The Numbers That Worry Me

I'm an optimist because most of the things we worry about self-correct and recover in due time. I don't worry about stock market crashes. I don't worry about whether profit margins are too high or if earnings are about to fall. Most of these issues are overblown. And even when they do become problems, they are short-term problems.

I worry about problems that can cause permanent damage to businesses and the economy. They're really the only things we should worry about because they're the only things we will probably look back on 50 years from now and think, man, I wish we did something about that.

Here are three. 

I worry about the long-term unemployed
Ten million Americans are currently unemployed. More than a third of them have been out of work for six months or longer. Most of those -- 2.6 million -- have been unemployed for more than a year.

The longer someone is unemployed, the lower the odds are that they're regain employment. According to the Council of Economic Advisors, those unemployed for less than five weeks have a 31% chance of getting a job in the next month. At 27 weeks of unemployment, it's 12%. After a year out of work, it's just 9%.

The problem is that employers view the long-term unemployed as tainted goods. A year ago, Rand Ghayad of Northeastern University sent out 4,800 fake resumes to 600 random job openings. He found that employers were more likely to call back candidates with no relevant job experience than those with experience but who had been out of work for more than six months.

Rapper Lil' Boosie just got out of jail after five years and talked about how shocked he was at how much the world has changed. Technologies like Instagram and Facetime blew him away. There's a similar shock for the long-term unemployed. New technologies that workers have mastered over the last few years are totally foreign to the long-term unemployed. That makes them less valuable to employers.

Every day this continues it gets worse. I worry we're at a point where it's so bad it's unfixable, creating a black hole where millions of Americans will literally never recover from the financial crisis. People who could have grown their talents and made the economy better may be permanently held down. That hurts the growth outlook for everyone.

I worry about how correlated success is to your parent's success
Capitalism works best when the smartest people with the best ideas who work the hardest succeed in a meritocratic way. That's how it works most of the time in America, but there's a growing perversion where success has less to do with how innovative and driven you are and more to do with who your parents are. The single best predictor of future income is your level of education, and the one of the best predictors of your level of education is your father's income. Put these together and you don't get meritocracy, you get dynasty.

In 2001, economist Bhashkar Mazumder calculated the heritability of income. He showed that if a father earned $1 more than average, his children could expect to earn $0.50 to $0.60 more than average. Amazingly, Mazumder found that incomes among brothers are more correlated than height or weight. Literally, if you have a brother who is rich and tall, you are more likely to also be rich than you are tall.

Everyone knows someone (or is someone) who started from nothing and became something. The problem, as they say in journalism, is that the plural of "anecdote" is not "trend." Yes, some are born into poverty and work their way to the top. But most don't. Just 4% of those born into the lowest income quintile eventually make it to the top income quintile, but 40% of those born into the highest income group will stay there as adults, according to the Pew Economic Mobility Project. Of those born into the lowest income quintile, more than 70% won't make it out of the bottom half of wage earners as adults. For those born into the top income quintile, two-thirds will remain in the top half as adults.

This worries me not because of jealousy, but potential. There are an untold number of geniuses who were never able to succeed only because they couldn't afford the education and networking that comes from attending a good school. And there are an untold number of people in power not because they're geniuses, but because their parents got them into good schools. When so much of an average person's future is determined before they exit the womb, the entire economy loses. 

A hundred years ago, America decided that an education through high school was important enough to guarantee it to everyone regardless of income. We figured this out before most of Europe, and it's been credited as one of the reasons America dominated the 20th century. Given how important knowledge is in today's economy, I have a feeling whoever figures out the public importance of college and trade-school education will dominate the 21st century. Right now, that's not us.

I worry about how pervasive short-term thinking has become
As a share of the economy, we spend 60% less on infrastructure today than we did 40 years ago. Corporations are spending less on long-term capital expenditure projects and more on share buybacks. Consumer spending is at an all-time high, and the personal savings rate is half its long-term average. Fifty years ago, the average stock was held for more than eight years. By 2010 it was down to five days.

One of the biggest ironies of the last hundred years is that while we're living longer, we're thinking shorter. Life expectancy at birth has increased by 10 years since 1950, but our attention spans seem to have contracted by at least as much.

Whether it's a person or a company or a country, a common denominator to success is the ability to think long term. But almost everywhere today -- from politics to companies to individuals -- short-term thinking is winning. I think it's a product of a 24-hour news cycle, which was born in the last 20 years, and, in order to fill time, blows the most trivial nonsense out of proportion.

