Company pensions capping;comments please?

"Ronald Raygun" wrote

... "Ronald Raygun" wrote

Your definition of "negative unemployment" implies that you consider full employment to be when "jobs available" equal "job applicants" - and 'positive unemployment' to be when there are fewer jobs available than there are applicants.

This appears to be confusing "unemployed people" with "people applying for jobs" and "job availability". Someone does not need to be out-of-work in order to apply for another job. There does not need to be a lack of jobs available for us to see unemployment.

For instance, there could be no jobs available and high unemployment (agrees your definition). Or - no jobs available, yet (almost - see below) everyone has a job. There may be many jobs available, but no applicants (eg due to shortage of expertise) - even with unemployment. [Ie there could be "more jobs available than there are applicants" even with a certain level of (positive!) unemployment.]

All of the above ignores the possibility of self-employment. People who become self-employed do not generally "find an available full-time job & take it"; they can effectively "create" the job (producing economic growth) ...

"Ronald Raygun" wrote

Ah, but there will *always* be unemployment hence you cannot use its existence to imply anything!!

For instance, someone moving jobs will not always be able to match an ending date with a starting date (even in the ideal circumstance of there being plenty of jobs to go around). This person will be classed as "unemployed" for the interim, even if there are many, many jobs around with no-one to apply for them! [Plus, of course, there may be a few in society who are happy to take welfare & remain "unemployed" long-term.]

"Ronald Raygun" wrote

But you can do *both* !

Reply to
Tim
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"Ronald Raygun" wrote

Aha! - I see, your definition is basically: unemployment = number of people 'out-of-work' - number of jobs "available".

I rather see it as simply: unemployment = number of people 'out-of-work'.

So ... under your definition, there could easily be many, many people 'out-of-work' under a "full" employment situation - as long as there are at least as many jobs "available" as there are people 'out-of-work'?

Now, what exactly does "available" mean in terms of jobs? - Perhaps just

*advertised* jobs? - Or employers actively looking? Or 'holes' which could be "filled", but which the employer hasn't woken-up to the fact yet? Just jobs that there is someone (to become the employer) who would pay for? Or - all those that are economically viable (even if not yet noticed by a would-be employer)? Or - any job that might be a "good idea" (eg some environmental issues, eg cleaning-up sites, even though no-one wants to pay & it's not economically viable)?

I wonder why the government haven't hit onto this idea - when quoting numbers of "unemployed", they could deduct the number of jobs being advertised!! (or do they do this already?!).

Reply to
Tim

It's not as simple as that, but basically, yes. Unemployment is the number of people out of work *and seeking work*. If there were job vacancies for them to fill, they presumably would fill them. Therefore the two definitions above, as amended, are basically the same because those out of work who can fill the jobs available would immediately vanish from the ranks of the unemployed.

It's basically a question of whether there are more pegs than holes or the other way round, with due regard to them being the right shape.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

I think that the out-of-work peg (ooops, person) who hasn't yet found the right hole (ooops, vacancy) to fill, won't necessarily find any solice in the fact that their job exists, but they just haven't found it yet! :-(

Reply to
Tim

Ronald Raygun wrote:

Indeed, that was the point of my question - if you think that raising the retirement age was a bad thing you presumably think that lowering it would be a good thing, but how far would you lower it and why? It looks to me as though your answer probably boils down to "until the workforce equals the amount of work to be done", in which case you are subscribing to the lump of labour idea even though you said you don't.

That's pretty much a meaningless distinction, unemployment levels are a significant component of economic performance.

That's a remarkable number of fallacies in one paragraph! For a start, in much of the country we do in effect have negative unemployment. The media are always keen to report unemployment statistics, but they don't give much coverage to the vacancy statistics, currently around 600,000 I think (if you dig around on the national statistics web site you can find them). The true level of demand for workers is probably quite a bit higher because people won't bother to advertise new jobs if they can't fill the ones which are already on offer. There are four main reasons why the unemployment numbers are not zero: 1) some people are always going to be between jobs. 1% unemployment is less than 5 months in a 40-year working life; if someone has two periods where they spend a couple of months between jobs it's probably fairly good going in an environment where people change jobs several times in a career, certainly I've already been unemployed for a lot longer. 2) Unemployed people are often in the wrong location, a lot of the jobs are in the south and midlands and a lot of the unemployment is in the north. House prices and local ties mean that people are often unwilling to move to where the jobs are, particularly for relatively low-pay or even mid-pay jobs (e.g. Stagecoach in Oxford has a lot of trouble recruiting bus drivers). 3) There may be a skill mismatch, many of the long-term unemployed are people who, for one reason or another, don't have suitable skills for the jobs on offer. 4) People may be holding out for a better job than what's on offer. We get lots of complaints here from out-of-work IT people; probably they could find jobs as bus-drivers or shop assistants rather easily, but having been used to having a high income as an IT worker they probably don't want to settle for that. (I was in a large B&Q last week, and on a pre-bank holiday Saturday there were a grand total of three staff in the shop! I imagine they would be happy to employ more people if they could get them.)

