Looking from afar at the US Jobs market situation it is unsettling to watch to say the least. With the unemployment rate to have recorded to have fallen to 9.7% it begs the question why the US has taken the brunt of the pain of the global financial crisis. That is 14.8 million are looking for a job, (the figure 9.7% can’t really exemplify how dire that situation is).
Comparing unemployment rates around the world with the leading at United States at 9.7%, Germany's at 8.6%, the UK's 7.8%, Canada's 8.3%, Japan's at 5.1% and Australia at 5.3%, why is the world’s only premier capitalist market struggling.
So looking at the blogger talk of impending doom daily on the web, the constant questions seem to be is there going to be hyperinflation, a double dip recession or another great depression.So while that is interesting i think it may be more useful to look at the lessons learnt and potentially ideas on where we as a country we want to be to avoid another or at least reduce fallout from a similar scenario occuring in the future..
Its unfortunately obvious that looking at where we started in this crisis there was fundamentally many things already wrong within the US in structural way. The combination of these factors existed already before the GFC hit and these circumstances occurred simultaneously having a snowball effect.
Here are some of problems before GFC hit in a summary form:
This is just a miniature summary of the serious problems that were ready to be unleashed when any crisis would have hit. So looking at these factors occurring simultaneously it’s quite obvious to see what happened when Lehman Brothers, AIG and GM all went bankrupt and why some were saved. However while the scenario perhaps could not be avoided I believe this situation could have at least stopped some of the collateral damage. There is always learning from crises and I’ve put down some ideas that could assist in helping reducing further situations in the future as well help the current situation.
Some ideas that could help the current situation:
1) The situation from the government point of view was quite bad and unsustainable so when the situation got dire job cuts would occur and for a state like California job cuts would need to be even more severe. This explains why many people in the US do not like big government. Sustainable balanced budgets are a must. In a crisis like this, local and state governments are with their surpluses should HIRING not be firing.
2) Defined benefits scheme should immediately cease across all government institutions and companies. This should be replaced with another system that pays at the same time as wages and finishes once an employee leaves the company or government workplace.
3) Reduce Housing supply as much as possible, this situation is occurring as we speak which is a good thing. This in the short term will cause pain to construction jobs but will push home prices up because demand = supply.
4) Reduce immigration to the US to 0, if there are no jobs, there is no need for anyone to come there. Unfortunately this did not occur although it did reduce but reducing it to 0 would have helped.
5) Healthcare in the US is very expensive compared to other nations around the world. Healthcare should no longer be provided by employers as these ties the company into overall company costs. By getting rid of this, wage demand will likely push higher eventually when things pick up.
6) I repeat Healthcare in the US is very expensive compared to other nations around the world. it’s obvious that consumer prices for healthcare are unaffordable and therefore the burden must go to someone else. Prices must come down and significantly. Think by half of the amount you pay now or ever further. Someone in the healthcare chain needs to take a pay cut.
7) Create policies to encourage the savings rate. However once the fed increases the rates to a proper level many Americans will be encouraged to buy treasuries.
8) The illegal immigration problem must be tackled. If you are thinking objectively 1000 people who employed illegally is 1000 people who have an opportunity to work even if for low wages. Also check remittances going overseas.
9) The public companies desire to sack workers for a quarterly profit is just plain wrong. These publicly listed companies could have taken a hit for a quarter but instead simultaneously fired hundreds of thousands of workers. This needs to be stopped, they contributed to this crisis and consumers should be made aware
10) There are millions of unemployed, and looking at the DOL summary for January 2010 “Employment fell in construction and in transportation and warehousing, while temporary help services and retail trade added jobs”. I doubt retail and temp help will provide 10 million more jobs, but the government need to show where there needs to be planning for future jobs growth to put all these workers. Enough of saving, we need to figure out where they will be. (Note many construction jobs will come back eventually once housing supply goes back to normal but this may take many years.
These are some of the many solutions to help the US remain competitive; please feel free to provide your own solutions to the current problems.
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com