I worry that 30 years from now we'll realize that companies could have been more successful if they weren't so concerned about profits in the second quarter of 2014. Or that politicians' laser focus on the next election seriously hurt the country. Or that investing in infrastructure, science, education, and R&D is more important than what the Dow did yesterday.

But that's about it. "I'm an optimist," Winston Churchill once said. "It does not seem too much use being anything else."

Check back every Tuesday and Friday for Morgan House's columns on finance and economics. 

 


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  • Report this Comment On March 21, 2014, at 5:19 PM, WyattJunker wrote:

    If you worry about the long term unemployed, then you better get ready for a long term prescription for an anti-anxiety agent.

    Obama is only too willing to make them a permanent class in our society by continuing to believe in the Communist Manifesto's wage and price controls, of which labor are the central aspect. Raise the price of labor, capriciously as Obama does, Morgan, guess what happens? Your number one worry only continues.

    Long term structural debts are not our problem. Nor are the entitlements. Those can be reformed or modified. What can cause detrimental harm to us however, is if the people begin to become well versed and trained in becoming state recipient dependents.

    Obama has done very well in that regard.

  • Report this Comment On March 21, 2014, at 5:27 PM, TMFJCar wrote:

    Morgan,

    Great article, I see you threw in a Lil Boosie reference.

    Apparently, the first commenter doesn't share your optimism...

  • Report this Comment On March 21, 2014, at 5:30 PM, TMFHousel wrote:

    No economic writer will quote Lil Boosie ever again. I'm sure of it.

  • Report this Comment On March 21, 2014, at 5:31 PM, agwisreal wrote:

    The more meritocratic and fair society gets, and the more the best students are admitted to the best schools, the more assortative mating we'll get and the larger the heritable component of success will loom.

    It's not just admission to good schools that's the key to success, though admission to a decent school is helpful. It's the talent and drive that got the student to where they made the grade for admission.

  • Report this Comment On March 21, 2014, at 5:40 PM, ondram wrote:

    Fantastic article. Thank you.

  • Report this Comment On March 21, 2014, at 5:48 PM, pepiii wrote:

    Great piece, the problem is that most of us can't do anything about the problems. People who write great articles that make sense should make sure they are read by our congressman. Send them all a copy.

  • Report this Comment On March 21, 2014, at 5:54 PM, silverpudding wrote:

    Once again the success of many middle class individuals is attributed to that of their parents. The conscientiousness, values, drive, and intelligence of parents and the attendant success of their children is written off as "inherited wealth" as if it were inevitable.

    That educated/successful individuals have educated/successful offspring is nothing to be worried about. If successful offspring could not be predicted - if it were a mystery as to how someone became accomplished - cause for concern would be greater.

    Competence is cultivated over time. Good families provide a foundation upon which such behavior flourishes. What one should focus on is the specific values and , behaviors and whatever else is necessary to make a "good environment" for raising competent kids.

    Realistically if a poor child is academically accomplished she has a far greater chance of attending college on the state's dime today than was the case in the past - particularly if she is deemed disadvantaged. In fact whether or not one is academically accomplished one has a greater chance of at least attending college than in generations past. Perhaps this is why the imprimatur of a college education lacks much of the wallop it once had.

    In any case it is hard to imagine, short of raising all children in close to state mandated equal environments, devoid of parental input, how the correlation between parental and children's characteristics can be significantly diminished. In fact if environments were literally identical differences would still be found and they would be due almost entirely to the genetic makeup of the children as all others sources of variation would have been disposed of.

  • Report this Comment On March 21, 2014, at 6:28 PM, TMFHousel wrote:

    <<In any case it is hard to imagine, short of raising all children in close to state mandated equal environments, devoid of parental input, how the correlation between parental and children's characteristics can be significantly diminished>>

    Other countries that have done at better job promoting higher education will show this to not be the case. People think America is the land of Horatio Alger, but statistically we have some of the lowest income mobility in the developed world:

    http://www.oecd.org/tax/public-finance/chapter%205%20gfg%202...

  • Report this Comment On March 21, 2014, at 6:48 PM, cmalek wrote:

    Long term unemployed may lose their attractiveness to employers but they do not become instant morons the moment they become unemployed. The assumption that just because one is out of the workforce, one is not keeping up with technology is ludicrous. With a little help, the long term unemployed can be easily brought up to speed.

  • Report this Comment On March 21, 2014, at 7:00 PM, Zombie111 wrote:

    Enjoy your use of statistics to skewer "prevailing wisdom". As a non-American, the dynastic aspect seems quite clear (the Kennedys, the Bush family etc).

