Can over-employment ever be bad?

[Infohawk]

These days, obviously, underemployment is the big issue. However, low-employment rates in the past triggered policy changes by governments. The biggest changes in the west came in the form of increased immigration from non-European countries. Even today, the refrain we hear so often is that immigrants do work that natives don't want to do. One also just hears generally that anything under 5% unemployment is bad for the economy.

Honest question: has anything bad really ever happened because of low unemployment rates?

I remember reading that during the middle-ages improvement in standard of living for the majority (who were of course agricultural workers) improved after the plagues because there were not enough workers to do what was required. Lords had to be nice to their peasants. In modern times, I just can't really see what the downside would be. People would have higher wages. Sure, some products or services that people chose not to do would become more expensive but the market would then choose which of those services people really needed. Maybe people would have to clean their own toilets for a change. Or maybe the rich would pay students living wages to clean their toilets up. But overall, the most important jobs would still be filled by the market.

 

[Throckmorton]

One also just hears generally that anything under 5% unemployment is bad for the economy.

What they really mean is that it's bad for the rich, because it means more wealth and power going to working people which means less for the rich.

 

[PeshakJang]

If there is a lack of labor, that means there is production capacity going unutilized.

 

[Texashiker]

Honest question: has anything bad really ever happened because of low unemployment rates?

In recent history when there were a manpower shortages, living standards improved from higher wages and technology improved.

Technology improved because manufacturers needed ways to utilize the people that were on hand.

Take a look at the cotton gin for an example. There is only X amount of cotton that can be processed by hand in a single day. With the cotton gin cotton growers were no longer limited to manpower.

Some of the advances in wages and benefits go back to world war II and the shortages of workers. Where would our benefits and wages be like today if WWII never happened?

If there is a lack of labor, that means there is production capacity going unutilized.

This is where improvements in production comes in.

 

[sm625]

Yes! When everyone is working, everyone is focused on consumption. Everyone is in the rat race. Culture invariably degrades. We end up with a mass of drugged out zombies sitting around watching fail videos on youtube and/or talking about how gatorade should be used to water lawns. Everyone gets stuck in a vicious cycle of increasing consumption to attain happiness by buying more useless bobbles, and then working longer hours at some meaningless job so they can afford to pay the interest on the debt from those stupid bobbles. And because we're all focused on petty consumption and useless trinkets, we fail to see what should be so clear and obvious: our country is being ripped apart. The cycle ends when people stand up for their rights, when they recognize oppression and corruption, when they stand against it. When they get their first taste of victory, they for the first time feel something that all those years of collecting useless crap never gave them. These are multi-generational cycles and they occur repeatedly throughout history. Google "kondratiev" for more..

 

[Macamus Prime]

Over-employment means it cuts into maximum profit making. It is perfectly OK to gut your operations, in order to insure you are making more money.

Now, we are not talking about JUST ENOUGH money, or getting by, or operating at a loss. We are talking about; Company A made $2.3 billion in profit for 2010 and now it wishes to make $2.7 billion in profit, so it decides to outsource and down size.

That, I do not agree with.

It is obviously allowed and praised in many instances. There are many people who cook up all sorts of plans and projects to suck off each board member of said hypothetical Company A and claim a % off of the savings for themselves. I do not agree, because these assholes are just piling the work onto those beneath them and the only direction they give is; "figure it out".

Figure out how one person is suppose to do the work of 3 others. Figure out how you no longer rely on someone who speaks English and knows your work - but now rely on someone 12 hours ahead/behind you, over a shitty phone connection and who doesn't speak English all too well. Figure out how to deliver much more at the same or less compensation. And, kiss your boss' ass for still having a job.

If you complain, you are ungrateful for the situation THEY put you in. Come on! You should be thanking them!

And, it only benefits one group of people - the ones who "work hard" in coming up with awful money saving ideas. Not the people who bust their humps in actually pulling off the shitty situation they were placed in.

Waste is bad, I understand this.

But, how is the waste of one person (spending $250,000 a month on a personal air jet) better or acceptable than the waste (read: salary) of ten people? That is elitism and indeed class warfare; where the person eating a $1,000 lunch on a private plane feels his/her expenses should NOT be compromised for the sake of making more money for the company.

The US has turned into a grab all for the rich. There is nothing but contempt when someone asks for work. Or, crys when their home is taken away. Yet, the scum bag who cooked up investment products that damn near killed the global economy is praised and worshipped by those who see with their nose (smell money) and have closed their eyes and heart.

