at math.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 27th, 2011 at 07:01:40 PM EST
[ Parent ]
The person who made that graph should have his data analysis license revoked.

Incidentally, Mitchell considers Beveridge curves empirically and theoretically suspect, even when they are actually done correctly. I haven't dissected the paper he bases his claims on, though, so I'll reserve judgement as to whether he's right about that.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 01:10:25 AM EST
[ Parent ]
JakeS:
The person who made that graph should have his data analysis license revoked.

An explanation of why would be a positive.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 02:23:46 AM EST
[ Parent ]
It's what physicists call a "shotgun plot." I haven't checked, but it would greatly surprise me if you could find any meaningful sort of correlation in that data, nevermind enough to justify curve fitting. And even if you have a good theoretical reason to want to fit a curve to this sort of data, the amount of scatter means that if you start fitting anything noticeably more complicated than a straight line, you'll end up fitting to the noise rather than any signal that might or might not be there.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 02:44:34 AM EST
[ Parent ]
The fit could be to a straigth line in a log-log plot...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 04:27:11 AM EST
[ Parent ]
Unlikely. Look at how the points are distributed. A straight line fitted to a log-log plot would have been much flatter, unless you enforced some sort of theoretically derived intercept, which is a bad sort of thing to do unless you know some tricks for doing it without screwing things up.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 07:03:08 AM EST
[ Parent ]
I was thinking more of a circle...
by asdf on Wed Jan 26th, 2011 at 07:56:22 AM EST
[ Parent ]
billy blog » Blog Archive » Nobel prize - hardly noble

The economy is in underemployment equilibrium, and it is not a mistake. So what drives the economy to this underemployment equilibrium where workers are involuntarily unemployed?

Modern Monetary Theory (MMT) shows us clearly that involuntary unemployment arises when the private sector, in aggregate, desires to earn the monetary unit of account, but doesn't desire to spend all it earns. Firms do not hire because they cannot sell the output that would be produced. In this situation, nominal (or real) wage cuts per se do not clear the labour market, unless those cuts somehow eliminate the desire of the private sector to net save, and thereby increase (investment) spending.

The only entity that can provide the non-government sector with net financial assets (net savings) and thereby simultaneously accommodate any net desire to save and eliminate unemployment is the government sector. It does this by (deficit) spending. The obvious conclusion is that unemployment occurs when net government spending is too low to accommodate the need to pay taxes and the desire to net save.

Fantastic.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 05:13:56 AM EST
[ Parent ]
Makes me feel less dumb.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Jan 26th, 2011 at 06:47:16 AM EST
[ Parent ]
What about letting companies turn depreciation (ie investments) into costs right away? That should spur investment.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jan 26th, 2011 at 08:38:22 AM EST
[ Parent ]
What do you mean? "marking to second-hand market" the productive assets of a firm?

And, depreciation is an investment?

If you front-load depreciation, wouldn't that risk making firms balance-sheet insolvent?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 09:40:08 AM EST
[ Parent ]
What I'm saying is that today when you invest in something, like say a ship, you can depreciate it over say 20 years. This means that you can count 1/20th of the cost of the ship as a cost per year, for the coming 20 years. This reduces your booked profits and hence lowers your tax.

By turning all investments into costs, immediately (ie you can reduce your booked profits with the entire cost of the ship, right now) investments will be spurred, as every euro of investments will mean roughly 25 cents less in tax (given a corporate tax of 25 %). And money today is far more valuable than the same amount of money as an income stream spread over 20 years.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jan 26th, 2011 at 10:34:38 AM EST
[ Parent ]
What you're proposing would be to book the tax savings in the first year, and nothing for the following 19 years.

But also, depreciation can only be booked as a cost because it also impairs the asset. You cannot claim a 100% loss for tax purposes and still claim your asset is worth 100%, now can you?

The point of depreciation is that the value of the future income from the investment is reduced as time passes because there's less useful life left on the asset, as well as the asset being damaged with use. But the reason that's booked for tax purposes is that it's also booked for firm valuation purposes.

