Calculating unemployment levels

In a previous post, I said that “One of the things that seems obvious to me but most people seem unaware of is that the US is a country in deep decline and if no corrective action is taken soon it will end up just like many other failed empire in history, collapsing from within due to a combination of hubris, arrogance, and greed.” Readers might have been excused for being somewhat skeptical since things don’t seem so dire and we hear upbeat reports about how things are getting better. In the next series of posts I will show how the real state of the economy is being kept hidden to make things look good, or at least not terrible.

In any democratic society, the most sensitive number politically is the level of unemployment. If it is high, then one has public unrest and strong dissatisfaction with the government. If it is low, then workers can bargain for better wages and benefits and so the business sector’s profits get reduced, which makes corporate CEOs and their shareholders unhappy. In oligarchic societies like the US, the needs of the corporate sector always win out so governments tend to pursue policies that prevent full employment while simultaneously taking steps to curb public unhappiness by either giving them some benefits temporarily to help them get used to the idea of not working or hiding from them how bad the situation is.

In the US it is the Bureau of Labor Statistics that keeps track of unemployment numbers. In the current recession, the ‘official’ unemployment level has reached close to 10% and is staying there despite stimulus packages and the like. This is high by historic US standards and it is surprising that it has not created as much unrest as one might expect. But what people may not know is that the ‘real’ rate of unemployment is much higher, maybe twice as much, and that the lower official figure is the result of a steady process of cooking the books over the past few decades.

The unemployment rate is calculated as the number of unemployed workers divided by the total labor force, and the resulting number is multiplied by 100 to get a percentage. (The definitions of employed, unemployed, and total labor force is given here.) By finding ways to make the numerator smaller and/or the denominator larger, one can make the rate smaller. To be counted among the unemployed, one has to meet fairly strict criteria:

Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities:

  • Contacting: an employer directly or having a job interview; public or private employment agency; friends or relatives; a school or university employment center
  • Sending out resumes or filling out applications
  • Placing or answering advertisements
  • Checking union or professional registers
  • Some other means of active job search

Passive methods of job search do not have the potential to result in a job offer and therefore do not qualify as active job search methods. Examples of passive methods include attending a job training program or course, or merely reading about job openings that are posted in newspapers or on the Internet.

There are categories other than employed and unemployed. ‘Marginally attached’ workers are “persons without jobs who are not currently looking for work (and therefore are not counted as unemployed), but who nevertheless have demonstrated some degree of labor force attachment. Specifically, to be counted as “marginally attached to the labor force,” individuals must indicate that they currently want a job, have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and are available for work.”

‘Discouraged workers’ are “a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons:

  1. They believe no job is available to them in their line of work or area.
  2. They had previously been unable to find work.
  3. They lack the necessary schooling, training, skills, or experience.
  4. Employers think they are too young or too old, or they face some other type of discrimination.

Depending on which categories of workers you count as unemployed, there are six measures of unemployment:

  • U-1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
  • U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
  • U-3: Total unemployed persons, as a percent of the civilian labor force (this is the ‘official’ unemployment rate that the government and media publicize)
  • U-4: Total unemployed persons (i.e., U-3) plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
  • U-5: Total unemployed persons, plus discouraged workers (i.e., U-4) plus all other “marginally attached” workers, as a percent of the civilian labor force plus all “marginally attached” workers
  • U-6: Total unemployed persons, plus all “marginally attached” workers (i.e., U-5) plus all persons employed part time for economic reasons, as a percent of the civilian labor force plus all “marginally attached” workers

So if a member of the ‘officially’ unemployed gets so discouraged that he/she stops even looking for work (which is a bad thing), U-4 remains unchanged but the official unemployment rate U-3 actually goes down, which looks like a good thing. Similarly, if you are forced to work part-time as a greeter at Wal-Mart because you cannot get a full time job, you drop out of the U-3 category (again reducing the official unemployment rate) but the U-6 figure remains unchanged.

Looking only at the U-3 number makes things seem rosier than they really are.

Next: Cooking the books on the unemployed.

POST SCRIPT: Film review: Up in the Air

This film is really good. It stars George Clooney as someone whom companies hire to perform the distasteful task of firing their employees and getting them to accept the severance package. The film shows the varied reactions of people upon learning that despite having put in many years of faithful service, they are now being unceremoniously dumped by a total stranger. Their emotions range over sad and angry and humiliated and despair, the last one especially common among older workers who know that their chances of ever getting another job are slim to none.

