Spanish Unemployment At ~25%, How Can This Be Sustained?

[Paul Or Nothing II]

Perhaps you can show me where you see prices falling and by how much? Inflation is low but we are not seeing deflation so to claim that we are better off as a total economic unit because falling prices have more than offset the incomes lost from job losses is ludicris. The overall economy has a lot less money to spend and significangly lower purchasing power than we had five years ago with lost wages and incomes while prices have not been going down to offset that. Purchasing power as a country is way down. Some are better off (those who kept jobs and got raises) but many are worse off in terms of purchasing power.

Perhaps you should read the thing in the context it was said - my reply was a reply to your reply to "Knighted" about the fact that if governments didn't do anything to "fix" the economy then prices would start falling & purchasing-power would increase.
BUT is that what the government has been doing? NO, they're busy trying to "stimulate" the economy with stimulus-packages & low interest-rates & trying to prop up the prices & create inflation so why would prices fall?
It was a general statement by "knighted" about "what would happen if government just let the economy be on its own!" & my reply was in that context.

Could getting rid of the Federal minimum wage help? According to statistics from the US Bureau of Labor Statistics, as of 2011 about three percent of the entire work force was paid the US minimum wage or less. Getting rid of or changing this would likely have only a very tiny (if any) impact on the overall unemployment in this country. http://www.bls.gov/cps/minwage2011.htm

If minimum wage laws are so benign then why have them in the first place? Again, if people are offered X amount of free stuff then why would they work a job only to receive a payment in a similar range? Those are unproductive consumers, if they actually had to produce to consume instead of getting free stolen stuff then there would be net increase in REAL WEALTH - goods & services - & lower prices

Companies are mostly not hurting for cash to hire people with- they are sitting on about $1 trillion right now.
http://www.reuters.com/article/2012/...80T07420120130

You talk of supply and demand- the problem is the lack of demand for labor which is what needs to be addressed to reduce unemployment. Getting rid of welfare or unemployment insurance increases the supply of labor- which already has an excess- and does nothing to address the demand issue.

Again supply and demand- companies are not seeing enough demand for their goods and services to warrant them increasing their demand for labor- even if, as was suggested, you lower the cost of that labor via getting rid of minimum wage laws.

It's irrelevant how much cash companies have. Just because you have cash doesn't mean you should start buying at whatever price something is being offered, of course, some may do it but it's not prudent. And companies are NOT in the business of dolling out free money, they are considering the rate-of-return on their capital; companies are "buyers" of labor & laborers are "sellers" of their services so if companies are not hiring it means prices (wages/salaries/etc) are too high for them to want to "buy".

If you have a big stock of goods with you & nobody wants to buy it, what does that mean? If you wish to sell them immediately then you must lower the prices to competitive levels.
But again, minimum wage laws & welfare doesn't help the process at all, instead by stealing & transferring capital from the productive people to the unproductive, the economy is squeezed even more; & as I've said before, there's always "regulation" & "regulatory costs" to deal with

The solution for increasing demand is simple. Lower prices.

+1

EXACTLY! It's that simple if one actually understands how the markets work.
But instead a lot of people will ponder over statistics, graphs & all kinds of useless mathematical models & overcomplicate things unnecessarily.
On the other hand, if one understands how the markets work then it's not that hard to realize the "solutions".
But unfortunately, most people simply don't understand the markets - because they are incapable or misguided or just intellectually lazy.

[Zippyjuan]

It's irrelevant how much cash companies have. Just because you have cash doesn't mean you should start buying at whatever price something is being offered, of course, some may do it but it's not prudent. And companies are NOT in the business of dolling out free money, they are considering the rate-of-return on their capital; companies are "buyers" of labor & laborers are "sellers" of their services so if companies are not hiring it means prices (wages/salaries/etc) are too high for them to want to "buy".

The point about companies having tons of cash was to show that it is not that labor is too expensive for them to afford. It is that they don't need more labor since there is not enough demand for their products to justify hiring more people. Lowering the minimum wage will not impact it. They have plenty of money to pay workers if the demand requires them to take on more employees. They aren't going to hire more until that demand for their products is high enough. Again- the problem is a demand for labor- not its price or supply.

[Knighted]

So your solution to getting employers to hire more people is to get rid of unemployment insurance? I agree that this would make more people want to go out and look for a job but how is that increasing the number of jobs available (the current problem)?

