Germany's economy continues to sink; will politicians reform?

[DanS]

Another nice rebuttal DanS. It seems that you can only talk to people who agree with you.

We've been through this "talk" so many times before. Really, is it worth talking about anymore? I've trotted out the numbers several times to show that high economic growth most often occurs during high productivity growth periods. In this respect, high productivity growth causes recessions only inasmuch as high economic growth causes recessions.

[Kidlicious]

Originally posted by DanS


We've been through this "talk" so many times before. Really, is it worth talking about anymore? I've trotted out the numbers several times to show that high economic growth most often occurs during high productivity growth periods. In this respect, high productivity growth causes recessions only inasmuch as high economic growth causes recessions.

As I just posted to Oerdin. Productivity growth has too different causes. You're talking about productivity improving because of increasing sales. That occurs because people have income to spend, not because they are not recieving unemployment benefits.

[Kidlicious]

Here's a good article for you Oerdin. This guy seems to have a pretty good handle on the subject.

About.com

[axi]

Okay, alot has been written in this thread and some points I adress here have been rebutted by others before me as well, but I wrote this by commenting as I read the thread.

But as an economics major, you can see that if layoffs aren't made in an economic downturn, more companies will go out of business, causing job losses. Forcing companies to keep paying employees that are no longer profitable leads to fewer companies and fewer jobs. So yes, during an economic downturn it would make workers jobs less secure, but would also mean there are more jobs in the economy, meaning more people are actually in work

What kind of companies are those that go out of business when business is bad for a couple of years? Don't they have savings from the profits they had earlier? No long term strategy?

If the type of economy you want is a bubble economy made of zero-commitment dot-coms and Mc-Jobs, then you have a point. But I don't know of any serious firm that would be willing to toss away half it's skilled and trusted workforce because of a bad year and then expect to do good when an economic upturn forces them to replace them.

an economic downturn doesnt mean no new jobs are being created, at least over here. There are always some sectors, and firms, that are growing even during a downturn.

True, but laws are made for all the companies indiscriminantly, so the general trend is what counts.

Actually higher productivity makes recessions worse, because of the layoffs.

Read my post more carefully. I wrote that increasing productivity with zero or negative production rate has to lead to layoffs (considering the contemporary business strategy, since of course one could always reduce working hours or have their employees sitting it out). However, high productivity is needed by an individual enterprise during a recession in order to maintain a competitive advantage and obtain an increasing part of the shrinking pie. But, since the employees will be unwilling, you can't have the productivity increase and thus you're doomed to having a shrinking business, with less employees and less production.

The problem is once good times do come all the anti-reform types say the reforms aren't needed.

And the first and foremost anti-reform types are inside the enterprises themselves. During good times they are the last people inside a firm that will risk changing things. Not to speak about their frivolous spending and mismanagement.

Yes, there will be lay offs if reforms occur but the sooner reforms are completed the sooner companies will make profits (by shedding excess labor) and the sooner they will start hiring again.

IMO you are forgetting the macroeconomic side of it. If the govt allows the layoffs, they decrease private spending which lets the economy tank even further.

No. Productivity impovements do nothing for stability, and can actually cause a recession.

What scale are you referring to? Company, sector, nation, worldwide? I was referring to company-wise productivity which is a good thing. Above that, you do have a point about stability but as for the recession, doesn't market demand have to be really inflexible for that to be true?

For a short time, yes. But if you have them for a very long period of time, or forever, it would encourage people not to work. Sorry but communism doesn't work.

If you force companies to pay for them (that's what severance pay is, in some way), then you would encourage them not to lay off. This is evident isn't it?

Okay, I could start flipping all your arguments inside out and they would still hold, but do things actually happen that way? There is no proof whatsoever of any significant amount of people staying in unemployment because they prefer it.

The state can't create jobs that will benefit society (state jobs don't do anything to help).

But how come the jobs that benefit society the most (doctors, schoolteachers, policemen, firemen, air traffic controllers) are provided by the state?

Imagine that employers hire more in a recession so that producivity falls.

Of course one could imagine a productivity increase/decrease that does not come from firing/hiring employees. Productivity increases can be brought by better organisation and implementation of newer technologies, both of which need the participation of the employees in order to succeed.

State jobs require money and that requires either taxing the citizens or businesses.

State jobs pay back the money they require by providing useful services.

[axi]

By the way....

(from reuters.com)

By Andrea Hopkins

WASHINGTON (Reuters) - Initial U.S. jobless claims surged unexpectedly last week, taking claims to their highest level since late September, but analysts shrugged off the large jump as a holiday-related blip.

The number of Americans filing first-time claims for state unemployment insurance aid rose 43,000 to 364,000 in the week ended Jan. 1, up from a revised 321,000 in the previous week, the Labor Department said.

It was the largest one-week gain in nearly three years and far surpassed Wall Street expectations for a rise to 331,000 from the originally reported 326,000 in the prior week.

A Labor Department analyst said the rise was partly due to difficulties with seasonal adjustments for the holiday, and economists said the data did not alter their outlook for healthy hiring in December.

U.S. Treasury bond prices got a modest lift on the weaker-than-expected claims report, while the dollar shaved some gains but remained higher on the day. U.S. stocks opened higher as a slew of retailers reported holiday sales data, though the weak employment data caused some concern.