Clooney is this generation’s Cary Grant, a good-looking charmer with a roguish twinkle in his eye who can make even an unsavory character appealing. In this film he plays someone who is really good at doing what should be a truly nasty soul-killing job and even takes pride in doing it well. Like a lot of us guys, he has set his heart on achieving some quite pointless goal in life, in his case to rack up 10 million frequent flyer miles, which he pursues with great dedication. And yet he manages to make this shallow person come off as sympathetic and even likable. Writer-director Jason Reitman seems to have a knack for pulling off this trick, having done it before with Thank You For Smoking, in which the main character is a shill for the tobacco industry.

The film’s examination of the essential rootlessness of Clooney’s character and the contrast with the strong ties in which the people he fires are enmeshed, is excellent. Although it is a serious film, it is also a funny one with great writing. It is well-worth seeing. Here’s the trailer:

The phony social security crisis-7: Who are the hard workers?

As I said in the previous post in this series, the elites who work in comfortable conditions in well-paying jobs have no idea of what work is like for the vast majority of people. And they live in this cocooned world where the media feeds their inflated sense of self-worth. The ever-oblivious New York Times columnist David Brooks is one of those people who serves the needs of such people, someone who can say with no sense of irony: “I was going to say that for the first time in human history, rich people work longer hours than middle class or poor people. How do you construct a rich versus poor narrative when the rich are more industrious?”

The rich are more industrious? How clueless can you get? Does he have any idea how hard manual laborers like farm and construction workers or waiters work, on their feet, each and every day? I’ll let Matt Taibbi dissect him:
[Read more…]

The phony social security crisis-6: Retirement and the nature of work

The doomsayers have managed to persuade the majority of people that they will not receive anything from social security, though that is completely false. The idea that the only way to solve the overblown social security ‘crisis’ is to raise the age of full benefits eligibility from 65 to 70 is wrong. There are other ways to fix social security other than raising the retirement age. The most obvious is to remove the cap that limits the social security payroll tax to only those incomes below $106,800 (the ceiling for 2009). Currently all incomes above that limit do not contribute to the social security trust fund. But there should be no upper limit. As Kevin Drum points out in a handy chart, that one move alone would solve the Social Security problem but there are other ways.

Of course, lifting the cap on earnings that are subject to the social security tax is one of those solutions that will adversely affect only rich people who will hardly notice it but since it is this same group that forms the oligarchy that runs the government and the media and sets policies, such policies are not even considered because this greedy group cares only about increasing its wealth even more, aided in their attempts by the media ignoring this systemic feature. The New York Times recently ran a disapproving article about how the elites in Pakistan avoid paying taxes: “That is mostly because the politicians who make the rules are also the country’s richest citizens, and are skilled at finding ways to exempt themselves.” I wonder when the NYT will realize that the US is not much better?

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The phony social security crisis-5: Raising the social security retirement age

(Continuing a series from March 2008.)

If you want to implement policies that really stick it to poor people, you have to do it when the Democratic Party is in power. The reason that Democratic administrations are the most useful vehicle for harming the poor is that those who call themselves ‘liberals’ are far more vigilant when Republicans are in power, rightly seeing them as out to serve the interests of the wealthy. But the Democratic party, while serving the interests of the same oligarchy, has fooled people into thinking that they are in favor of economic justice, so when they attack the poor, liberals are caught wrong-footed and do not mount a vigorous counter-attack.

That is something that the oligarchy that runs America realized some time ago but hasn’t quite sunk in with liberals because of their fixation on shoring up the Democratic Party’s electoral fortunes. This interesting comparison between those who call themselves liberals and those who say they are progressives is worth pondering. One key difference is that “Progressives pursue issues; liberals support candidates”. Liberals who think they must support Obama at all costs because otherwise his opponents will benefit at the polls are falling into the same trap as with Bill Clinton, and will end up enabling policies they should oppose.

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The evil of the consumer economy

(My latest book God vs. Darwin: The War Between Evolution and Creationism in the Classroom has just been released and is now available through the usual outlets. You can order it from Amazon, Barnes and Noble, the publishers Rowman & Littlefield, and also through your local bookstores. For more on the book, see here. You can also listen to the podcast of the interview on WCPN 90.3 about the book.)

(Due to the holiday, this is a repost from Thanksgiving of last year, edited and updated.)