It's down right disturbing. But, it is common practice and widely accepted - lets see where this all goes.

 

[Demo24]

While it might sound nice to have so many people employed, it also creates economic issues as well. With everyone working this inevitably means that some positions might go unfilled, obviously demand will increase and thus incentive for someone to fill that role. If they were previously filling another position, then that one has to be filled as well. Gaps in work force without an appropriate increase in production efficiency eventually leads to stagnation. No more can be produced, and any work force 'drop' leads to decreased production. Wages may increase, but so will the cost of many products to compensate.

That is an extreme example and I'm not well versed enough in employment history to cite some period in history (although it makes me think of the Stalin era). However ultimately you do want some percentage of the work force to be actively searching for positions.

 

[yllus]

The effect of immigration to most Western nations seems to (somewhat counterintuitively) be an increase in wages and employment. Conversely, extremely low unemployment rates tend to be a drag on productivity.

The Effect of Immigrants on U.S. Employment and Productivity

Immigration effects on employment, income, and productivity vary by occupation, job, and industry. Nonetheless, it is possible to total these effects to get an aggregate economic impact. Here we attempt to quantify the aggregate gains and losses for the U.S. economy from immigration. If the average impact on employment and income per worker is positive, this implies an aggregate “surplus” from immigration. In other words, the total gains accruing to some U.S.-born workers are larger than the total losses suffered by others.

Figures 1 and 2 show the response of key economic variables to an inflow of immigrants equal to 1% of employment. Figure 1 shows the impact on employment of U.S.-born workers and on average income per worker after one, two, four, seven, and ten years. Figure 2 shows the impact on the components of income per worker: physical capital intensity, as measured by capital per unit of output; skill intensity, as measured by human capital per worker; average hours worked; and total factor productivity, measuring productive efficiency and technological level. Some interesting patterns emerge.

First, there is no evidence that immigrants crowd out U.S.-born workers in either the short or long run. Data on U.S.-born worker employment imply small effects, with estimates never statistically different from zero. The impact on hours per worker is similar. We observe insignificant effects in the short run and a small but significant positive effect in the long run. At the same time, immigration reduces somewhat the skill intensity of workers in the short and long run because immigrants have a slightly lower average education level than U.S.-born workers.

Second, the positive long-run effect on income per U.S.-born worker accrues over some time. In the short run, small insignificant effects are observed. Over the long run, however, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

The third result is that the long-run increase in income per worker associated with immigrants is mainly due to increases in the efficiency and productivity of state economies. This effect becomes apparent in the medium to long run. Such a gradual response of productivity is accompanied by a gradual response of capital intensity. While in the short run, physical capital per unit of output is decreased by net immigration, in the medium to long run, businesses expand their equipment and physical plant proportionally to their increase in production.

 

[Anarchist420]

It can be if it's funded by government deficit spending or if it's due to mandated maximum wages.

 

[JockoJohnson]

Over-employment means it cuts into maximum profit making. It is perfectly OK to gut your operations, in order to insure you are making more money.

Now, we are not talking about JUST ENOUGH money, or getting by, or operating at a loss. We are talking about; Company A made $2.3 billion in profit for 2010 and now it wishes to make $2.7 billion in profit, so it decides to outsource and down size.

That, I do not agree with.

It is obviously allowed and praised in many instances. There are many people who cook up all sorts of plans and projects to suck off each board member of said hypothetical Company A and claim a % off of the savings for themselves. I do not agree, because these assholes are just piling the work onto those beneath them and the only direction they give is; "figure it out".

Figure out how one person is suppose to do the work of 3 others. Figure out how you no longer rely on someone who speaks English and knows your work - but now rely on someone 12 hours ahead/behind you, over a shitty phone connection and who doesn't speak English all too well. Figure out how to deliver much more at the same or less compensation. And, kiss your boss' ass for still having a job.

If you complain, you are ungrateful for the situation THEY put you in. Come on! You should be thanking them!

And, it only benefits one group of people - the ones who "work hard" in coming up with awful money saving ideas. Not the people who bust their humps in actually pulling off the shitty situation they were placed in.

Waste is bad, I understand this.

But, how is the waste of one person (spending $250,000 a month on a personal air jet) better or acceptable than the waste (read: salary) of ten people? That is elitism and indeed class warfare; where the person eating a $1,000 lunch on a private plane feels his/her expenses should NOT be compromised for the sake of making more money for the company.