Money today being more valuable than money tomorrow is probably implicit in the depreciation as well. Or it could be, for a second-order effect.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 10:43:06 AM EST
[ Parent ]
Migeru:
But the reason that's booked for tax purposes is that it's also booked for firm valuation purposes.

Starvid is seeing it from the income statement side, where the investment would be booked as 100% cost in year 1 (therefore lower profit => less tax). While of course there's the balance sheet to be considered: if you book 100% in year 1, then the asset has no value on year 2's balance sheet. Which would be a false image of the company's value. (I know that's what you're saying, I'm just putting it another way).

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 11:03:50 AM EST
[ Parent ]
Gah, this hinges on the difference between a cash flow statement and an income statement. Depreciation is a cost but not a cash outlay...

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 11:10:40 AM EST
[ Parent ]
Don't follow you on cash flow. Annual taxation is based on (roughly speaking) income minus costs ie the income statement.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 11:31:25 AM EST
[ Parent ]
There ARE considerations other than the tax benefit, though one would hardly know it from the discourse in the business sections of the popular press. Double entry what?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 27th, 2011 at 03:30:14 PM EST
[ Parent ]
Sure you would get a pretty funny situation, if you took all the tax credit in year one but also wiped out the entire book value of the asset in year 2! :D

What I'm proposing is not that though: the balance sheet value of the asset should still be depreciated by 5 % per year, but the entire tax credit should be allowed to be claimed year 1. I think this might very well be the most efficient tax cut ever, bang-for-the-buck-wise.

Now, please rip it to pieces. :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Jan 27th, 2011 at 08:03:44 PM EST
[ Parent ]
There's no good reason to not write down the asset at the same time you depreciate it for tax purposes. You're never going to become insolvent due to tax-motivated write-downs, because your tax incentive stops when your income for the fiscal year hits zero. It can't go negative due to accelerated depreciation, since you don't get money back in taxes when you're bleeding money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 27th, 2011 at 11:07:19 PM EST
[ Parent ]
This may be purely national, but in France you can certainly count a deficit in Year N, by either getting a refund on tax paid in Year N-1, (carryback), or by carrying forward to reduce next year's (or over several) taxable profit.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jan 28th, 2011 at 02:16:50 AM EST
[ Parent ]
The reason is to if you do write if off all at once, you're going to have a balance sheet which doesn't give a fair view of your actual assets. That €40 million tanker is still worth €40 million in year 2, or at least €38 million. Creating hidden values in balance sheets doesn't help anyone.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jan 28th, 2011 at 06:36:22 AM EST
[ Parent ]
You're always going to have a balance sheet that doesn't give a fair view of your assets - most fixed assets last longer than you depreciate them over (that's why coal looks so cheap; all the plants are fully depreciated, but remain functional).

And I disagree on hidden assets being of no help. They serve to stabilise balance sheets against cyclical variations. And, for the most part, it is not unreasonable to mark assets up during a downturn and depreciate them faster during an upturn. Because the conventional wisdom during an upturn tends to overvalue assets, so marking assets up during the nadir of the business cycle means you're more likely to get a realistic valuation, while depreciating assets faster during the upturn will make it less likely that you overshoot the long-term value of your firm.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jan 28th, 2011 at 11:23:55 AM EST
[ Parent ]
You're always going to have a balance sheet that doesn't give a fair view of your assets

This is no reason to make balance sheets less transparent than they need be. If so, we could just abolish balance sheets outright.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jan 29th, 2011 at 03:29:18 PM EST
[ Parent ]
This could be done as a political choice, certainly. I'm not sure it would be hugely successful as stimulus, because I doubt if companies make major investment decisions (we were discussing 20-year depreciation) for tax reasons. It might trip a few switches, though.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jan 28th, 2011 at 02:11:30 AM EST
[ Parent ]
This wholoe discussion is nothing new. many Governments, including the UK have allowed for accelerated tax depreciation, or 100% tax write off in the year of investment, and this does not have to be reflected in the asset register. Instead, you can record a liability for tax refund repayment in the balance sheet, which is amortised, cash less, over the economic life of the investment.