Each year, the Thanksgiving holiday is ruined by the revolting attention that the media pays to the retail industry in the days immediately following Thanksgiving. They wallow in stories of sales, of early-bird shoppers on Friday lining up in the cold at 4:00 am to get bargains, fighting with other shoppers to grab sale items, people getting trampled in the crush, the long lines at cash registers, the year’s “hot” gift items, and the breathless reports of how much was spent and what it predicts for the future of the economy.
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The pernicious anti-tax attitude

The news is full of stories about the budget problems faced by the federal and state governments. But unlike the federal government which has ways to pay its bills without raising taxes, state governments have to balance their books the old fashioned way, by either reducing expenses or raising revenue or both.

But thanks to the anti-tax sentiment unleashed in 1978 by California’s passage of Proposition 13, we are now witnessing the fruits of the relentless propaganda over the past three decades that said that taxes are intrinsically evil and that lower taxes are always better.

When times are good and tax revenues are high, people demand that taxes be cut because it is ‘their’ money. When things turn sour, as they now have, people argue that to raise taxes would be to deepen the recession and that taxes should be cut even more to ‘stimulate the economy’, a phrase I have come to detest since it usually precedes some scam to siphon off wealth even more to the rich and to destroy the common good. So we have reached the stage when it has become an act of faith that it is always good to lower taxes and it is never good to raise them.
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On wealth-2

(Part 1 can be seen here.)

One of the odd things that I have found about America is how many people are willing to fight to protect the interests of the very wealthy, even though they themselves are nowhere close to attaining that level of income, and where the efforts by a few to acquires such wealth adversely affects them. Some are willing to defend the rampant greed that resulted in practices the led to the recent financial collapse. “Joe the Plumber”, “Tito the Builder” and others like them were notable figures during the last election campign that belonged to this category. During the recent tea parties protesting Obama’s tax policies, a demonstrator was asked whether he earned more than $250,000. When he said that he earned much, much less, he was asked why he was protesting since his taxes would be lowered. He said that he hoped to become wealthy some day and thus was looking out for his future interests, however unlikely that may be.
[Read more…]

On wealth-1

In writing the series of posts on spreading the wealth and on financial frauds, I started musing on what wealth is and what it means to different people. For many people, becoming wealthy is seen as a desirable goal, an end in itself. Our media is soaked in wealth-porn, the endless regaling of how much wealthy people earn and the details of their lifestyles.

It seems to me that there are three pathways to becoming wealthy: inheriting wealth, acquiring wealth as a byproduct of trying to reach some other goal, and actively seeking it for its own sake because it is important to you.

There is not much one can say about the first category. One either has rich relatives who die leaving you their money, or one hasn’t.

The second type of person is like that of some artists, like J. K. Rowling the creator of the phenomenally successful Harry Potter books, who achieve massive and unexpected success. My guess is that what drives such people is similar to what drives academics, they want to do something for its own sake and seek above all to produce a successful work of art that is recognized as such. Commercial success is very welcome but is not the primary goal. Evidence for this lies in the fact that such people usually do not stop creating new works even when they have no financial reason to continue working. It is the very rare author or actor or painter or musician who stops producing new work simply because they have made lots of money. For such people their primary goal is to produce something they are proud of and is valued by their knowledgeable peers.

There is a subset of this second category that consists of inventors. Such people like Thomas Edison, Henry Ford, Bill Gates, and Steve Jobs are similar to artists in that they are trying to create something new. But at the same time, they necessarily must have a business orientation since their idea is to produce something useful and valuable, not a work of art, and the main yardstick by which that is measured is by selling a lot of it. So making a lot of money is an important measure of whether they have produced something of value. This is different from an academic or artist or poet who can be considered a success while still not being rich.

The third type of person is one for whom making a lot of money is the primary goal in life and it does not matter to them how they achieve it. Such people are willing to spend their entire lives doing something they dislike as long as it enables them to become rich. They tend to view life as a competition and the winner is the person who dies with the most money. They may, in the course of making money, produce something of value and merit, but their primary goal is to be rich. So for them, it does not really matter if they became so by producing a better widget or creating a chain of stores or winning the lottery. Those are just the means to the end of becoming wealthy.

This is why I will never be wealthy. I do not have rich relatives and can expect no inheritance. I do not do the kind of work that is likely to make a lot of money as a side effect. But most crucially, I simply have no desire to be wealthy. While I will of course work to make a living and to “put food on my family” (in George W. Bush’s memorable words), I simply cannot see myself doing something just for the sake of making a lot of money.

