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Robert

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Reply with quote  #76 
I'm a freelancer and it seems every few months I hit a period when I have no work and it feels like I am unemployed. When work comes in then I feel employed. While everyone being employed seems like an obvious goal to set apparently most economists say it would be inflationary and advocate something like a 3% unemployment rate as what the goal of our government should be. If you experienced the 1970s then you know inflation is something to fear. My feeling is since it seems most economists and the government think a 0% unemployment rate would bring economic problems for the country as a whole fighting for that is a battle that can't be won. I think it makes more sense to fight for the government stepping in and supplying jobs as a last resort when the unemployment rate stays high for a prolonged period of time, for example, over 6% for 6 months, in which case the government might be required to employ people to get the rate below 6%. I think it is important to keep in mind that we are dealing with a complex economic system with many variables and it is necessary to look at the whole picture when advocating any changes. While it certainly would be great to help a few million people in need, if that winds up hurting a couple of hundred million people that is a problem that has to be taken into consideration. No easy answers.
readytowork

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Reply with quote  #77 
Why would everyone working cause inflation?
Robert

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Reply with quote  #78 
Here is one explanation of why full employment (0% unemployment) would cause inflation.

Again from Wikipedia

Ideas associated with the Phillips curve questioned the possibility and value of full employment in a society: this theory suggests that full employment—especially as defined normatively—will be associated with positive inflation. The Phillips curve tells us also that there is no single unemployment number that one can single out as the "full employment" rate. Instead, there is a trade-off between unemployment and inflation: a government might choose to attain a lower unemployment rate but would pay for it with higher inflation rates.

Most economists no longer use the Phillips curve in its original form because it was shown to be too simplistic. This can be seen in a cursory analysis of US inflation and unemployment data from 1953-92. There is no single curve that will fit the data, but there are three rough aggregations—1955–71, 1974–84, and 1985-92—each of which shows a general, downwards slope, but at three very different levels with the shifts occurring abruptly. The data for 1953-54 and 1972-73 do not group easily, and a more formal analysis posits up to five groups/curves over the period.[citation needed]

But still today, modified forms of the Phillips Curve that take inflationary expectations into account remain influential. The theory goes under several names, with some variation in its details, but all modern versions distinguish between short-run and long-run effects on unemployment. The "short-run Phillips curve" is also called the "expectations-augmented Phillips curve", since it shifts up when inflationary expectations rise, Edmund Phelps and Milton Friedman argued. In the long run, this implies that monetary policy cannot affect unemployment, which adjusts back to its "natural rate", also called the "NAIRU" or "long-run Phillips curve". However, this long-run "neutrality" of monetary policy does allow for short run fluctuations and the ability of the monetary authority to temporarily decrease unemployment by increasing permanent inflation, and vice versa. Blanchard (2000, chapter 8) gives a textbook presentation of the expectations-augmented Phillips curve.[citation needed]

An equation like the expectations-augmented Phillips curve also appears in many recent New Keynesian dynamic stochastic general equilibrium models. In these macroeconomic models with sticky prices, there is a positive relation between the rate of inflation and the level of demand, and therefore a negative relation between the rate of inflation and the rate of unemployment. This relationship is often called the "New Keynesian Phillips curve." Like the expectations-augmented Phillips curve, the New Keynesian Phillips curve implies that increased inflation can lower unemployment temporarily, but cannot lower it permanently. Two influential papers that incorporate a New Keynesian Phillips curve are Clarida, Galí, and Gertler (1999) and Blanchard and Galí (2007).[citation needed]

ladyactivist

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Reply with quote  #79 

In a capitalist economic system where capital is dominant over labor wages always chase prices with workers striving to achieve what the International Trade Union Confederation calls a decent standard of living. Any theory blaming full employment for inflation has to be wrong.

Why this constant search to justify a certain minimum level of unemployment instead of making the government responsible for full employment?

Can't you find just one economic theory justifying full employment?

