Regarding Underemployment

This is just meant to be a few thoughts.  I haven’t worked everything out, but I want to talk about how the labor markets are weak.

Yes, the headline statistics are strong.  The U-3 unemployment figure is low at 6.2%.  But look at a few other statistics:

My, but wages as a share of GDP has been falling.

And real wages have flatlined.  No surprise that many feel pinched in the present environment.  Even the Federal Reserve Chairwoman Janet Yellen expresses her doubts about the labor markets, which was expressed through the most recent FOMC Statement.

The problem is this: the relationship between labor employment and monetary policy is weak.  It is weaker than pushing on a string.  There are two major factors retarding the US labor market, and they are globalization and increased productivity from technology.

The value of knowledge is rising relative to less-skilled labor.  As such, we are seeing increased income inequality in the US, but lower income inequality globally.  Bright people in foreign lands who can transmit their skills over the internet can do better for themselves, even as more expensive counterparts in the US lose business.

Call this the revenge of the nerds.  The internet enables bright people to profit from their differential knowledge, as it can be applied to wider opportunities.

Think of India for a moment.  Many bright people with advanced degrees, but education amounts to little unless you can use it for your own benefit.

Here’s my main point.  The FOMC con’t do much about the labor markets; their power is weak.  The bigger factors of globalization and technology can’t be fought.  They are too big.

Thus, you are on your own.  The US Government does not have the power to re-create the unique middle class prosperity of the ’50s and ’60s.  If you work for others, you are not your own master.  Aim to make yourself the master of your situation, by making yourself invaluable to your clients.