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Joe Barbieri has Bachelors' degrees in both Civil Engineering and Commerce from the University of Toronto. He has worked in the Financial Services field for over 13 years, with over 10 years on the institutional side of the business. He has covered positions from Fund Accounting to Investment... More
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  • Is There A Disconnect Between Policy Makers And The Unemployed? 0 comments
    Nov 28, 2012 4:48 PM

    There is a prevailing attitude that states that "if you want a job, you just have to go out and find it. If you don't find it, the solution to the problem is to get more schooling." The assumption is that there is always a job, and the onus is on you to make it happen. What if there isn't employment? If you are in an industry that is downsizing, which is the case in most industries, and there are more jobs than people, isn't it logical that some people will not find jobs? If this condition persists, and people believe the assumption above and decide to get more schooling, does this change anything? If there is one job and 10 people want it, and they are all equally qualified, there will be 9 unemployed people. If 2 years later, there is still one job and 10 people go to school to get more training, and they all come out equally qualified, isn't it still true that one person will get the job and 9 people will be unemployed? If we raise the ante still further and say that all 10 people are PhDs. If there is only one job, and 10 PhDs, won't there be 9 unemployed PhDs? Does more training mean better odds of finding employment? Not necessarily - there is something called "being overqualified", which means if you are not an exact fit for a job, you will not get it.

    There is an economic law of supply and demand. The basic idea is that the more there is of something, the cheaper it will be. This applies to goods, services, and labour. The more people are looking for the same job, the cheaper the price will be. The price of labour is the wage. On the other side of this law, the larger the demand is, or the more something is wanted, the more expensive the price is. This applies to goods, services, and labour. If this situation happens, there will be 10 jobs and only one person applying for them, so this person gets to choose who they want to work for at the highest wage. When have you heard of this happening in recent times? For most people, there tends to be large supply and little demand, and there are more people than there are jobs. This means that unemployment will persist for a long time in spite of what the unemployed do about it.

    Where is the evidence of this economic law? The unemployment rate is at multi year highs, and has been there for years. (3)(4) The Federal Reserve admits this when it is trying to stimulate the economy until the unemployment rate goes down. (4) The average wage paid is also rising at the slowest rate in 50 years, which translates into the fact that the demand for workers is at its lowest in 50 years. (2) If people are receiving employment benefits, are they in fact lazy and are prolonging joblessness? If there is no job, there is no job. If all of the sectors have the same problem, where is someone supposed to work?

    Should the government be paying people forever? No. But there should be a realization that jobs have to come first before people can be mobilized to take them. There should be an incentive for everyone to create jobs, and the people will naturally fill them. Is there a disconnect between the policy makers and the people who have to do the work?

    Sources:

    1) http://online.wsj.com/article/SB10001424127887324712504578133093359840804.html?mod=dist_smartbrief

    2) http://www.ctvnews.ca/world/u-s-unemployment-rate-ticks-up-to-7-9-per-cent-1.1021594

    3) http://research.stlouisfed.org/fred2/series/UNRATE

    4) http://abcnews.go.com/Business/federal-reserve-interest-rates-low-mid-2015/story?id=17226149&page=2#.ULU3C2fNl3g

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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