In America the President is declaring that the second Depression has been avoided. The NEBR has announced that the first one ended some time ago. Yet if that is the case why is no one able to explain the reason there are no new jobs being created. Companies are making money, sure, but that has been at the expense of employment. By cutting costs, companies have found their profits increase. Yet in employment terms, the depression has not yet ended in America, in Europe or elsewhere.
That said, we find in the UK, that with government cuts to spending levels of 25 per cent across all departments bar Health, Educaion and Overseas Aid, private business, where sales are getting harder to find by the month, is now facing yet another increasein the minimum wage, on top of increased payroll taxes.
Do they want unemployment to skyrocket?
Will kids be sent to the scrapheap in growing numbers as they leave school?
The only way anyone will be able to get a job for the foreseeable future will be to moderate their price to meet the market.
Prices are falling hard, though you wouldn’t know it. Houses are cheaper, by quite a margin than they were two years ago. Vested interests try to hide the fact but its true. Petrol and home heating costs should have more than halved if the oil and gas markets decided the level of retail prices, as they should. It is only the hidden climate change levy funding loss making wind farms across the nation which is keeping the bills at all time record levels.
This autumn, the latest mini phase in economic optimism, where European debt problems have been magicked away by keeping them out of the news, and stock markets have experienced the fastest one month rally since 1939 will soon find itself meeting another kind of story. The world and his dog, who have not noticed that prices of near everthing are still lower than they were in 2007, will soon be reacqainted with the fact. People are going to be reintroduced to the reality of the deflationary era we are now well into.
People can only remember inflation, and so that so that is still the beast that governments and trades unionists are all trying to slay. They will soon wake up and realise that we are now into a different era where a period of inflation would be a blessed relief. By raising wage costs when credit and money supply are shrinking fast, people will be thrown out of work. More people will be claiming benefits as a direct result. The government’s social security spending bill will not be able to cope, with their debts already weighing us down to the ground.
The fall in credit so far has been the compulsory ending of credit provided to defaulters. Credit card debtors are seeing their facilities removed, and banks are removing overdrafts from non payers. As of yet, the realisation that the debt game has at least another twist to go in its downwards spiral, has not registered with financial companies. Next up, the value of cash will rise to the point that few want to part with it. Credit will tighten a lot further yet. As soon the contraction of credit hits a second leg downwards, the effects on demand in the real economy will be felt very quickly.
To help keep people in a job, the minimum wage should be cut from GBP 6 to GBP 4 as soon as possible.
In many industries that is already the amount being paid by companies brave enough to find loopholes in the law. This is achieved by booking fewer hours than those actually being worked. The workers in question go along with it as they are kept on a trial basis only, where payment is not legally required, and are dismissed before the law hands them so called workers rights at three months.
After two weeks at home they are then rehired for another trial.
This information was relayed to me by a fellow blogger who had taken on such a contract recently. He was on GBP 3.50 an hour, but has since managed to find something better. But for while he took it as he had to pay off his debts. By living with his parents, he was able to cope.
The minimum wages goes up from £5.80 to £5.93 (2.24% up) from 1 October 2010 , near enough $10 an hour. Just crazy. It would be sensible to halve it as soon as possible.