Thursday, July 16, 2015

Manufacturing and Duration of Unemployment

In a comment on an earlier post, John had pointed out that the duration of unemployment had increased. There are a lot of theories behind why and when it started. My view, is that unemployment spells are increasing due to structural factors. If we look at data starting in 1990 (when manufacturing employment start to decline) we see a pretty strong correlation between the duration of unemployment and jobloss in manufacturing:


9 comments:

  1. I agree with you, Professor Herzog, as to what you said earlier when you said that a possible hypothesis as to why unemployment duration has increased is due to structural factors. This graph is very interesting because it points out the inverse relationship that has occurred since 1990 until now between manufacturing employees and the median duration of unemployment. I believe that unemployment today doesn't necessarily have to deal with the fact that we don't have people who are capable of fulfilling jobs and the skills necessary to do so, but it is that there are not jobs available to fit the skills of those in the labor force actively looking for employment.

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  2. From 2001-Present America lost almost one third of its manufacturing jobs. Manufacturing is a strong representation of a healthy economy because it represents a livable wage paid mostly to a semi-skilled workforce, meaning that anyone with the work ethic to due so can work a manufacturing job. In 1977 manufacturing represented 22% of all nonfarm payrolls, compared to 9% today. I couldnt find the exact amount manufacturing workers were paid in 1977 but the minimum wage was 2.90$ which adjusted for inflation is 11.88 cents. Assuming that manufacturing workers made above minimum wage we can reasonably guess they made around 15$ an hour working 40hr weeks with benefits. That's a livable wage being paid to 22% of nonfarm roll employee's. America needs to reinvest in manufacturing if we are going to ward off another recession because it provides a livable wage to a large amount of employees, adds to our GDP, and helps us become more of an export instead of an import country.

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    Replies
    1. https://www.creditwritedowns.com/2012/05/chart-of-the-day-us-manufacturing-unemployment-1960-2012.
      http://www.coons.senate.gov/manufacturing/supporters
      http://www.calculator.net/inflation-calculator.html?cstartingamount1=2.90&cinyear1=1977&coutyear1=2014&calctype=1&x=88&y=14

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    2. https://www.creditwritedowns.com/2012/05/chart-of-the-day-us-manufacturing-unemployment-1960-2012.
      http://www.coons.senate.gov/manufacturing/supporters
      http://www.calculator.net/inflation-calculator.html?cstartingamount1=2.90&cinyear1=1977&coutyear1=2014&calctype=1&x=88&y=14

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    3. This is true. The trouble is, Americans (not all, but enough to warrant a generalization) tend to be fixated on the acquisition of either a white-collar job or some sort of "passion." Manufacture tends to have a somewhat negative effect on the dignity of the human person (sorry, it's necessary for industrialization, but I could go on for a long time as to why that's not a good thing either). In a pre-industrial society, people could be apprenticed into a profession. They had to work to become something, and thus had something to be proud of. With the advent of manufacture, convenience won out over craftsmanship, and it all went downhill from there.

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  3. Due to the controversy surrounding the TTP, I took a good look at the graph from 1994 onwards. This is because the common comparison to the TTP is NAFTA. NAFTA came into effect in 1994, but I'm curious because it doesn't seem to have adversely affected the manufacturing sector until, perhaps, later. So, that makes it harder to determine if the drop in manufacturing jobs was due to that, or part of a longer trend as companies realize other areas have a comparative advantage in manufacturing (i.e. China, Vietnam, Bangladesh, The Dominican Republic, etc.).

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  4. I agree with what Quentin has to say. By attempting to re-strengthen our own national manufacturing industry, we would help to create stable jobs. Goods that are produced in America are often more highly sought after than goods produced overseas because of their assumed quality and because many people like the fact that if a good was produced in America, it was most likely produced by an American citizen. This is not to say that overseas manufacturing is a bad thing, but especially after the great recession, many Americans found themselves in situations where costs of production outweigh the well-being of human capital. For companies and corporations, higher margins mean higher profits, and many are willing to sacrifice the well-being of their employees just to make an extra buck. So then, is it possible that these very companies are contributing to unemployment time and overall unemployment in the United States?

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  5. I agree that a correlation is certainly present here. Not to be that guy, but how can we assume here that one is causing the other, and that some outside factor isn't causing both the increase in duration of unemployment and the decrease in persons employed? As discussed in the recession video, these changes are often caused simply by loss or gain of faith in the economy. I think that in this case, Americans have lost some faith in American manufacturing, as it is far cheaper to ship the process overseas.

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  6. Unemployment is definitely one of the worst things for people, so the figure growing is very sad. I am lucky to be working in Forex trading where everything is so easy to manage and get extra income. I am finding it extra smooth thanks to OctaFX broker where they have outstanding 8 USD no deposit bonus, it’s really perfect and helps me work well which allows me to be successful easily while there is no restrictions on how I trade with it.

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