I can tell you how. Abolishing unemployment insurance would immediately force most of the population to work - no more being picky and only taking jobs that paid as much as their old ones. When there is a glut of workers actually seeking work, the country is in a situation where there is a large surplus of labor and a shortage of demand. In basic economics, what happens when there is a surplus of a commodity and a shortage of demand? Prices fall. In this case, the price of labor falls in the form of wages. In the short term, these lower wages allow labor intensive businesses (manufacturing) to become profitable once more, causing them to jumpstart previously stalled operations in the country or allowing new labor intensive businesses to start up. This is exactly how China managed to create millions of jobs practically overnight from its previous subsistence farming populace once it began opening its economy to the world. Lower wages attract labor intensive industries. In the short term, this means more jobs.

How did national buying power increase? Those working were not given raise and those who lost jobs or hours are making less. Who is making more? It is also possible to have productivity growth without wage growth- that can happen if the benefits of this higher productivity are taken by the employers or share holders in the form of higher profits instead of being passed along to workers or to consumers in the form of lower prices.

I expected more from you Zippy. I've always regarded you as a fairly educated fellow, but you fell into a trap set to snare amateurs with your statement above. You're completely ignoring the role of competition in the markets. Employers/share holders cannot simply pocket higher profits while price gouging consumers. Competition does not allow it. In today's global markets, companies seeking larger profits aim to do so by increasing revenues by capturing larger market shares, NOT by jacking up profit margins. However, from the above statement, you seem to think that a company can simply raise prices indefinitely on consumers. I recommend starting your own business and trying that. You'll be filing for Chapter 11 practically overnight.

[Zippyjuan]

You are making the assumption that all markets are completely free and highly competitive- most actually are not. The less competitive the market for a product, the easier it is for the owners of capital to keep the benefits from gains in productivity instead of passing them along. In the US, incomes have been lagging increases in productivity for decades now.

http://stateofworkingamerica.org/cha...wth-1947-2009/

[Knighted]

You are making the assumption that all markets are completely free and highly competitive- most actually are not. The less competitive the market for a product, the easier it is for the owners of capital to keep the benefits from gains in productivity instead of passing them along. In the US, incomes have been lagging increases in productivity for decades now.

Actually, I'm not. Unlike some, I have no such illusions about the free market. We don't have a free market. And some companies in specific industries are most certainly far better insulated from competition than others. However, even if we can cherry pick a few companies better insulated from competition, the net effect across all industries is still a fiercely competitive market, and increasing globalization in recent years has only made this more true. Anyone on the inside of a fortune 100 company (the biggest profit rakers in the nation) can tell you that there is no money cow that the companies are milking more and more from every year. It's a hard fought battle to stay dominant in the market.

I've seen the productivity chart relative to family income before, and it is perplexing. There are some factors that might explain it though, at least partially. For one, your chart is measuring median family income. Single parent families are far more common today than they were 30 years ago, which would have the effect of lowering this metric even though true incomes have may have increased. For two, these are inflation adjusted metrics that have changed many times in the last few decades, and on top of that, different adjustments are used for productivity and income growth. Does this explain the entire lag? I don't know - but it does explain some of it.

But I don't buy your explanation about the cause being that the owners of capital are keeping more and more of the productivity gains. For starters, if that's true, what triggered this turning point in the mid 1970's? Do you think business owners were completely altruistic before this and overnight decided to be more greedy? No, they were subjected to the same market forces all along of supply/demand of labor - the same forces that determined wages in 1950 and the same forces that determined it in 2010. Besides, if the owners of capital are pocketing more of the gains, then why have corporate profits as a share of GDP remained virtually steady over the last 80 years?

[Paul Or Nothing II]

The point about companies having tons of cash was to show that it is not that labor is too expensive for them to afford. It is that they don't need more labor since there is not enough demand for their products to justify hiring more people. Lowering the minimum wage will not impact it. They have plenty of money to pay workers if the demand requires them to take on more employees. They aren't going to hire more until that demand for their products is high enough. Again- the problem is a demand for labor- not its price or supply.

