Opinion

Edward Hadas

Time to retire unemployment

Edward Hadas
Aug 20, 2014 09:25 UTC

Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Give Janet Yellen credit. The chair of the U.S. Federal Reserve is keen to use monetary policy to help get more people into good jobs. Her priority – work is more important than finance – is reflected in the subject of this week’s get-together for the world’s central bankers: “Re-Evaluating Labor Market Dynamics.” One item should be on the agenda of the distinguished guests at Jackson Hole, Wyoming: how to replace the concept of unemployment.

The suggestion may sound frivolous, but the idea of a simple measure of unemployment is tied to a wrong view of how modern economies work. The unemployment rate made sense in developed economies a century ago, when workers were men who wanted full-time jobs as soon as they finished school, and to continue until they died or retired. In that world, unemployment was easy to define – working-age men without a job.

That binary split of employed and unemployed no longer exists. Many people nowadays drift in and out of paid jobs, shifting back and forth from full to part-time work. Some move in and out of the legal economy. Transient self-employment is common. Retirement is a flexible concept. Parents and other carers sometimes balance paid and unpaid labour.

Students, prisoners or disabled people at any time could and might want to work for pay. And paid employment cannot always be interpreted as a sign of a well-functioning labour market: jobs may be precarious, ill-suited to the worker’s skills, or pay less than a living wage.

Why the global recovery is so slow

Edward Hadas
Aug 6, 2014 17:39 UTC

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The International Monetary Fund recently engaged in what has become an annual ritual. For the fourth year in a row, it reduced its forecast for world GDP growth. The 0.7 percentage point average decline from the earlier estimate to the new 3.4 percent growth projection is not huge, but the persistent disappointments make many economists uneasy.

Larry Summers has an explanation for the problem in rich countries, which he calls secular stagnation. The former U.S. treasury secretary’s argument has several strands, but his main thesis is that investment has been too low for almost two decades because prevailing interest rates have been too high and because politicians have not permitted sufficiently large government deficits. Controversially, he suggests that growth has been painfully slow whenever financial bubbles are lacking, as in the years since the 2008 crisis.

Apple’s many magic tricks

Edward Hadas
Apr 30, 2014 15:22 UTC

Apple is in the news for borrowing $12 billion this week, even though it has $151 billion of cash on its balance sheet. The financial legerdemain will keep the technology giant’s tax bill down. It also is suitable for a company whose business model has long looked more like a magic act than a traditional corporate drama.

Of course, Apple has, or had, one of the necessary attributes of any successful enterprise: a strong competitive advantage. The California company’s edge comes from a synergistic mix of design expertise, marketing genius and supply chain mastery.

There is also a bit of technological expertise, but that’s where the magic starts. Apple is a tech star which skimps on the industry’s lifeblood, research and development. The 2.7 percent of revenue dedicated to R&D in the first half of the company’s current fiscal year is puny compared to phone rival Samsung Electronics’ 6 percent-plus and double-digit percentages at Google and Microsoft.

AOL, solidarity and health insurance

Edward Hadas
Feb 19, 2014 15:59 UTC

The head of the American internet company AOL managed to say something really stupid a few weeks ago, and to sound callous at the same time. It’s a shame Tim Armstrong came off so badly, because he was trying to deal with a serious topic.

Armstrong was trying to justify the company’s decision, since reversed, to trim its employees’ retirement benefits. He started out at a disadvantage, because the chosen cutback was sneaky. A change that sounds innocuous, moving from monthly to annual employer payments into employee pension savings accounts, is actually a way to eliminate payments to employees who leave before the end of the year. It’s hard to look honest and upfront when explaining that.

But the former Google bigwig turned a disadvantage into a public relations disaster by bringing up the high costs of caring for two employees’ premature babies. The implied complaint about these million-dollar infants sounded heartless and invasive. In more humane hands, though, the Armstrong discussion could have been a fruitful one. The challenges that AOL faces are built into the way Americans arrange their employee welfare programs.

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