There are a very few occasions when I think it would be nice to have a lot of money. When I travel on long airline flights, I sometimes have to get to my coach seat by passing through the first and business class sections. When I see the comfortable and spacious seats they have compared to my cramped one, I think how nice it must be to be able to easily afford to pay the extra thousands of dollars for that luxury. But then I realize that in order to be able to be able to splurge for those few hours of comfort on a plane, I would have to work at a job I dislike on a daily basis all my life. That would not be a good trade-off.

In order to become rich for its own sake, you must be willing to spend a lot of time at it. If you want to become a successful investor in the stock market (say) you have to study the market and company reports and the business world and so on. The catch is that you would have to devote a lot of time towards this and that is something I have no wish to do.

What would be the point? My preferred lifestyle is one that is very simple. I don’t much like to travel to exotic places or stay at fancy hotels or resorts, eat at expensive restaurants (or eat out at all for that matter), go to shows and concerts, etc. I like to live what others might consider a really boring life: reading, writing, thinking, and spending time with friends. My idea of a great weekend or holiday is when I have no place that I must go to and nothing that I must do. If I were to sacrifice my time and other interests to make a lot of money, I would have lost more than I gained.

POST SCRIPT: Signs of the times

Kodak announces that after 74 years it is is discontinuing production of Kodachrome film due to the public shift to digital photography.

Don’t tell Paul Simon, he’s going to be really upset.

Financial frauds-6: The danger of having an oligarchy

(For previous posts in this series, see here.)

In a provocative article, Pulitzer Prize-winning war correspondent Chris Hedges warns that those people who have elite educations often make the biggest blunders because they have been trained to think highly of themselves, and thus become less reflective and more overconfident.

These institutions [i.e., elite prep schools and universities], no matter how mediocre you are, feed students with the comforting self-delusion that they are there because they are not only the best but they deserve the best. You can see this attitude on display in every word uttered by George W. Bush. Here is a man with severely limited intellectual capacity and no moral core. He, along with Lewis “Scooter” Libby, who attended my boarding school and went on to Yale, is an example of the legions of self-centered mediocrities churned out by places like Andover, Yale and Harvard. Bush was, like the rest of his caste, propelled forward by his money and his connections. That is the real purpose of these well-endowed schools — to perpetuate their own.
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Barack Obama is a product of this elitist system. So are his degree-laden cabinet members. They come out of Harvard, Yale, Wellesley and Princeton. Their friends and classmates made huge fortunes on Wall Street and in powerful law firms. They go to the same class reunions. They belong to the same clubs. They speak the same easy language of privilege and comfort and entitlement. They are endowed with an unbridled self-confidence and blind belief in a decaying political and financial system that has nurtured and empowered them.

These elites, and the corporate system they serve, have ruined the country. These elite cannot solve our problems. They have been trained to find “solutions,” such as the trillion-dollar bailout of banks and financial firms, that sustain the system. They will feed the beast until it dies. Don’t expect them to save us. They don’t know how. And when it all collapses, when our rotten financial system with its trillions in worthless assets implodes, and our imperial wars end in humiliation and defeat, they will be exposed as being as helpless, and as stupid, as the rest of us.

Hedges is perhaps too pessimistic, sweeping, and apocalyptic. At least I hope so, as otherwise we are done for. There are genuinely clever people who go to these elite schools. They are not the problem. The problems are those who suffer from what William Deresiewicz, a professor of English at Yale, called ‘entitled mediocrity’. i.e., people who see themselves as smart merely because of their background and privileged opportunities and not out of any personal achievement. He takes elite universities to task for having lost sight of their mission and becoming instead essentially narrowly focused trade schools, although the trades students are being prepared for are the professions.

When elite universities boast that they teach their students how to think, they mean that they teach them the analytic and rhetorical skills necessary for success in law or medicine or science or business. But a humanistic education is supposed to mean something more than that, as universities still dimly feel. So when students get to college, they hear a couple of speeches telling them to ask the big questions, and when they graduate, they hear a couple more speeches telling them to ask the big questions. And in between, they spend four years taking courses that train them to ask the little questions—specialized courses, taught by specialized professors, aimed at specialized students.
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Since the idea of the intellectual emerged in the 18th century, it has had, at its core, a commitment to social transformation. Being an intellectual means thinking your way toward a vision of the good society and then trying to realize that vision by speaking truth to power. It means going into spiritual exile. It means foreswearing your allegiance, in lonely freedom, to God, to country, and to Yale. It takes more than just intellect; it takes imagination and courage.