    Also, while it is true that a bright kid can really benefit from a good school, the cost of a college education is a real barrier. But education can lower the crime rate.

    A large pool of long-term unemployed young men is a source of social unrest and even radicalism, which is not a good thing for anyone.

  • Report this Comment On March 21, 2014, at 7:01 PM, TMFHousel wrote:

    cmalek,

    No one said they instantly become morons. But skill atrophy is real. There's a lot of data on it:

    http://economix.blogs.nytimes.com/2012/03/28/the-enduring-co...

  • Report this Comment On March 21, 2014, at 7:18 PM, Kryptyk wrote:

    What troubles me is $1 trillion+ of student loan indebtedness, for education that in many cases fail to prepare graduates for viable careers.

  • Report this Comment On March 21, 2014, at 8:21 PM, randyk62 wrote:

    Great stats - interesting conclusions. Simply another well researched article and, of course, required reading.

  • Report this Comment On March 21, 2014, at 9:48 PM, copadomundo wrote:

    On the unemployed: there are nearly 10 million more people affected (difference between U-6 and U-3 measures), so it's an even bigger problem. But, now that so many social benefits are means-tested, these folks are making a rational (albeit short-term) economic decision to not work. When you add up the tax-free benefits available (SNAP, welfare, SS disability, housing, cell phones, school lunches, etc.) and compare it to the net cash from working (after taxes and commuting costs), you'd need a $40k/year job (family of 4 estimate) to make working worthwhile.

    Structurally, you could reduce or eliminate these benefits to (hopefully) incent people to take jobs less than $40k/year. Or, you have to make minimum wages much higher. Sadly, the former will make some needy families destitute and the latter will lead to further job losses. The only solution is a growing economy. We simply have to find a way to give people the dignity of work again.

    On the lack of a meritocracy, this solution seems so simple to me: school choice with vouchers, and no limits as to the choice of school. I'm one of those lucky few who has made it from the 4th or 5th income quintile while growing up, to the 1st quintile in most of my adult life. That was wholly due to educational opportunities available to me through schools that actually taught kids to read, write and compute. The average school in the US no longer succeeds at those basic fundamentals. But, if we allow every child, rich and poor, to take the $20k/year we pay for their education, and spend it at any school they wish, this problem will be fixed in 3 years. Yes, 3 years. Because suddenly all ships will rise.

    On the short-term thinking by companies and people: is it really that irrational to not invest for the long term, Morgan? Your Lil' Boosie quote actually makes my case. If the whole world can change in 5 years, why would one invest in a 20 year project? I acknowledge that, in 20 years, we probably will still have washing machines and cars, but what if someone invents self-cleaning clothing, or driverless vehicles (oh wait, they already have!).

    Nice article. Thought provoking.

  • Report this Comment On March 21, 2014, at 10:14 PM, jvgfool wrote:

    The only way to solve the unemployment problem is to trickle up this economy and grow the middle-class, which is the opposite approach of the Republican controlled congress.

  • Report this Comment On March 21, 2014, at 10:55 PM, TMFShaggy wrote:

    Awesome article my friend! Short term thinking does not get talked about enough. We are genetically hard wired to think emotionally first, long term second. I encourage anyone out there to read "Thinking, Fast and Slow" by Daniel Kahneman.

    In addition, technology is allowing us to do things very quickly. I can sell my house in a weeks time because of the internet (think how long it took years ago through traditional sales process).

    Combine these two factors and we have to figure out ways to train our brains to slow down and think long term despite our emotions. Neuroscience and behavioral economics will help. Luckily because this world moves so quickly, these learning's are become pervasive as well.

  • Report this Comment On March 22, 2014, at 3:56 AM, 2beewise wrote:

    TMFHousel, I’m asking your indulgence to add a 4th top level issue that is looming all around us - environmental degradation. It surrounds us. It invades our bodies. It leaves us diseased and dying. And we don’t talk about it because it’s an ugly and inherently “pessimistic” subject. (I will try not to write a doctoral theses here.)

    The Fukushima Daiichi nuclear reactor “bomb” is case in point, and still our government and the power industry is pressing to build more Nuc generators. Big oil is determined to run another oil pipeline (K-XL) through the heart of America; over the largest fresh water aquifer on the continent. There is no such thing as a pipeline that doesn’t leak!! And tar-sands crude is the most toxic crude ever extracted from Earth. Tar sands crude is a “chemical bomb” and it’s a bomb already happening.