The whole point of this kind of incentive is to make it attractive within a certain time window to make an investment, threby bringing investment forward.

having reclaimed 100 % tax credit on the investment in year one, you are unable in subsequent years to use the accounting depreciation on that specific asset to offset corporate tax, so you future marginal tax rate increases.

by senilebiker on Sat Jan 29th, 2011 at 07:48:45 AM EST
[ Parent ]
It seems this is a pretty ordinary policy in Europe. And here I thought I was onto something new. :P

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Jan 29th, 2011 at 03:31:26 PM EST
[ Parent ]
It is in fact (I now find) practised in France re targeted investments, most recently photo-voltaic.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jan 31st, 2011 at 09:58:11 AM EST
[ Parent ]
That is of debatable value as a form of stimulus, since firms invest in the expectation of demand. No expectation of demand, no investment, no matter how many tax breaks you give them.

Now, I quite like accelerated depreciation for another reason. It artificially reduces the size of people's balance sheets. And since crises occur when people overestimate their balance sheets...

Incidentally, the Danish tax code already permits depreciation times that are rather on the short end (around five years) for most goods except electronics.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 02:32:43 PM EST
[ Parent ]
Depreciating computers in three years makes sense when we are dealing with Intel and Microsoft.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 27th, 2011 at 03:31:39 PM EST
[ Parent ]
Or with Moore's Law generally.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 27th, 2011 at 03:57:56 PM EST
[ Parent ]
Yes, the "except for electronics" was supposed to refer to depreciation times being short, not to depreciation times being five years (IIRC, consumer electronics are depreciated over three years).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 27th, 2011 at 07:02:53 PM EST
[ Parent ]
No expectation of demand, no investment, no matter how many tax breaks you give them.

True, but this tax cut would lower the internal rate of return required for investments, and hence increase investment, ceteris paribus. Furthermore, it would shift the economy towards higher capital intensity and hence allow higher salaries as the salary fraction of the total cost mass is lower for capital intensive business. This would, however, amount to industrial policy (gasp! oh noes!).


Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Jan 27th, 2011 at 08:05:16 PM EST
[ Parent ]
As stimulus goes, tax credits are a notoriously weak tool. The Americans have a great deal of experience in this matter, given their proclivity for fiddling with tax cuts when they should be building infrastructure. Their results are unimpressive.

As a structural policy tool, I quite like accelerated depreciation for its shrinking effect on balance sheets. But I strongly doubt that it's going to substantially alter the capital structure of a country. Although you could probably combine it with a reduction in the deduction for outgoing interest, and end up with a package that would discourage excessive leverage while remaining more or less distributionally neutral.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jan 27th, 2011 at 11:33:28 PM EST
[ Parent ]
Tax credits are viewed as a good in and of themselves by the US RW, provided they primarily benefit the wealthy. Calling one a tool is just to put a condom on it, for the protection of the wearer.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 29th, 2011 at 05:57:52 PM EST
[ Parent ]
Migeru:
at the wage rates being offered

I think that's the point that, at least, Eurointelligence was making: that employers will need to offer more in a tight market.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Jan 25th, 2011 at 12:33:06 PM EST
[ Parent ]
Given that labour supply is largely inelastic w.r.t. wages, I suspect that the reason for the lack of qualified labour is not so much underpaying as the arrogant expectation that actually training labour to become qualified is Somebody Else's Problem.

A tight labour market doesn't mean that employers pay more in order to get more labour, because more labour will not be forthcoming at non-prohibitive price increases. What it means is that the price of labour will be set by the minimum that is required for demand destruction rather than the minimum required to prevent riots, sabotage, blockades and other disruptive direct action.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 12:55:27 AM EST
[ Parent ]
JakeS:
I suspect that the reason for the lack of qualified labour is not so much underpaying as the arrogant expectation that actually training labour to become qualified is Somebody Else's Problem.

But, as I suggest above, Germany is widely reputed to be a country that succeeds rather well in training skilled workers for the "middle" jobs that are manual but require technical capacity. That reputation may have been based on past performance only and the neolibs may have changed everything, but that would have to be demonstrated.

