Unemployment is Job One

Conventional wisdom held that because hiring and firing is so much easier in the United States than in “socialist” Europe – where getting rid of an employee is not so simple and not so cheap – the United States ’ flexibility would always generate better employment statistics than Europe could. After all, you don’t hire folks when you understand all the fringe benefits you will have to pay, the social taxes and the severe restrictions and costs of firing anyone who has been with the company even for just a few years. As result, smart folks have said for years, job creation in Europe would always be more difficult than in the U.S.

Well, welcome to the “d”epression of 2008-???? The May 22^nd New York Times (when the numbers are adjusted, to compare apples to apples, for the way such rates are calculated): “In April, the rate in the United States rose to 8.9 percent. When the European figures are compiled, it seems likely that the American rate will be higher for the first time since Eurostat [the European Union’s official statistical bureau] began compiling the numbers in 1993… For men, the unemployment rate in the United States surpassed that of the 15 original European Union countries in December. By March, it was 9.5 percent in the United States , compared with just 7.5 percent for women. The figures for men and women in the 15 European countries, however, are close together, at 8.4 percent and 8.5 percent.” And it sure looks like the U.S. unemployment rates are just about to exceed those of Europe … and just keep on going up.

Why? The very safety nets available in Europe actually make it easier, with government support, to keep lots of people in jobs that would have been cut in the U.S. Also, normally, when work gets bad in one spot in the U.S. , workers tended to move to places where employment is brighter. Well, there aren’t too many places in the U.S. where jobs are flowing, and moving means you might have to deal with selling your old house in markets where houses just aren’t selling or where you have to sell at such a loss that moving is emotionally unavailable. And try to get a loan in a new market if you want to buy a house… when your down payment is still sitting in unsaleable real estate.

Housing booms and busts in Europe are not pandemic; places like Spain and Ireland suffered from these housing crises, and their unemployment rates trend significantly higher than the European average (making them look more like the U.S. , especially in the big housing bust states). But the rest of European housing didn’t crash and burn as in many areas in the United States .

Changes in U.S. work habits are afoot. Americans are slowly moving away from a world of corporate employment with pension and health benefits, a corporate ladder to climb, and time-with-the company benefits into a world of telecommuting or serving as independent contractors, engaged to perform specific jobs for a specific term (often extended), folks who often are left to fend for themselves when it comes to medical and retirement benefits. It just costs too much to provide these perks, and this economy has sent a pretty clear message to our workforce: don’t count on anything a company might promise you, because bad economic times can wipe it all away; take care of yourself!

The May 22^nd Time Magazine (in a series of articles entitled “The Future of Work”): “It costs the average American company more than $14,000 per year to provide coverage to an employee and her family. The employer response: shift more of that growing burden to workers. As a result, companies have seen their health-care spending rise 29% over the past five years, but employees have seen their outlays — for premiums, co-pays and deductibles — rise 40%... Retiree health care is getting whacked hardest — just when the boomer generation needs it most. Of the employers surveyed, 45% have already reduced or eliminated subsidized health-care coverage for future retirees, and an additional 24% are planning to do so or considering it.

“Corporate pensions, the third leg of the proverbial retirement stool (the other two being Social Security and personal savings), are also being eroded as the foundering stock market wreaks havoc on employer pension funds. At the end of 2008, employer-sponsored pension plans were underfunded by more than $400 billion, according to Mercer, a management-consulting firm.”

The values in work are changing with the generations that are moving in and up. Time again: “‘Paying your dues, moving up slowly and getting the corner office — that's going away. In 10 years, it will be gone,’ says Bruce Tulgan, head of the consulting firm Rainmaker Thinking, based in New Haven, Conn., and author of a new book about managing Gen Y called Not Everyone Gets a Trophy. ‘Instead, success will be defined not by rank or seniority but by getting what matters to you personally,’ whether that's the chance to lead a new-product launch or being able to take winters off for snowboarding. Tulgan adds, ‘Companies already want more short-term independent contractors and consultants and fewer traditional employees because contractors are cheaper. And seniority matters less and less as time goes on, because it's about the past, not the future.’”

Maybe Europe’s subsidized system will fail in the end as well, since they are competing against increasingly better-educated workers from places like India and China , where employment costs are just a fraction of what they are in the West. Whatever happens, don’t expect the future of “employment” to look anything like what it seems today.

I’m Peter Dekom, and I approve this message.