    There isn’t a single thing you do that isn’t directly connected to and dependent upon a predictable and healthy environment - Not One. And that “healthy environment” is under major alteration day & night World wide.

    Less than two months after Duke Energy was caught dumping 30,000 tons of toxic coal ash into the Dan River, in N. Carolina, Duke was caught pumping coal ash wastewater out of a toxic wastewater pond and into a canal which drains into the Cape Fear River; which is a source of public drinking water for residents in Fayetteville, Sanford, Dunn, Harnett County, Fort Bragg and Wilmington, North Carolina.

    Every single one of us is carrying toxins in our bodies that are eating away at our health. I remember clearly the arrival of Rachael Carson’s book “Silent Spring” in 1962 and I’ve watched with dismay and disgust the accelerating attach the Planet has sustained - everything that Rachael Carson predicted and more.

    The above is a tiny snippet of empirical evidence that moves me to make this addition.

    Thank You for your indigence.

  • Report this Comment On March 22, 2014, at 5:20 AM, Interventizio wrote:

    Short-term thinking. "I think it's a product of a 24-hour news cycle, which was born in the last 20 years, and, in order to fill time, blows the most trivial nonsense out of proportion."

    I think too that's the main culprit. Good analysis!

  • Report this Comment On March 22, 2014, at 6:11 AM, DJDynamicNC wrote:

    "What can cause detrimental harm to us however, is if the people begin to become well versed and trained in becoming state recipient dependents."

    That doesn't make any sense, given human history and nature.

    We are born dependent on other human beings. We live our lives dependent on other human beings. We will die surrounded by other human beings. We are social animals - our intellect is our second greatest strength, but it is our societies that have seen us through millions of years of evolution.

    Nobody is "becoming" dependent on society. We are born that way, and it is our nature that this is so.

    It is also one of our great triumphs.

  • Report this Comment On March 22, 2014, at 6:13 AM, DJDynamicNC wrote:

    "The more meritocratic and fair society gets..."

    Meritocratic and fair are two competing values. Society can become more fair or more meritocratic. It is very unlikely to become both at the same time.

    A meritocracy is far from fair. It will see the very best soak up most of the reward and the second best and everyone on down getting much, much less. That's the point. Look at pro sports - the all stars are orders of magnitude better rewarded than even the second tier of great players. That's a meritocracy.

    It's a shitty way to run a society, though - vastly over-rewarding those who best adapt to a particular set of marketable skills. Give me fairness any day.

  • Report this Comment On March 22, 2014, at 6:13 AM, DJDynamicNC wrote:

    "TMFHousel, I’m asking your indulgence to add a 4th top level issue that is looming all around us - environmental degradation."

    Agreed; this is not something that should be overlooked in any long term evaluation.

  • Report this Comment On March 22, 2014, at 10:52 AM, Mathman6577 wrote:

    Everyone keeps taking and writing about the long-term unemployed (and soon income inequality). They are a symptom and not a root cause. The root cause is poor economic growth. The government needs to revitalize the economy, not put bandaids on by trying to "fix" the unemployment problem by extending benefits. Let's put a bandaid on the economy by promoting growth. Start by approving the Keystone XL pipeline and expediting licensing of more LNG export terminals (things that can contribute to growth). Then proceed to lowering the marginal tax rates (which has proven to be growth-friendly).

  • Report this Comment On March 22, 2014, at 3:16 PM, kyleleeh wrote:

    I had an interesting experience the other day that shows how lack of tech knowledge hurts the long term unemployed:

    I was talking to a family member about an older relative that has been out of work for several years and has given up hope of being hired. I said it's so easy to do "something" these days. If I lost my job the first thing I would do is put my spare bedroom up on air B&B, and start driving for Uber or Lyft until I found a new job.

    She said "I don't think she knows about any of those things"

  • Report this Comment On March 23, 2014, at 1:56 AM, Saintmark01 wrote:

    Morgan, another terrific article.

    I work for a Fortune 500 company in a dying industry. As a result of our recent merger tens of thousands of people are losing their jobs. Merging the number two and three companies in downward-spiraling industry simply created a temporarily bigger company generating bigger losses. Yet, despite the fact that companies like Amazon, Costco, Walmart and Target have fundamentally changed our particular industry, our management continues to focus on this quarter's performance. They are fiddling with short term "strategies" with no recognition that if the company does not refocus it will die in matter of five years or less. Sadly, the Board has established a series of "rewards" for the new management team that is based on achieving short term (60 days) objectives. No rewards are in place for developing a 5-10 plan to reposition the company for success.