Perhaps you should be looking for a way of looking at the world based on the concepts of  social and economic justice for working people because unless we are searching for social and economic justice for all workers we won't find a solution to unemployment.

Are you concerned about social and economic justice?

If the Justice Party is not concerned about social and economic justice which includes a government charged with the responsibility for full employment, what kind of justice does the Justice Party stand for?

Try entering the real world of life being experienced by the unemployed if you are truly in search of a reason for full employment because only Wall Street has a need for unemployment. Wall Street's need is based on greed. The need of an unemployed worker is a living wage job.

How can all workers employed at living wage jobs possibly cause inflation?

All workers being employed at living wage jobs with a nation at peace is what leads to creating a stable economy.

Have you considered any economic theory explaining inflation being fueled by monopoly price fixing, militarism and wars instead of working people seeking a socially just society where all workers have living wage jobs as being the cause of inflation?

When you are researching for your writing why don't you try placing yourself in my shoes?

Try thinking of yourself as an unemployed single mother of two little girls and a little boy with four mouths to feed, four bodies to clothe, four people needing a roof over their heads heated in the winter time having to pay for child care while spending $6.00 a day for bus fare looking for a job that will most likely be part-time paying the minimum wage as I am hounded to pay off student loans for training I was assured jobs would be no problem finding with an ex-husband who came home from Afghanistan a complete nut job who refuses to pay child support.

Life has a way of tossing out all the phony economic theories about full employment causing inflation when you are the one needing a living wage job.

A life of unemployment has a way of leading a person towards whom they should vote for, too.

Robert

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Posts: 114
Reply with quote  #80 
I think in our society it is accepted that there will always be some people at any given point in time who are temporarily unemployed. Therefore it is strongly suggested that people save up money for a rainy day to make it through such tough times. For those who are layed off we have six months of unemployment benefits. For people with little or no assets there is food stamps, title 8 housing and other programs. People who happen to be out of work have options such as self-employment (which is the option I chose), moving to places with better employment opportunities, learning new skills to enhance their chances for employment, networking to find job openings, getting help with their resumes, and so forth. Should a government low-paying job be another option? Perhaps but it probably would do little to solve the problem of achieving a decent living wage. I don't think that theories blaming full employment on inflation have proven to be wrong. Economics isn't physics. There are no laws of nature in economics. It is hard to make definitive conclusions about theories as a far as I can tell. We live in a competitive society. Therefore when it is comes to jobs you have to try to beat out the competition. Unfortunately no one has devised a system where everyone wins.
readytowork

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Reply with quote  #81 
Lots of excuses being made for continued unemployment. When will we hear from the leaders of the Justice Party on this issue? Is the Justice Party for making the government responsible for seeing to it we all have living wage jobs? 
JobsWithJustice

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Posts: 6
Reply with quote  #82 
Doesn't anyone think its strange Rocky Anderson refuses to explain his position regarding the government being required to maintain full employment? Looks like the Justice Party is no better than the Democrats.
Robert

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Posts: 114
Reply with quote  #83 
Why would the Justice Party or any party for that matter embrace a definition of full employment (0% unemployment) which almost nobody uses and which many if not most economists believe causes inflation? Who is hurt the most by inflation? Probably minimum wage workers who have to wait for an act of Congress to get a raise and the elderly on fixed incomes. The focus should be on the government leveling the playing field that we complete on for jobs. The playing field is getting more and more tilted in favor of the rich. In general, those children who grow up in mostly white wealthy suburbs with world class public schools and often the ability to attend top private middle schools and high schools have a huge advantage over everyone else when it comes to competing for jobs later in life. This is not fair. It is an injustice to many millions of people that needs to be addressed.
JobsWithJustice

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Reply with quote  #84 

Why would any party embrace a definition of "full employment" being 3% or millions of people being unemployed.

You have provided no explanation why full employment would cause inflation except some vague notion that "most economists" embrace this idea.

Are you speaking for the Justice Party? Please clarify this because we have a right to hear the answer from leaders speaking for the Justice Party.

