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The Generational Change in Employment

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March 19, 2012 – Comments (0) | RELATED TICKERS: LUFK.DL

Board: Macro Economics

Author: qazulight

Based on my perusal of the data on GapMinder and the anecdotal evidence from people seeking employees, I am beginning to the think that the employment situation is about to make a generational change.

Yoda posted about the cities and towns needing to get out of their pension obligations. First, these pension obligation problems are a symptom of three things. One, declining tax revenue, Two, a wage, price deflationary spiral that makes the pensions seem generous. Three, probably the most acute problem; the annuity tables have been changed to in ways that the actuaries never accounted for. If even 10 years ago, when the contracts and obligations were established, anyone had said you must fund your pension annuities based on zero percent interest rates, they would have been laughed at like the survivalist.

So, today the compensation system for civil servants is under attack. The idea being that it should be like contract labor like much of the U.S. labor market has gone to. I believe that this will be a significant problem for the government services in the future.

Looking at GapMinder, the data reveals that except for most of Africa and a few isolated countries in Asia, the live birth rate per woman has dropped to replacement value or below. All of Europe, China, Japan and the established portion of the U.S. (I believe that if you drill down into the data of the U.S. the only reason the live births are above replacement value is the skewing from recent immigrants, and even that is tailing off.) are not reproducing at replacement value and have not been for the last 20 years. Further, and this is what is not apparent, Mexico's birth rate dropped to replacement value about 20 years ago. So, even 6 years ago when we were at full employment, we had a relief valve for empty positions. Today, that pool of labor is not available and will not return. Further, Allen Greenspan testified before Congress that we were "exporting our wage inflation to China" that is no longer possible. India, while it is only recently dropped into the replace zone, will soon start running out of new labor.

So, what does this mean? I started in the labor pool in the late 1970's when the unions were having their last hurrah. From then until now, or until the economy improves, they have had no leverage. Striking was almost pointless as replacement workers were readily available.

Civil servants typically did not organize, at least not down here in Texas. But, the government employers were able to attract talent based on lower wages but a more stable employment and benefits. If the government employers break their promises they will have lost credibility and they will have to compete dollar for dollar for talent in the future.

My daughter-in-law is working for a public relations firm here in East Texas. She was commenting that Lufkin Industries has a quarter page ad in the local paper. They are adding machinist and fabricators. These are union jobs with union wages. They started the campaign around the first of the year and the jobs are still not all filled. Further, one job, the administration assistant job has gotten ZERO applicants.

http://www.lufkin.com/index.php/careers?start=20

I am not saying that unionism will return, nor am I even hoping it will, rather I am pointing out that a generational change in leverage for employment may be under way. Industry leader have had their entire careers managing labor with a surplus of labor. These people will need new skills, tactics and strategies going forward. Watch for the ones that learn the fastest.

Let's take a look at what happens when a typical young person hears about a job. Since Lufkin Industries pays very good wages and is hiring, we will use them.

The first search. "Lufkin Industries Employment"

https://www.google.com/search?client=ubuntu&channel=fs&a...

The search gives us the Lufkin Industries Website.

http://www.lufkin.com/index.php/careers

News about Lufkin Industries.

http://lufkindailynews.com/news/local/article_67de40c4-ed3a-...

Other jobs in Lufkin at Indeed.com

http://www.indeed.com/q-Lufkin-Industries-jobs.html

And reviews of employment at Lufkin Industries at GlassDoor.com

http://www.glassdoor.com/Job/Lufkin-Industries-Jobs-E964.htm...

As the balance of power shifts to employees from employers, employers will need to watch their reputation carefully.

Cheers
Qazulight

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