JakeS:

A tight labour market doesn't mean that employers pay more in order to get more labour

In the real world, employers don't "pay more to get more labour". They may offer more, in a competitive situation, in an attempt to attract what skilled labour is in fact available. There is always a margin of unemployed workers, or workers interested in changing jobs, particularly changing up. Increases at the margin will gradually tend to raise wages in general in the sector, since all workers (and their unions, though I admit I'm not sure what the collective bargaining situation is wrt the Mittelstand) will be aware of them.

JakeS:

the price of labour will be set by the minimum that is required for demand destruction

Don't quite get this. How does it apply to production for export?

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 02:21:31 AM EST
[ Parent ]
But, as I suggest above, Germany is widely reputed to be a country that succeeds rather well in training skilled workers for the "middle" jobs that are manual but require technical capacity.

That doesn't necessarily prevent them from whining about it.

In the real world, employers don't "pay more to get more labour". They may offer more, in a competitive situation, in an attempt to attract what skilled labour is in fact available.

Yes. That's what I argued.

Don't quite get this. How does it apply to production for export?

You have a largely inflexible upper limit to how much labour your population can provide. When you hit that limit, a game of chicken begins between the consumers of labour, and prices go up until enough consumers of labour back out. When the utilisation goes significantly below that limit (i.e. when unemployment rises enough that employers do not have to engage in a bidding war), prices drop to whatever level organised labour is able to defend through political and/or monopoly power.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 03:03:21 AM EST
[ Parent ]
JakeS:
That doesn't necessarily prevent them from whining about it.

Of course not, but does Germany have a decent system of vocational training for these technical/manual posts any more, or doesn't it, is the question that seems relevant.

JakeS:

a game of chicken begins between the consumers of labour, and prices go up until enough consumers of labour back out

In an economy that has depressed wages over a long period and is export-oriented, there might be quite some room for wages to rise before reaching labour-market demand destruction.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 05:14:05 AM EST
[ Parent ]
afew:
does Germany have a decent system of vocational training for these technical/manual posts any more, or doesn't it
It's quite possible that the system of vocational training is no longer what it is trumpeted to have been.

Back in the 1970's there were already novels about "involuntary unemployment" among youth looking for vocational training.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 05:26:21 AM EST
[ Parent ]
It's pretty certain that it is not what it used to be or was reputed to be. But the dual education system is still there, and Mittelstand companies train apprentices (under some constraint).

The Apprentice: Germany's Answer to Jobless Youth - BusinessWeek

Lately, though, [2009], the system has come under stress through factors related to both the current downturn and long-term changes in the global labor market. The number of apprenticeships slumped more than 10% between 2000 and 2005, recovering only after the government threatened to compel companies to take more trainees. German officials expect the number to dip again this year because of the financial crisis.

The point you make here seems to me generally valid (and spot-on concerning France, for instance), and has surely taken its toll in Germany. But the relative position of Germany in this regard would still seem to me to suggest that it takes vocational training more seriously than a good many other developed economies.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 06:06:00 AM EST
[ Parent ]
afew:
The number of apprenticeships slumped more than 10% between 2000 and 2005, recovering only after the government threatened to compel companies to take more trainees.
Did the same thing happen in the 70's?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 06:43:09 AM EST
[ Parent ]
The only discussion I can find is in a Dutch Central Planning Research Memorandum comparing German and Dutch apprenticeship systems (1995).

The author says there was a dip in the '70s then a rise in the '80s, that cannot be ascribed to demographic factors. (From points gleaned elsewhere, it's likely to be cyclical: companies pruning back in a downturn, then catching up).

1985-1995, the author says the decline is linked to demography. Afaik the decline has continued, leading to the government intervention in the mid-'00s that re-established the situation somewhat before the downturn.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 08:31:16 AM EST
[ Parent ]
But whan unemployment is at 7%, twice the historical norm and definitely not a "full employment" level, where's the pressure to raise wages?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 05:29:06 AM EST
[ Parent ]
If you're an employer looking for rare skilled resources on the labour market, the existence of large numbers of unemployed persons who don't possess the necessary skills will not solve your problem.