Analysts stressed the volatility of the jobless claims report, especially around the holidays.

"This week was the end of New Year's Eve and we always have trouble adjusting for holidays. This year Christmas was also on a weekend," said Anne Parker Mills, head of foreign exchange research at Brown Brothers Harriman in New York.

"If you look at the four-week moving average, the level remains consistent with comfortable gains in the jobs number. It does not do anything to change consensus expectations for a gain of 175,000 jobs tomorrow," Mills said, referring to the Labor Department's December employment report, due for release on Friday.

The closely watched four-week moving average of claims, which smooths weekly volatility, climbed to 333,000 from 332,250 in the prior week.

The department's employment report is expected to show 175,000 jobs were created last month after November's 112,000 gain. The unemployment rate is expected to be unchanged at 5.4 percent.

[Adam Smith]

Class Is In Session

At any given time an economy has a stock of productive factors such as capital and labor.

The productive factors are used to produce goods and services.

Income, in its most basic definition, is goods and services per person.

If productivity increases, then the economy produces more goods and services from the same stock of productive factors.

This results in more goods and services per person, so income goes up.

Some prices will change. Some people will work in different industries. But overall, income goes up.

[Kidlicious]

Originally posted by axi
Read my post more carefully. I wrote that increasing productivity with zero or negative production rate has to lead to layoffs (considering the contemporary business strategy, since of course one could always reduce working hours or have their employees sitting it out). However, high productivity is needed by an individual enterprise during a recession in order to maintain a competitive advantage and obtain an increasing part of the shrinking pie. But, since the employees will be unwilling, you can't have the productivity increase and thus you're doomed to having a shrinking business, with less employees and less production.

OK. My mistake.

[Kidlicious]

Adam Smith,

That all happens when there is constant full employment. Since we are talking about a recession what you are saying is hardly relevant.

[Adam Smith]

Productivity means more production from the same amount of resources.
Recession, expansion, whatever, has nothing to do with it.

[Drogue]

Originally posted by axi
What kind of companies are those that go out of business when business is bad for a couple of years? Don't they have savings from the profits they had earlier? No long term strategy?

If the type of economy you want is a bubble economy made of zero-commitment dot-coms and Mc-Jobs, then you have a point. But I don't know of any serious firm that would be willing to toss away half it's skilled and trusted workforce because of a bad year and then expect to do good when an economic upturn forces them to replace them.

If a market started not to make profit, most companies either downsize or change tact. By going out of business I don't mean bust, I mean they choose to cut down the loss making part until business takes up again. During a particularly cold winter, should an ice cream manufacuter keep all their workers, just so they have them in the summer when they're needed? Why should they have to pay them when they're not needed? It would be more efficient for them to not have workers during the winter, and rehire when they're needed. This type of seasonal employment - employment during the times when it's needed - is far more efficient, as the people can then be productive at something that is needed during the winter, like at a skiing resort, and at ice cream making in the summer. If you have laws that stop hiring and firing, then you can't do this, and that company would be far less efficient and they'd be fewer companies entering seasonal markets, as well as the lack of productivity.

If business is bad, it pays to downsize until it recovers somewhat. Why pay for people during times when they're not needed, when there's excess capacity?

[Fake Boris]

Originally posted by Giancarlo
Despite El Freako's claims about unemployment, this isn't really relevant. Unemployment is just an after-product of mismanagement. The German economy was grossly mismanaged after the reunification, and unemployment is hardly a problem. It has to do with huge benefits given out to unemployed. Spiffor said it himself... the old benefits were proportional to former wages.

Proportional doesn't mean equal.

[Kidlicious]

Originally posted by Adam Smith
Productivity means more production from the same amount of resources.
Recession, expansion, whatever, has nothing to do with it.

It has a lot to do with it. First of all your claim assumes that there is always full employment. Obviously there is not. So the economy doesn't always work the way you think it does, even in full employment. Second, during a recession things work differently. There is already surplus resources not being used. Freeing up more resources is going to do nothing more than aggrevate the problem. You want to say that increasing supply some how brings supply and demand into balance when it's demand that needs to be increased. Increasing supply only increases the imbalances.

[Adam Smith]

One Last Time for the Exceptionally Thick

Suppose we have two workers.
One worker is employed, one is not.
The productivity of the employed worker goes up.
He therefore produces more goods and services than before.
Income, which is goods and services per person, increases.

This has nothing to do with full employment (which there is not).
This has nothing to do with recession or surplus resources (which there are).
Productivity, again, has to do with how much goods and services (i.e., income) you produce from a given stock of resources.
You CAN'T increase your income (goods and services) by producing LESS from the same set of resources.

[GePap]

Originally posted by DanS
There is so much bad economics in this thread (more than usual), the stench is starting to get to me.

Wait, there is such a thing as "good" economics? Is that using chicken entrails as opposed to the tea leaves?

[Kidlicious]

Re: One Last Time for the Exceptionally Thick

Originally posted by Adam Smith
Productivity, again, has to do with how much goods and services (i.e., income) you produce from a given stock of resources.
You CAN'T increase your income (goods and services) by producing LESS from the same set of resources.

The employment of the resources is not constant. It changes. When you have productivity gains there is always the possibility of less employment, and when there is a recession that possibility is significanly larger.