    Many of our tens of thousands of "displaced" workers are certain to become part of the log-term unemployed. These same people as recently as three weeks ago were actively engaged in trying to salvage their company. Management, on the other hand, is focused on the short term goal of stripping out as many people as possible to demonstrate "synergies" to Wall Street.

  • Report this Comment On March 23, 2014, at 7:47 AM, Mathman6577 wrote:

    Saintmark01: I'm sorry about your company. It appears it wasn't very forward thinking like successful businesses need to be. The large Fortune 500 company I have worked for, for over 30 years, has adapted to the changes throughout the years by getting out of slow-growth industries and investing in aerospace and commercial/residential building systems (which happen to be high-growth). It however has had to eliminate positions and move operations out of high-cost states (like CT) which has resulted in layoffs. I'm sure a lot of these people have joined the ranks of the long-term unemployed.

    I go back to my premise that the government needs to help grow the economy and not put a bandaid on the unemployment system by offering to extend benefits.

  • Report this Comment On March 23, 2014, at 8:41 AM, devoish wrote:

    “The single best predictor of future income is your level of education, and the one of the best predictors of your level of education is your father's income. Put these together and you don't get meritocracy, you get dynasty.” – Morgan Housel

    “It’s not what you know, it’s who you know” – Grandma.

    Parents with better incomes, socialize within the same higher cost school districts along with other parents with better incomes, and help each other’s kids get jobs with better incomes. Parents with low incomes work second jobs alongside other parents with low incomes and second jobs, and are aware when low paying jobs open up, and most of the opportunities they get to see are low paying jobs that require second jobs to get by.

    Parents with good incomes can help their children with zero interest loans to start a business, where as the child of a low income parent has to go to a bank and the interest payment may make their pricing un- competitive. The child with the loan from his parents sometimes actually believe that he worked harder or smarter than a competitor who went out of business even though the one whose business failed actually produced and sold 5% more goods, but not the 12% more he needed to pay the banker. You have been taught all your life that you have to work hard to succeed, so in turn it is easy to believe that your financial success is mostly the result of your hard work.

    When your job involves dealing with a bank you get to develop a relationship with your contact at that bank that someone in maintenance does not have. Your friend at the bank sends over a friendly co-worker that helps you into the best mortgage for you or the best business loan for your child, while the girl in maintenance winds up in the most profitable mortgage for the bank and a bigger bonus for the broker. Fifty years ago someone could get that book-keeping job and that contact without needing parents able to pay for and get their child a college education without getting that child into a education debt.

    Those children without college loans to pay are better able to weather a financial crisis, and get to keep their houses because they have savings they can shift toward rising health insurance costs while the children with college loans do not have the savings to work with because they have an extra debt to pay and higher mortgage interest rate because of it.

    Over the last forty years these social advantages have slowly accumulated on top of each other, but as long as there was the increasing money supply of new loans to pay old interest expenses it was less destructive, because more opportunity to get money existed no matter what your job title was. Once lenders decided to pull the new money needed to pay old interest out of the economy, all of these inequalities of opportunity became much more significant and incredibly destructive to hard work, as hard work, ability, and intelligence became so much less important than the innocent ‘who you know’, or the less innocent collusion that runs rampant in finance and helped finance come to dominate our society and our freedom to guide our own futures through representative Government.

    Because the principle of every new loan puts money into the “real” economy when it is issued it can be paid back. Because the interest is not put into the economy, it cannot be paid back without taking it out of the real economy, by taking it from your neighbor who did not borrow or gain from your loan. Because the interest on every loan increases the costs of making a purchase to everyone whether they borrowed or not, the sum amount of the interest due should be placed into Social Security so the money needed to pay interest on a loan is eventually available to the real economy and to those who work hard in the real economy, whether lenders ever make another loan or not.

    Best wishes,

    Steven

  • Report this Comment On March 23, 2014, at 1:45 PM, johnnywitt wrote:

    Look, we already have a blueprint of how to have the greatest nation the world has ever known. We HAD the most prosperous & best educated middle class in the world.

    Now, with our nascent energy boom, we can once again be the most pre-eminate nation in the world.

    We are going to have to use the German/Japanese light manufacturing model and our newfound cheap energy to drive this model. The tax rate for the richest will have to go back to the rates we had during the 50's-60's of 70-90% on the wealthiest folks and we have to keep our energy right here in America and not let the plutocrats destroy our path to prosperity by exporting all our energy. We have to return to having the bulk of the wealth of this country in the hands of the middle class to have any hope of having a democratic form of government, otherwise the big money calls all the shots and they are the only ones that get representation.