Either you are going to spend money training the unskilled, (for an uncertain future result), or you offer more wages now for workers who are likely to be immediately productive.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 05:49:36 AM EST
[ Parent ]
So training the unskilled is everyone else's problem, resulting in a decreasing pool of "workers who are likely to be immediately productive", large numbers of unemployed persons, and business complaints that the educational system doesn't train in "rare skills".

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 05:58:42 AM EST
[ Parent ]
And in increased wages..?
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 06:06:53 AM EST
[ Parent ]
That is unpossible.

In any case, without speding in in-house training you get increasing wages for a shrinking group of rarely skilled workers, chasing after whom is a zero-sum game for the firms involved.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 06:30:24 AM EST
[ Parent ]
So, to follow you, German employers are dumb enough to obey your first point out of ideological stubbornness, but smart enough to collectively realize your second?
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 08:37:24 AM EST
[ Parent ]
Both points are consistent with narrow self-interest.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 09:23:42 AM EST
[ Parent ]
So are offering more (in a squeeze) to hire or poach skilled people from competitors, and kicking the "human capital" can down the road bacause of the greater costs involved. It depends on how each employer defines his narrow self-interest.

If there has in fact been a decline in in-house training because of the slump (and demography), then possibly the government will need to intervene to encourage picking it up again. But that will take time. Attempting to attract skilled labour from elsewhere may plug some gaps, but it will also take time (and may not play well with German opinion).

My point is not to say the Ernst & Young report is accurate and that Germany is running into a tight skilled-labour market for middling manufacturors - I (we) don't have the answer to that. But it may be the case, or soon become so, because the availability of skilled labour is surely a limiting factor on German export expansion.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 10:25:56 AM EST
[ Parent ]
The issue here is that in-house training internalizes as a cost a societal benefit, so it is not individually "optimal" according to naïve homo oeconomicus reasoning.

Basically, if you train an employee and they leave the firm before their higher productivity has paid off your training investment, you lose out. If they leave to go to a competitor, they win without investing in the training. So it may be individually optimal not to train, and to poach trained workers from competitors. But if nobody trains, soon the industry as a whole has no more workers to hire.

The only way out of that is collective/societal, either through an industry-wide training scheme, or government intervention. Or if a given firm is large enough to have market power and to have its own large in-house training scheme which can afford to lose some percentage of its trainees early. But small or medium enterprises are not in a position to train many more than one person at a time, so to them the risk of losing a trainee is unacceptably high.

In any case, even within the same industry, there is a common ground applicable to all firms which can be taught to anyone wishing to join the industry, but then there's in-house procedures, technologies, hardware and software, etc, which will take months to learn in any case. So industry-wide training, or school training is not a substitute for in-house training.

I mean, when they say they don't have qualified computer science people coming out of the universities, are they saying people come out of university functionally illiterate (not being able to learn a new computer system/language in a relatively short period of time, on the job)?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 10:54:58 AM EST
[ Parent ]
I don't think we disagree on the first part of your comment. As to the final question, I really don't know, but that does sound like business concern trolling.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 11:14:48 AM EST
[ Parent ]
My
self-serving rhetoric of businesses
upthread

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 11:22:40 AM EST
[ Parent ]
Yes, except that the FT piece talks about skilled manufacturing workers, not IT grads.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 11:35:55 AM EST
[ Parent ]
I mean, when they say they don't have qualified computer science people coming out of the universities, are they saying people come out of university functionally illiterate (not being able to learn a new computer system/language in a relatively short period of time, on the job)?

They're saying that the typical UK comp sci graduate knows Java and perhaps Flash, but has no experience of C/C++/etc, assembler, or deep hardware engineering - never mind clever stuff like kernel hacking or compiler design.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 11:24:43 AM EST
[ Parent ]
How many firms need kernel hackers? Seriously.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 11:27:09 AM EST
[ Parent ]
How many firms need someone with a Phd in string theory?