The second thing is the demographic effect. At the moment the fertility in the UK (the number of children per woman) is running at about 1.6, so clearly as long as that persists there is an ongoing lack of equilibrium, there will always be fewer people entering the workforce than leaving it. The retirement of baby boomers makes that worse, but it would happen anyway. Raising the retirement age doesn't help with that in the long run, but at least it gives more time to address the problem. Also we are effectively raising the age at which children enter the workforce by having many more go to university, which is further reducing the number of people coming into the workforce.

The third problem, and the most basic, is your assumption that making people retire automatically creates jobs for young people to move into. That is just wrong. Firstly there is the obvious point that people are not interchangeable; as I said above, mismatch of skills is a major part of why unemployment persists. More fundamentally, this view assumes the "lump of labour" idea, that there is a fixed amount of demand which is satisfied by a fixed number of workers, but it simply isn't like that. Overall potential demand is more-or-less unlimited; maybe there will come a day when everyone has everything they want, but we certainly aren't there yet. There can be limits to demand in particular areas, for example you can only eat so much food so having more agricultural workers is not very useful, but in general there is far more potential demand than potential supply, so the limiting factor is how much you can produce. Forcing people to retire when they were willing to keep working reduces production (assuming they were doing something useful). Of course, having younger people unemployed *also* reduces production, and should also be tackled, e.g. by education and training, but there is no trade-off - in fact somewhat the reverse, more training means more employment opportunities for trainers. And another point is that you usually need investment; as an obvious example, someone has to put up the money to build a factory before workers can work there, so it's a good idea for the government to have policies which encourage investment, e.g. by taxing it less than consumption.

Another potential limit is resource exhaustion, greens have been arguing for at least 30 years that growth was about to come to a halt because we would run out of oil, electricity, food or whatever, but so far it hasn't happened and shows no sign of doing so. In any case there are plenty of things which don't use much in the way of resources; even if there are environmental limits on the production of cars, there are unlikely to be similar limits on the production of TV programs or web sites.

OK, if you are saying that there is a fixed amount of *useful* work then that

*is* the lump of labour fallacy. Of course, usefulness may be in the eye of the beholder, some people may doubt whether particle physics (to take a random example :) is really useful, but the fact that governments are willing to pay people to do it implies that society as a whole does value it, and I can assure you that particle physicists could find a *lot* more things to do if the resources were available! Equally I might doubt whether women really need to wear makeup, but there is clearly a substantial demand for the products of the cosmetics industry.

This seems to be the basic error in your argument, you are assuming that a given unemployed person would be doing useful work if there were any to do, but in fact there are many reasons why this is not the case. Apart from what I've said above, which are the main issues in the current environment, there is also a potential problem with timing, to build a factory and train workers to use it takes time, maybe several years, so there is a lag between starting the process and getting something useful out at the end. In a situation like the Great Depression that can become a trap, because no-one wants to take the risk of starting the cycle in case they can't in the end sell the output of the factory, hence the Keynesian argument for pump-priming, that the government may have to step in to force the process. In normal times that's not such a good idea because governments often back the wrong things. Also that's less of a problem now than it was at the height of industrialisation, these days it's easy for someone to start their own business fairly quickly and with relatively little capital (but of course they have to know how to do it, information is also a kind of capital).

Another aspect of this is that a large amount of work doesn't appear in the statistics because it isn't traded. I've notionally been on holiday for the past couple of weeks, but in fact I've been working fairly hard on my house and garden. I might have paid someone else to do a lot of that, in which case it would have appeared in the statistics, but the real economic effect is much the same in either case (except that I'm not a very productive gardener because I don't know anything about gardening). Similarly I spend quite a lot of time answering questions in uk.finance, which from my POV is leisure but which I hope is nonetheless at least somewhat useful, and people certainly pay for magazines with less insight than you get in this newsgroup! Indeed, the internet as a whole has a large component which is missing from economic statistics because so much is free, e.g. usenet, web sites, free software etc. To take a specific example, Daytona is apparently unemployed in a technical sense, but that is clearly not the same as being unproductive.