    We can do this. We can turn this thing around.

  • Report this Comment On March 23, 2014, at 5:27 PM, adasand wrote:

    Morgan comes out as a liberal in this article, me being a lib myself I dont care, but I know most investors would and the comment section shows. Morgan is probably one of the smartest guys in Fool, I know everyone thinks they are smart, but if you keep your ego aside look at his account and his commentaries on Youtube, you would see he is smarter than most of us. If he can see a problem, there is a problem. It is not something that liberals are shouting because they are "jealous of the rich, or they are lazy" (im sure there are some of those as well), but because there is an issue.

    As long as people keep their mythical partisan beliefs we will never get out of this whole. Reganomics have been in play since Regan took office, and since then the problems have been getting worse. There is a limit to which we can cut taxes, with every recession if we kept giving tax cuts, the effective tax rate will soon be 0.

    If trickle down were to work, the American public would be better of today than they were before Regan took office, this is not the case at all, for any thinking man that should be proof that Reganomics does not work.

    If you take a medicine today and if you dont see the results in 1 year, you know that medicine is not working, so you should change the medicine. It is the same with the economy.

  • Report this Comment On March 23, 2014, at 7:54 PM, ellaerdos wrote:

    I hate to break it to you but you have a more pressing problem then the upward mobility of wealth.

    Their is no longer a draft, you now have a professional standing military. Officers and senior NCO's are "lifers" and an amazing number come from families who have a history of military service.

    This is 3% of the population that most Americans have no contact with, and it works both ways.

    Downsizing a force that has been at war for 11 years and putting midcareer military professionals on the street, without hope, has the makings for social chaos.

    .7/

  • Report this Comment On March 24, 2014, at 1:40 PM, FoolTheRest wrote:

    I cannot believe I had to read a TMF article to learn Lil' Boosie is out. Times are changing...or I am just getting older.

  • Report this Comment On March 24, 2014, at 1:42 PM, rafish wrote:

    Great article. It's easy to be an optimist if you have an ample stake in the new economy, but long-term growth at some point gets affected by erosion of buying power across an increasingly disenfranchised population. Some of our talent ought to be spent figuring out how to realize of the human potential now being lost or wasted.

  • Report this Comment On March 24, 2014, at 3:13 PM, stumptownbro wrote:

    "One of the biggest ironies of the last hundred years is that while we're living longer, we're thinking shorter." Very well said!

  • Report this Comment On March 24, 2014, at 3:31 PM, pussnboots1 wrote:

    Mr. Housel

    This is the best and most realistic article written by you, Fool contributors, that I have read since I joyned the Fools. (Can't believe it's nearly 10 years). I would add the number 4, penned by one of the other Fools. My hat off to you.

  • Report this Comment On March 25, 2014, at 2:25 AM, somethingnew wrote:

    Really great article and food for thought. On a side note I can only imagine how Lil Boosie feels. I feel overwhelmed by new tech in the present. I couldn't imagine being locked up then being exposed by everything new in the past 5 years.

  • Report this Comment On March 25, 2014, at 11:45 AM, TMFLomax wrote:

    Morgan,

    This is SUCH a great column, a grand slam. I so totally agree these worrisome elements reveal a lot of our problems and in how things are not as so many people believe strongly (the definition of "meritocracy" is a huge one). I wish I had written this article. ;) That's why I feel compelled to add on!

    Two pieces of glimmers of good news I'd like to add, which give me some hope: Some massive companies met with President Obama at the beginning of the year about a pretty simple change of thought: not viewing long-term unemployed as the "damaged goods" you mention, and giving them a shot at jobs instead of basically assuming things/discriminating against people who likely are unemployed through no fault of their own other than a tough job market. I experienced it during the dot-com bust recession. Many people did. Competing against tons of people who have similar experience and talents or better -- or, even the "impressive degree" mentioned above -- doesn't actually mean those who didn't get the job aren't talented (and might be better workers, who knows?).

    http://www.nytimes.com/2014/02/01/us/politics/big-companies-...

    According to some articles I have seen, Google has loosened its once incredibly high standards for hiring (i.e., emphasizing PhD's etc. before). Now it's not as much about "IQ" but more an emphasis on "learning ability" according to pieces like this one:

    http://www.slate.com/blogs/business_insider/2014/02/24/googl...