The US has turned into a grab all for the rich. There is nothing but contempt when someone asks for work. Or, crys when their home is taken away. Yet, the scum bag who cooked up investment products that damn near killed the global economy is praised and worshipped by those who see with their nose (smell money) and have closed their eyes and heart.

It's down right disturbing. But, it is common practice and widely accepted - lets see where this all goes.

Who hijacked your account? What you stated makes perfect sense. And it's good to see no hillbilly/redneck ass-raping talked about either.

It is just plain ridiculous how much corporations keep pushing to squeeze every last penny out of everyone...just for a high profit margin to report to their stockholders. Gone are the days of CEOs only making 40-50x the avg. worker---they didn't make enough so now 400-500x is the new norm. Who cares that the extra money could be used to boost productivity, a company has to have the best of the best CEO in place to rape it.

This is a good example of where most "normal" people will say to get gov't involved. Maybe not limit/restrict CEO pay as a law but tax the shit out of them if they make x amount more than the avg. worker. Start taxing more for shipping jobs overseas---companies love all the benefits of being HQ in the US but don't want to use the local workforce, fuck them.

 

[JS80]

Inflation. See Japan.

 

[blackangst1]

What they really mean is that it's bad for the rich, because it means more wealth and power going to working people which means less for the rich.

So more minions working for the Lords are bad for them?

 

[Infohawk]

The effect of immigration to most Western nations seems to (somewhat counterintuitively) be an increase in wages and employment. Conversely, extremely low unemployment rates tend to be a drag on productivity.

It seems like their data stops right about when the Great recession was entering the picture. I also doubt they are really able to separate a period of remarkable growth in the west during the second have of the 20th century from the coinciding mass wave of third world migration. Correlation does not equal causation and we know that there are developed countries with little immigration that did fine without importing as many immigrants as say the US or France or the UK. I don't doubt that immigration increases production during boom times, but I don't see how one can reasonably say that in a period like this that added workers are increasing wages or employment.

In any case, I'm aware that there are economists that say we should not have too low of unemployment theoretically. I alluded to that in the OP. I am more interested in whether anything bad ever happened due to low unemployment rates historically. I just don't see any actual situations in history where low unemployment has caused any problems.

Edit: I just noticed he also cites mainly David Card over and over. Card is known for being left-wing (minimum wage is another example). Suffice it to say there are respected economists on the other side too. I find his view on the minimum wage particularly ridiculous. If he's right than economics is basically completely useless as it can't even predict the effects of price ceilings and floors.

 

[Infohawk]

Inflation. See Japan.

Great example of why unemployment figures aren't everything. How can Japan have a so-called Lost Generation if employment is unemployment is so low? Too much labor doesn't automatically mean less wealth. It's also felt in a power shift to employers including decreasing wages and quality of life. Japan's inflation problems are related to its government spending if I recall correctly. Competition from China and Taiwan is what fucked Japan's labor situation. Again, that's an issue of unemployment.

 

[QuantumPion]

A shortage of labor would have a similar effect to a shortage of other crucial commodities such as oil. It would cause prices to rise across the board and decrease purchasing power. I'm don't think that is the exact same thing as inflation (which is an increase in the total supply of money, thus decreasing the relative value of goods) but the end effect is similar.

 

[Infohawk]

A shortage of labor would have a similar effect to a shortage of other crucial commodities such as oil. It would cause prices to rise across the board and decrease purchasing power. I'm don't think that is the exact same thing as inflation (which is an increase in the total supply of money, thus decreasing the relative value of goods) but the end effect is similar.

Do you have any historical examples of this actually happening and being meaningfully disruptive?

 

[QuantumPion]

Do you have any historical examples of this actually happening and being meaningfully disruptive?

I would say WW1 and 2 are the prime examples.

 

[Infohawk]

I would say WW1 and 2 are the prime examples.

Yeah, you're going to have to explain how you think low unemployment directly caused WW1 or WW2. The fact that the Nazis rose to power when unemployment was high and that the US was still in the Depression when they entered the war is kind of an indicator that you're probably not going to have a good answer.

 

[Anarchist420]

Yeah, you're going to have to explain how you think low unemployment directly caused WW1 or WW2. The fact that the Nazis rose to power when unemployment was high and that the US was still in the Depression when they entered the war is kind of an indicator that you're probably not going to have a good answer.

Robert Higgs may have explained it.