Ok, so why isn't there additional demand for those companies' products? Because people aren't willing to consume more at EXISTING PRICES but if prices were lower then demand would go up automatically but in order to drop the prices, they need to be able to buy labor at lower prices, which they can't right now due to the fact that minimum-wage & welfare sets the price-floor for labor
And that's why companies deem it wiser to just sit on the money than to hire more employees because they wouldn't be in a position to sell MORE at EXISTING price-levels
Labor, physical & mental, is the basis of all prices
Further, I'd say that unemployment is almost always voluntary because labor, like any other economic factor, is a limited resource so there's always demand for it - the question always is the price (wage/salary/etc) - so labor will only remain unsold if it is asking for a price which is too high for businesses to be able to sell their products for a profit

You are making the assumption that all markets are completely free and highly competitive- most actually are not. The less competitive the market for a product, the easier it is for the owners of capital to keep the benefits from gains in productivity instead of passing them along. In the US, incomes have been lagging increases in productivity for decades now.

It's IRRELEVANT, whether markets are free or not, prices & profits are ALWAYS dictated by supply & demand
Even if you literally kill off all of your competitors, it does NOT mean you can charge whatever price you want for your product; yes, prices would go up but only because supply will have gone down because you alone mayn't be able to produce as much as all producers together could have but then people definitely wouldn't consume as much as they otherwise would have at lower prices & instead they might go for substitutes or consume slowly/sparingly.
so again, your profits will be dictated by supply & demand, for marginal sales you make you must lower the price further or it won't get sold; selling fewer stuff means fewer GROSS profits, simple as that & that's why even a monopoly must try to hit its prices at an "equilibrium level", not only selling too low results in less profits or even losses but even selling too high results in fewer sales & fewer profits or even losses (your product may be perishable, it may go out of fashion or even simply having them in stock & not "monetizing" it, loses you valuable time in which you could have put that money elsewhere to make profits)

And "owners of capital" are NEVER (barring extreme exceptions) interested in "passing on the gains", they are always looking to maximize gains on their capital, just as laborers are never interested in "passing on the gains" to the businesses; all are trying to maximize their gains as much as they can at all times, the only thing that restrains businesses' appetite for profits & laborers' appetite for wages is the supply-demand situation dictated through the Price System

[enoch150]

Black market

Everywhere in Southern Europe the official unemployment is 15% + for decades now but a large portion of the population that works in the tourism,agriculture and street selling is not registered as employed so not to pay taxes.

Perhaps not quite so high as that. These only goes through the first 5 months of 2010:

[politics]

First, we have to understand the perspective of the Spanish people. Until the last part of the 20 century Spain social and economic rates were of the lowest of Europe. Having one of the longest dictatorship in the century, Spain began a better cycle when democracy appeared.
With “the open markets fiction”, with a big bubble in housing and tourism, and a lot of companies making big and juicy money abroad, specially in Latin America. Spain made its best at the end of the 90s and the earliest 2000s, and made great numbers from the European welfare state traditional perspective, people felt like “oh well, we are a big country like Italy or France, and we have great relationships with US and the UK – The Azores summit -", so answering your original question, is there a chance that this situation would change the way Spain politics and economy works? No, People there like also happen in other countries like in Greece still prefer to wait and be leaded by the IMF, the WB and the European financial elites. These countries are still guided by the illusion of prosperity of the late 90s. Of course there are movements and questions that people is begging to make, as instance, part of the young people of spain is making some noise they called themselves “Los indignados” is like a return of the French may (68) but there are not real ideas of what to do or where to go. The level of political discussion in Europe is quiet poor. The answer that eurepean countries are finding , leaded by the establishment are those that are being taken in countries like Greece or Italy: follow IMF recipes, and changing the governments not because of peoples vote but for the financial elite choice.
If there is something that may change or at least Spanish people are making questions about is the Monarchy system. There is gonna be a lot of discussion about this subject however at the end of the day they will keep their system and the King will keep his job and also the next one, and this will happen because for a lot of people the King is the symbol that can keep Spain together. Spain is a country with a lot of nations inside that from time to time get the will to get independent.
So do not expect changes from Spain they will keep themselves in the EU and will follow the recipes from Euro Bank and so on.
In Europe at the end of the day are looking forward for staying in the Euro Zone, and living in the late 90s, they will do anything to go back to that moment, only Germany can live without that illusion.

[Jordan]

Spain would be in much better condition if it had the capacity to control its own money supply. It doesn't, so Spain will continue to get crushed.

[heavenlyboy34]

i thought eduardo was banned

I'd tell you eduardo's new screen name, but he'd have to kill you. And then I'd have to kill him.