    Still long, I apologize. Goethe (supposedly) said: "Few people have the imagination for reality" -- I kind of think that means it's harder to creatively think through problems/decisions and how they work in reality than checking boxes, "what worked before," "theories on what SHOULD work" etc. I think it's actually intellectually pretty lazy on too many peoples' part in our society (among all the other problems).

    Alyce

    PS: Few people have the imagination to quote celebrities and other people from wide ranges of experience like Lil Boosie in this context, and MANY people from all walks of life have observations about what REALLY goes on in the world. Keep it up! Thinking out of the box and pointing out real experiences people have, and in places other than textbooks and conventional wisdom. (I didn't think out of the box by using the term thinking out of the box, but oh well.)

  • Report this Comment On March 25, 2014, at 12:06 PM, SkepikI wrote:

    hmmm, I notice nobody seems to have the temerity to point out that Studies (a Morgan H specialty) covering 20-30 years seem impressive if they are not fully examined for methodology and flaws. We persistently accept their conclusions sometimes because they are "peer reviewed" (so WE dont have to think). Most of those that I did not lazily accept and reviewed in detail (all too infrequent I admit) become very suspect under scrutiny. Thus one can ask WHAT OTHER VARIABLES the "long-term unemployed" have in their treasure chests of data that might keep them unemployed.

    More importantly, Housel, nobody else seems to see the irony in decrying lack of long term thinking, and then hanging your hat on even 30 year studies.....

    If I were to pick something to worry about, it would be the lack of Frontiers. The OLD WORLD was mired in family privilege, inheritance, class structure, monarchy, right of conquest, and inbred genetic flaws for centuries before the NEW WORLD Frontiers broke the molds and merit came to the fore. Maybe you have a long term study for that Morgan, but it seems we are stuck on 20 or 30 years....

    Still, thought provoking and interesting reading, particularly your comment attraction.

  • Report this Comment On March 25, 2014, at 12:27 PM, TheCommonTulip wrote:

    One thing that's worth mentioning with the long-term unemployed is that many of their jobs have been replaced by technology.

    Amazon does the same revenue as Target with 1/6th the employees. What'sApp (sp?) was purchased for billions, it employed just 55 people. Thanks to advances in technology, there simply isn't going to be a need for many workers in the future.

    That would put a huge lid on the economy; that's what worries me.

  • Report this Comment On March 25, 2014, at 12:48 PM, damilkman66 wrote:

    Greetings. An item overlooked is people unable or unwilling to change their skills for the 21st century. I live near Ann Arbor MI and work in the the tech field. Even during the depths of the recession many of my friends who also work in various tech fields complained about the inability to find qualified applicants. Were not talking about them being choosy. They could not find anyone despite being headquartered in a town with a world class university.

    How do you think all of our high tech gadgets get designed and programmed? You would think that people would be interested in them. Yet so many refuse to even make themselves tech literate. I'm not even talking about understanding how an operating system works or how to code. How about just understanding pre calculus or taking a science class or two.

  • Report this Comment On March 25, 2014, at 12:51 PM, lexander50 wrote:

    I agree wholeheartedly with your take, Morgan. I would add as a corollary to what you said that I am concerned with the decline of attention to quality and customer service and the growth of the ambiance of entitlement. My friends to the right of the socio-political structure would blame government policy and the growth of the welfare State, as we saw in some of the comments; while those friends on the left would blame the growth of the power of corporations and the interference of corporations in the public discourse.

    I personally think that everyone is to blame for this phenomenon. Companies get comfortable in their positions, because of previous innovation or great accomplishments, and they seem to get the idea these days that they are entitled to keep their customers regardless of how much deterioration there is in quality or service (All I have to do is look at my cable company and /or my Cell phone service). When I complain, they even explain that they are not investing in the infrastructure, and don't care to. Yet my costs keep going up.

    Some even solicit the help of legislatures and the political machine to reduce competition and engage in what would have been deemed as breaking the ant-trust laws a few short years ago.

    Not to lay all the blame on the companies, I have been encountering employees that seem to feel entitled to their jobs despite the bad performance and abuse of their job responsibilities . More and More, I seem to encounter folks with the "I don't care" attitude, and this demonstrates itself through a lack of commitment to self-improvement and education.

    Furthermore, I also have noticed a pervasive sentiment of resentment towards those who are promoted because of merit or education or ability and the general sense is that people feel they should be promoted based on just showing up ( length of service)

    It follows that a culture focused on short-term and propagation of dynasty as you nicely expressed it, is less likely to be entrepreneurial and will be less focused on the next big idea. Add to this a workforce that is disengaged, and I fear that in a hundred years, we will be so behind that it will be impossible to lead again. We need to refocus the national dialogue on leading and staying competitive in all sectors and not just in one or two. In essence we need to start waking up from the semi-vegetative state that we find ourselves in...