That's silly. The only point of saving at all is to spend eventually, hoarding money for its own sake is pointless. The older you get the shorter the period over which it makes sense to save. The incentive for someone not to retire (aside from the fact that you may like the job) is that your pension is not enough to let you live the lifestyle you would like, so you work for an extra income to increase your spending. Some component of that probably will be saved for when you eventually do retire, but I think it would be pretty pointless to stay on in a job if you weren't spending any of the income from it, given that you might well die before you get around to spending it.

In case you haven't noticed, money is not real. *Wealth* consists of real things, not numbers in computers or bits of paper. The idea of spending (consuming) wealth that hasn't been created yet is nonsense, how can I drive a car which won't be built for five years? The economy is like a conveyor belt with items falling off the end of it, money is just used to decide who gets to take the things as they are produced. It's possible for things to fall off and not be used by anyone, production can be wasted, but it isn't possible to take more things than are produced, however much money you have. The reason we can consume more now than 50 years ago is because the conveyor belt has a lot more things on it, because we have got a lot better at producing them. That's partly because more people are working, partly because people are working more effectively, and partly because there is more capital employed (e.g. more computing power per employee).

What is true is that there is a balance between consumption and investment. You can produce things which you consume now, e.g food to eat, or you can produce components for a factory to make things you will consume in the future. People, individually and collectively, have to balance consuming a certain amount now and consuming more later; that balance is reflected in interest rates and returns on investment generally. The situation can change, e.g. in the post-war years there was little consumption and a lot of investment because people saw rebuilding after the war as a high priority. More recently people have had more interest in consuming now rather than investing. The odd thing is that at the moment things are out of sync; consumer spending is growing rapidly and people don't want to invest so share prices are low, and yet at the same time interest rates are low which implies that demand for saving is high relative to borrowing, so something is out of line.

It's true that there is a problem, indeed people may all decide to save (or spend) at once. The trouble is that individuals save by transferring their share of production to someone else in return for being able to claim it back with interest at a future date. It simply isn't possible for everyone to save at once. This seems to be a general problem, people traditionally look at macroeconomics (overall things like GDP, inflation, unemployment etc), or microeconomics (individual spending or working patterns and so forth). What often seems to get lost in the cracks is that the two have to meet somewhere in the middle, a decision which seems perfectly free on a micro level (buy a TV or put the money in a savings account) is highly constrained on a macro level - people can't *all* buy TVs at once because there aren't anything like enough, and if no-one buys TVs for a year or two the factories will all close and there will be none to buy when people want to start again. Indeed, mass-production of TVs only makes sense if you can assume that demand is fairly stable over time. Most of the time people act randomly so all the individual decisions do average out into a fairly stable trend, but every so often you get a situation where a large number of people try to do the same thing at the same time and things break down in some way (stockmarket crash or bubble, recession etc.). The counter to that is mostly that governments and central banks try to counteract damaging trends, e.g. by lowering interest rates if demand is falling or vice versa, but of course that's only as effective as their ability to forecast what will happen.

(I just spent about three hours writing that - at ten pounds an hour that would be worth about £30, divided by say 100 readers is 30p each. Worthwhile? As a magazine article it might get 10,000 readers, and it's probably worth at least 0.3p ... information products are interesting in that they cost almost nothing to reproduce, so productivity is proportional to the size of the audience. The internet is probably increasing productivity a lot more than people are noticing.)

Reply to
Stephen Burke

What are actuaries for?

We cannot predict the future. Otherwise we would make a fortune from gambling on the stock market, instead of losing out when it crashes. Actuaries jobs are about analysing risk. They would look at a scheme, look at the potential risks, look at past data and give an indication of the possible future outcomes. Also they need to do some mundane statutory calcs to prove solvency, or not, as the case may be. Clearly the main risks are that people live too long and investment returns are not sufficient to meet future claims. There is also some significant wage inflation risks. All actuaries do is look in a crystal ball and come up with a possible outcome, but this is not necessarily the truth. The difference is it is not a total guess and if advised correctly will come with an explanation of what the risks are and the impact of those risks, so that an intelligent person can use these to make some decsions.

Reply to
bertie

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