It seems the majority of U.S. Senators embraced the idea of full employment according to how they voted for the Full Employment Act of 1945. Only massive pressure and arm twisting by big business convinced members of the House to vote against the 1945 Act.

Why would you place strengthening public education to make it the very best education children receive be placed in opposition to full employment?

Provide proof full employment causes inflation. Where has this ever been the case?

You keep using the figure of 0% instead of full employment being the point at which everyone who wants a living wage job has one?

You then fall back on workers in training for jobs being proof full employment is not attainable.

I suggest we use the same unemployment figures the United State Department of Labor uses in order to determine full employment. The basis for those statistics have been posted in this discussion previously: U-1 through U-6. 

Robert

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Posts: 114
Reply with quote  #85 
I am not speaking on behalf of the Justice Party. The Justice Party is putting together a platform which may deal with this issue. I don't believe full employment relates to a living wage job, just a job. There seems to be general agreement that below a certain level unemployment leads to inflation. I think this relationship between low unemployment levels and inflation should be the part of discussions on full employment. Below is an analysis of this topic.

http://www.colorado.edu/Economics/courses/econ2020/section5/full-employment.html

Full employment, or the natural rate of unemployment, is considered to be consistent with a level of unemployment that predominantly comprises voluntarily unemployed workers. In other words, those members of the labor force who really want a job have one. Leaving the nuances of who is part of the labor force for the main text, the rate of unemployment consistent with full employment is a major issue for economic policymakers. Small differences in the perceived rate of full employment lead to significant variations in the policy response to economic growth.

The definition of full employment is critical, because as unemployment rates reach and fall below this level, inflationary pressures start to build. The further that the unemployment rate falls below the natural rate, the greater the pressure on inflation. This is a result of modern production methods. Even in a capital-favoring production country like the United States, worker wages represent over 70% of all production costs. Rising wages increase costs, which are usually passed on to consumers as price increases, leading to climbing inflation.

To understand the relationship between full employment and wage increases, let us assume that the agreed upon natural unemployment rate is 5%. If the unemployment rate is 8%, then there are workers who desire jobs but cannot obtain one (known as involuntary unemployment). With high unemployment rates, the existing labor surplus implies that employers have little trouble finding people to work at the prevailing wage. But as economic growth accelerates, the labor surplus diminishes as more workers are hired, and the unemployment rate falls. Finally, due to strong economic growth, the unemployment rate falls to a level consistent with full employment.

As the story unfolds, economic growth remains persistently bullish, but now everyone (give or take) who wants a job has one. Yet increases in the demand for labor continue to grow and employers must pay existing workers overtime and entice non-labor force participants into the labor force by offering them higher wages. As wages increase, more people are willing to work (reaching their reservation wage), but production costs rise. If strong economic growth persists, wages pressures continue to build, leading to increasing inflation (also known as cost-push inflation).

OK you say; no big deal. When the unemployment rate reaches full employment, use restrictive economic policies to slow economic growth to a level consistent with labor force growth (and labor productivity). That way the unemployment rate will stay constant at the full employment rate, and wage pressures will remain muted. That's a great idea. However, what is the full employment rate of unemployment?

Certainly, full employment in the United States has changed over the years. During the 1950s and 1960s it remained low, consistent with 3-5% unemployment rates. In the 1970s two main changes swept through the American labor force:

  1. The post-World War II baby boomers began to enter the labor force.
  2. Females increased their participation rate to 50% of the total women of working age.

Since both boomers and the wave of new females entering the labor force tended to be younger and less experienced job turnover, increased. By the late 1970s the natural unemployment rate had risen to the 7% range.

During the 1980s the increasing participation rates of women stabilized and the boomers were followed by the baby bust. The natural unemployment rate fell into the 6% range. The consensus among policymakers today is that the full employment rate of unemployment is roughly 4.5%. Once unemployment rates reach that level, economic growth needs to be slowed (we will see how later in this course), in order to level out the changes in the unemployment rate.