Among the elites there is also a clannishness, a willingness to shield their own from the barbarians at the gate, i.e. ordinary people. You can see it in the way that the Obama administration is seeking to avoid taking any action against those members of the Bush administration that have been involved in the most outrageous acts of criminality and violations of the constitution, such as torture, war crimes, warrantless wiretapping and the like. The Obama administration is trying to impose even greater secrecy than Bush did and fighting the efforts of those who want openness and investigations of wrongdoers. Such acts (lawlessness and the closing of ranks to cover them up) are the signs of an oligarchy.

It used to be the case that Americans would laugh at the ‘banana republics’ of South America as countries where ruling elites would violate laws with impunity, confident that even their supposed political opponents would protect them because of their common class interests. And yet, on April 7, Peru became the first country to convict a former democratically elected head of state for ordering killings and kidnappings by his security forces. Alberto Fujimori was sentenced to 25 years in prison.

We could learn something from the so-called banana republics.

POST SCRIPT: Why I don’t watch TV news

It looks like TV news is as almost as pathetic in England as it is here.

(Thanks to Earth-bound Misfit.)

Financial frauds-5: The problem with smart people

(For previous posts in this series, see here.)

Many of the people who were swindled by Madoff were those who suffer from what William Deresiewicz, a professor of English at Yale, calls ‘entitled mediocrity’. These are people who see themselves as smart merely because of their background and formal education and not out of any actual achievement. In a recent article in The American Scholar titled The Disadvantages of an Elite Education, Deresiewicz reflects on his own rising self-awareness of the limits his privileged education has created.

I never learned that there are smart people who don’t go to elite colleges, often precisely for reasons of class. I never learned that there are smart people who don’t go to college at all.

I also never learned that there are smart people who aren’t “smart.”
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The second disadvantage, implicit in what I’ve been saying, is that an elite education inculcates a false sense of self-worth.
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There is nothing wrong with taking pride in one’s intellect or knowledge. There is something wrong with the smugness and self-congratulation that elite schools connive at from the moment the fat envelopes come in the mail. From orientation to graduation, the message is implicit in every tone of voice and tilt of the head, every old-school tradition, every article in the student paper, every speech from the dean. The message is: You have arrived. Welcome to the club. And the corollary is equally clear: You deserve everything your presence here is going to enable you to get. When people say that students at elite schools have a strong sense of entitlement, they mean that those students think they deserve more than other people because their sat scores are higher.

It’s no coincidence that our current president [George W. Bush at the time of writing], the apotheosis of entitled mediocrity, went to Yale. Entitled mediocrity is indeed the operating principle of his administration, but as Enron and WorldCom and the other scandals of the dot-com meltdown demonstrated, it’s also the operating principle of corporate America.

It is this smug self-assurance of one’s own smartness that leads these people to fall prey to those who know exactly how to play on their weaknesses. Recently a hedge fund manager Andrew Lahde decided to retire after he had made enough money to live comfortably for the rest of his life, and he had some harsh parting words about the kinds of people that made it so easy for him to be so successful at making money. He said that the so-called ‘smart people’, who had a high opinion of themselves that was not based on any real achievements, were the easiest ones to take advantage of.

I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades.

Lahde was making money at these people’s expense legally but the people at the losing end were the same kinds of people who were swindled by Madoff.

America prides itself on being a meritocracy, that people get to the top by virtue of their ability and hard work. It is not clear if that was ever really true but there are definitely reasons to doubt it now. It is true that there are no legacies of a feudal system like a formal aristocracy and inherited titles. But we do now have in place a system that seems to perpetuate a ruling class. Wealthy people have created a system whereby they can send their children to elite primary and secondary schools and colleges (often starting with elite pre-schools!) where they move around largely with people like them and develop the contacts that, coupled with their parents’ network of business and social relationships, enable them to get onto the fast track of business and government. So we end up with a self-perpetuating elite.

What we have now is a one-party pro-war/pro-business form of government controlled by a wealthy elite that sees its role as preserving the privileges of the already privileged.

America has become an oligarchy, and that is not a good thing because it is usually a sign of impending collapse.

Next: The dangers of being ruled by an oligarchy.

POST SCRIPT: Telling the truth about religion

British comedian Marcus Brigstocke riffs funnily, but accurately, on the violence and hate and demands for special treatment that permeates the three so-called Abrahamic religions (Judaism, Christianity, and Islam) and the so-called ‘moderate’ religious people who are its enablers, something that I have said before.