    Thanks, once again for a well thought out article. Fool on!

  • Report this Comment On March 25, 2014, at 1:04 PM, SkepikI wrote:

    <I so totally agree these worrisome elements reveal a lot of our problems and in how things are not as so many people believe strongly>

    The prevailing sentiment, here and inside the beltway Alyce, I reckon. And so I am compelled to point out potential flaws in the data and studies you all are embedded with ;-)......

    First and foremost, has anyone herein, including you Housel, looked seriously at EXACTLY how the "long term unemployed" were vetted? hmmm? I note that the Pew studies are prominent and they are notorious for sloppy details driven by conclusions they wish to reach. BUT here's what I mean: Not too many years ago unemployment was at what 4%? when "full employment" was considered 5.5 or so? Which basically meant that people who DIDN'T WANT TO WORK were employed! Corollary: many who actually permanent long term unemployed in fact had jobs...

    SECOND: who investigated individual "long term unemployed" to check that they were in fact individuals and unemployed? I dont know for sure, but it seems likely this is just a massive numbers game with no real testing of the underlying "data" if you can call it that. Canada ran a study a couple of decades back and found that a significant percentage of the so called "unemployed" were in fact employed in the cash economy, in the euphemistically labeled "under the table economy" an act of both economic intelligence and rebellion in over taxed Canada. And then there is the fraud. How many of the long term unemployed drawing and "counted" in these studies are engaged in fraudulent identities, multiple collections etc.? Where were the tests for those data "knock-outs"? Nowhere to be seen I bet.

    I have no desire to argue the problems you id are not -problems that is. But like so many "economic studies" -is that an oxymoron? I see and see quoted, there are so many details ignored or left out, I have no choice but to remain skeptical...imagine that... If engineers designed and executed bridges the way economists designed and executed studies, there would be LOTS of jobs for everyone

  • Report this Comment On March 25, 2014, at 2:24 PM, gr8twhtebuffalo wrote:

    This was a great read....thank you for the article.

    While I don't disagree with your first two points the last one really hit home for me. There are too many of us who only think short term.

  • Report this Comment On March 25, 2014, at 2:44 PM, TXObjectivist75 wrote:

    If a child can expect to earn $0.50 more than average based on the father's $1 more than average, you will basically revert to the mean within 3 generations. I'm not seeing how a permanent dynasty is going to form there.

  • Report this Comment On March 25, 2014, at 3:50 PM, ibuildthings wrote:

    If our administration cares so much about our long-term unemployment problem, why are they supporting amnesty for 15 million or more low-wage competitors for the jobs that can't be exported, and refusing to protect our borders? Even the unions seem more interested in importing and legalizing future union members than they are interested in protecting the jobs and incomes of their current members. You are right about short term thinking.

  • Report this Comment On March 25, 2014, at 11:43 PM, Basilleaf wrote:

    excellent article. I especially agree with the two points the article threw in: the infrastructure and the inequality of education. Having lived in Europe, Canada and China, I admire so much the scale, speed in China's infrastructure built.Regarding the inequality of education, in my opinion, American is doing much better job.

  • Report this Comment On March 26, 2014, at 12:00 PM, zendiego wrote:

    Can be by choice, you have two incomes one drops out, what is the big deal. You are sick of the corporate grind, you take some time a sabbatical of sorts...so what. Maybe you hit a bad patch of bosses and shitty jobs, so what...

    For those that are tainted this way, more power to them as you can't always fit the social or corporate mold and necessity is often the mother of invention.

    I find it funny that those with jobs find it such a tragic situation. In the authors case, look at unemployment as a chance to find your real self, sure their could be soul searching and real suffering involved, but chances are you will survive.

  • Report this Comment On March 26, 2014, at 1:24 PM, SkepikI wrote:

    ^ Well that just makes you one of the statistical and anecdotal exceptions - according to Housel, the plural of anecdotal is not trend ;-) as opposed to a real problem for those who don't want to examine the data sources for flaws. BESIDES being a raconteur, rebel and provocateur, sir.... ;-)

    And Housel though it may be so that the plural of anecdote is not trend, it is also perhaps worth considering that the result of sloppy data collection and analysis is not truth or knowledge. While contradicting anecdotal evidence should not make us skeptical by itself, it is rational for personal experience that contradicts badly constructed studies to make us suspicious about conclusions.....

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