Actually if you're building Linux systems for business, kernel skills aren't irrelevant. You may not be building a new OS, but you will need to know why abusing the kernel or making wrong assumptions about it can cause problems.

But most employers just want some evidence of cognitive skills and task completion. They're not too worried about specifics.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 11:34:21 AM EST
[ Parent ]
ThatBritGuy:
most employers just want some evidence of cognitive skills and task completion. They're not too worried about specifics.
Then what is the skill shortage about?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 11:39:07 AM EST
[ Parent ]
They're not convinced by the evidence of cognitive skills and task completion?
by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 12:54:27 PM EST
[ Parent ]
And the universities are?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 04:04:19 PM EST
[ Parent ]
The universities are paid to be.

The problem in the UK is more that there are too many cartoon universities offering cartoon courses.

I looked up my old alma mater and the course content isn't any easier than when I did it - but the course has been extended with an additional year and now leads directly to a masters.

This seems sensible. But other unis are offering comedy comp sci with a bit of Android development and a few essays.

The differences are obvious with experience, but perhaps not so obvious to eighteen year olds.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 04:15:48 PM EST
[ Parent ]
In an economy that has depressed wages over a long period and is export-oriented, there might be quite some room for wages to rise before reaching labour-market demand destruction.

Yep.

This is precisely what employers do not want to happen. Which is why they start whining as soon as the bidding war starts.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 07:00:38 AM EST
[ Parent ]
So it's not whining for whining's sake, but is symptomatic of a squeeze.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 08:32:23 AM EST
[ Parent ]
Symptomatic of the risk of a squeeze within their planning horizon. That might mean that the squeeze is already here, or it might mean that they believe that there's a credible risk that it might happen a couple of years down the road.

Or they might be concern trolling for an expansion of the labour force (read: destruction of the pension system and turning higher education into vocational training) on general principles.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 02:43:22 PM EST
[ Parent ]
The second proposition is pretty unconvincing, given the type of labour we're talking about here - manufacturing workers who go through some form of vocational training anyway.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 03:09:44 PM EST
[ Parent ]
These arguments may be assuming rationality where none exists.

Conservatives aren't known for their grasp of reality. They're more likely to practice frog-twitch economics - kill the economy, dissect it, electrocute it, say 'hmm' when it twitches, then throw it away and try to find a new economy to torture.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 03:21:06 PM EST
[ Parent ]
German Mittelstand manufacturors are, in general, seen as having more than a nodding acquaintance with reality.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 04:08:36 PM EST
[ Parent ]
Maybe technological reality, but I submit they're likely to be Austrian gold bugs when it comes to economics.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 04:13:12 PM EST
[ Parent ]
But destruction of the pension system is right up their alley.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jan 26th, 2011 at 03:32:36 PM EST
[ Parent ]
Yeah.

It may be concern trolling, of course. But I think availability of skilled manufacturing labour is a factor to watch in Germany, since it may well cramp their style.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Jan 26th, 2011 at 04:07:00 PM EST
[ Parent ]
JakeS:
the arrogant expectation that actually training labour to become qualified is Somebody Else's Problem
Governments seem to have completely bought into the idea that training labour to the specification of individual firms is not the job of the firm.

Evidently, outside training cannot be to the spec of a firm, but somehow the idea that people will be hired and trained for the first few months to adapt their generic skills to thespecifics of the firm has disappeared.

So you end up, in the best of cases, with well-meaning governments wasting money on subsidies to train unemployed workers for jobs thet there's no guarantee will be there at the end of the training. And business still complaining that (say) univesities don't teach students about their in-house processes.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 04:30:55 AM EST
[ Parent ]
I suspect the issue is there are not enough qualified workers at the wage rates being offered,

I doubt that this is the case. Qualified workers have very strong incentives to work, even in the generous European welfare states. These kind of people do not become unemployed because they "choose" to. Further, it would go against protestant work ethic.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jan 26th, 2011 at 08:28:39 AM EST
[ Parent ]
Technology jobs pay relatively badly outside the City and below middle management levels.