The problem with this analysis is what if economic policymakers are wrong? Many argue that the natural unemployment rate has fallen to about 3%. If during an expansion, economic growth is slowed to maintain a 4.5% rate of unemployment, while 3% is consistent with non-inflationary growth, then there are still plenty of people (well over 1 million) who want to work at prevailing wages but cannot find a job. By putting on the growth brakes too soon, many involuntarily unemployed workers will still be denied meaningful work.

There are several arguments against using 4.5% as the full employment benchmark and that even if full employment is reached (whatever the level) wage increases will remain tame, causing only muted inflationary pressures. Some reasons that have been given include:

  1. Recent evidence showed that even as the unemployment rate fell from 6.7% at the beginning of 1994 to 5.4% by the end of that year, employee wage and benefit costs, along with inflation, remained steady.
  2. The productivity of American businesses has increased dramatically since 1993, rising at roughly a 3.0% rate in 1994. This helps to keep inflation low by offsetting any wage pressures. This is reflected by an increase in unit labor costs (total compensation adjusted for productivity) of only 1% in 1994. In contrast, at this stage in a typical business cycle, unit labor costs are rising at a 5% to 6% rate.
  3. A loss of worker negotiating power (unions, etc.) weakens the ability of employees to negotiate wage raises.
  4. The re-engineering of the workplace has led to large-scale layoffs during periods of economic growth and in companies earning record profits. Insecure workers have little ability to ask for raises.
  5. The global economy makes it easier to shift jobs into overseas production when domestic wage pressure build. Foreign production provides a relief valve to domestic wage pressures.

The above evidence indicates that the natural unemployment rate does lie well below 5% and that businesses are increasingly effective in keeping labor costs low. Higher worker productivity helps maintain the nation's standard of living by keeping inflation under control and boosting the competitiveness of U.S. products overseas. Regardless, policy makers are content with a non-accelerating inflationary growth rate consistent with an unemployment rate of around 4.5%










ladyactivist

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Reply with quote  #86 

I just found out Alan Maki created a new blog dedicated solely to full employment. It doesn't look to me like the Justice Party is interested in full employment. The Justice Party appears more interested in using unemployed workers as a means to control inflation. This doesn't seem like any alternative to the Democrats or Republicans. I thought the idea behind the Justice Party was to find alternative solutions. What good is any government no matter what party makes up the government if it leaves us with 3,000,000 to 5,000,000 or more unemployed people? I would have thought any party calling itself the Justice Party would be concerned workers get some justice. Any working woman or man unemployed not of their own choosing is an injustice. Anyways here is the link to Alan Maki's blog on full employment- 

http://fullemploymentnow.blogspot.com/

Most workers I know would never vote for any politicians who state they aren't for full employment. Most politicians evade talking about full employment or they at least claim to be for full employment but here we have members of the Justice Party saying they are against full employment because it causes inflation simply because some economists make this outrageous unfounded claim.

ladyactivist

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Posts: 7
Reply with quote  #87 

Even Obama and the Democrats appear to have a more advanced way of thinking than the Justice Party when it comes to unemployment and the minimum wage:

http://thinkprogress.org/economy/2013/02/13/1591791/minimum-wage-women-charts/?mobile=nc

Why The Minimum Wage Is A Women’s Issue, In Three Charts

During Tuesday night’s State of the Union, President Obama called on Congress to raise the minimum wage from $7.25 to $9 per hour. Not only is the proposal potentially good for business, but, according to a report released Wednesday from the Center for American Progress Action Fund, raising the minimum wage would also be a pillar for women’s rights. Here’s why, in three charts:

1. Two-thirds of minimum wage earners are women. A disproportionate number of women in the workforce hold the lowest-paying jobs, a fact that contributes to the gender pay gap. This means that women are far more likely to benefit from a wage increase:

2. Families benefit from a wage increase. Sixty percent of women are the primary or co-bread winners in their households. More money in their paychecks means more for their families:

3. Over 17 million women would benefit. The total number of women who would be earning more if Congress approved a minimum wage hike is 13.1 million. 8.9 million of these receive a direct benefit, while another 4.2 million women would enjoy the so-called “spillover effect” of increased wages to keep up with a changing wage structure:

Arguments against the minimum wage — made, within hours of Obama’s speech, by Sen. Marco Rubio (R-FL), Rep. Paul Ryan (R-WI), and House Speaker John Boehner (R-OH) — are predicated on the idea that it would weaken job growth or ruin the economy. In fact, studies show the opposite: that it would strengthen job creation, particularly when unemployment is high, as it is now.

 

 

 

 

Robert

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Posts: 114
Reply with quote  #88 
I assume members of the Justice Party can present their personal views. I don't even know what the Justice Party view is on full employment or if the Justice Party agrees on a definition. While there is no problem with being for full employment whatever definition is being used, we need to keep in mind that economic changes cause unintended consequences. We see this all the time. When the Fed raises or lowers interest rates some people benefit and some lose. If interest rates are reduced to stimulate the economy those people who depend on income from interest earned on their savings will be losers while many of the unemployed will be winners if the policy works. Conversely, if the Fed increases interest rates to dampen economic growth to control inflation the people who depend on interest from savings will be winners while it may be harder for the unemployed to find jobs if the policy works. Economics is very complex with many variables interacting.
Mcamelyne

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Posts: 12
Reply with quote  #89 
Hi Robert,

For the past 30 years, our economics have been mostly about robbing Peter to pay Paul to gain an extra 1/2% of growth.  When amortized over 50 years, that 1/2% turns out to be a very big number.  Now, we are in the retrenchment phase of paying it back.  The politicians will continue to lie because they do not want to lose their job but they are unable to create jobs and they are unable to reinflate the economy.

I had spent most of the past year trying to compare our current period with the depression of the 1930's.  After reading a book that Laura Bonham recommended called the Populist Movement, I think the better comparison is the 1870s post-civil war.  In that time, the government chose to reward the banks by deflating the economy to allow them to recover the value of their bonds.  We are about to enter another period of deflation as salaries continue to shrink in comparison to prices.  Eventually, prices will fall as well when people can no longer afford to buy anything and demand collapses.  The housing market has already started the process and consumer goods will follow soon.

The bond market and the stock market are at an all-time high driven by the endless money printing of the FED.  However, no market defies gravity forever and interest rates are set to rise taking the stock market down with them.  In every calamity there is opportunity and this is our time to shine.

Mike
Robert

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Posts: 114
Reply with quote  #90 
Mike,

Since you are interested in an historical perspective I would suggest reading a book titled "Plutocrats. The Rise of the New Global Super-rich and the Fall of Everyone Else." The author is Chrystia Freeland. There are interesting comparisons with the last Guilded Age. I haven't finished reading this book but one of the interesting points that there are actually two Guilded Ages going on at once. One is in the US which is our second Guilded Age. The other is in countries such as China, India, Russia, and Brazil. This is their first Guilded Age. This makes it different from our first Guilded Age because now there is this huge international labor market where middle-skilled workers are working for much lower wages than our middle-skilled workers and hence many of these jobs have shifted to these other countries. It is argued that this has left us with an "hour glass" economy, many desirable jobs at the top and many undesirable jobs at the bottom and relatively few jobs in the middle. It was also noted that the top 1% are making out like bandits all over the world. The author largely attributes this to an economic revolution spurred by technology and globalization. This has caused a disruption which has been great for hundreds of millions of people in the so-called developing countries who have been lifted out of poverty or been able to reach the middle class but devastating to middle class workers in Western countries. Sort of like when agricultural workers and artisans lost their jobs during the beginning of the Industrial Revolution in the West. This is now particularly hard for middle-skilled workers over age 40 who find it difficult to obtain education to change careers.
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