Typical pay for code monkeys and engineers can be as low as £25k in the UK. You might get £35k with a few years of experience and £50k-£75k as a consultant who can point to ten years of successful projects.

Better than the UK average, but hardly generous, especially compared to the sums you can earn doing something useless in finance.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 08:35:32 AM EST
[ Parent ]
Good compared to being on welfare...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jan 26th, 2011 at 08:40:27 AM EST
[ Parent ]
But bad compared to other work that pays better.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 08:41:36 AM EST
[ Parent ]
That's the reason for the push to include immigrants with high-skilled knowledge.. if this does not change they will have to equilibrate the wages of the "elite" with the elite of the "know-how".. and then it is clear that the apocalypse will be near... since people who know will have the same power that people who are bankers.

The end of the world as we know it.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Jan 26th, 2011 at 01:20:50 PM EST
[ Parent ]
People with useful knowledge will never be dangerous until they realise how they're being conned and manipulated by economic nonsense.

Engineers naturally seem to gravitate rightwards, and they're easy meat for libertarian promises of rugged self-apotheosis, and for narratives that describe the economy as a simple set of interlocking parts with rigid laws that - unfortunately, but inevitably - destroy real human rights and social responsibilities.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jan 26th, 2011 at 03:25:37 PM EST
[ Parent ]
You do not think that a significant mass of not-conned  people can develop if we ever get to 30% of very well paid highly-skilled workers?

Well, yes it could certainly happen, highly-skilled and no knowledge. Yes... I hope not.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Thu Jan 27th, 2011 at 10:29:17 AM EST
[ Parent ]
they will have to equilibrate the wages of the "elite" with the elite of the "know-how"..

A partial return to the 1960's world dominated by the Technostructure as described by Galbraith?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 04:06:26 PM EST
[ Parent ]
Starvid:
Qualified workers have very strong incentives to work, even in the generous European welfare states. These kind of people do not become unemployed because they "choose" to.
Nobody does, even unqualified workers... If nothing else, because the "generous European welfare states" don't allow people to stay on benefits for ever. After less than 2 years unemployed, you're likely to end up homeless "even in Europe".

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jan 26th, 2011 at 11:25:53 AM EST
[ Parent ]
Not in Sweden... The only homeless people in Sweden are either students who can't find a place to live because there aren't enough houses in university towns, or chronic drunks/narcotics users, often with severe mental problems. These unfortunates have their plight increased by the somewhat retarded Swedish narcotics and mental care policies.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Jan 27th, 2011 at 08:10:35 PM EST
[ Parent ]
From a brief trawl of Swedish government homeless statistics.

less than 2/3 of Swedish homeless have drink or drug problems,(Just over 2/3 of male, less than half of female) and it's hard to tell which are the cause or effect of the homelessness., only just over 1/3 of Swedish homeless have mental health problems. A maximum of 9% fall under the no other group, which would include students

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Jan 27th, 2011 at 09:15:52 PM EST
[ Parent ]
I bet this depends on the given definition of homelessness, like people over 18 still living at home, and so on.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jan 28th, 2011 at 06:40:06 AM EST
[ Parent ]
In what universe does someone living with their parents qualify as "homeless"?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Fri Jan 28th, 2011 at 07:17:41 AM EST
[ Parent ]
The Swedish one, possibly...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Jan 28th, 2011 at 04:37:49 PM EST
[ Parent ]
This is the main problem for a highly oligarchac modern economy... once India and China also need high-skilled workers...low wages in this segment will be over...

I think it will reconfigure social relations in the future completely... and I do not know exactly how things will turn out.. but when 30% of the job force have huge huge leverage (and soon salaries) and 30% have nil.. what would happen with the other 30%.. and with the elite?

Beats me.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Jan 26th, 2011 at 01:13:52 PM EST
[ Parent ]
once India and China also need high-skilled workers...low wages in this segment will be over...

In the long run we're all dead...

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Jan 27th, 2011 at 08:11:45 PM EST
[ Parent ]

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