2. Economics: Objectives: Students can list the six economic goals of U.S. society. Students can differentiate between fiscal, trade and monetary policy. Students can analyze unemployment (different types), GDP, and CPI (different types) to determine appropriate fiscal policy measures. Agenda: Lecture: information on the 6 U.S. Economic Goals, the differences between fiscal, trade and monetary policy, analyze the current state of unemployment, GDP and CPI and apply fiscal policy to political candidates. Video: History of Downsizing conflict Homework:

3. U.S. Economic Goals:  Economic Growth  Raise in the nations standard of living  Economic Stability  Full employment and stable prices  Economic Efficiency  Good use of resources to produce the most goods & services  Economic Security  Protect individuals from risks they cannot control  Economic Freedom  We decide  Economic Equity  We want a fair economy

4. THE 3 POLICY TOOLS OF THE FED 1. Monetary Policy 2. Fiscal Policy 3. Trade Policy

5.  To be counted as employed we count people who have worked for at least one hour during the past week, worked without pay in a family business for 15 or more hours, have a job, but did not work due to illness, weather, vacation or labor dispute.

8.  List at least 5 items that a job provides people.

9.  Wages and salary  Health insurance  Pension  Self Esteem  Status  Friends  Role in the community  Position in the Family  Helps create confidence  Helps create meaning in our life.  “Way of life”

10.  Bureau of Labor Statistics (BLS) compiles this data each month through a survey of 60,000 households through phone calls and a random sample of employers who are asked how many people are on their payroll.  You are 16yrs + and have worked during the past week, one is employed.  You are 16yrs+ and are not working but have tried to find a job, one is unemployed. It also includes those waiting to be recalled to a job from which they had been laid off.

11.  Labor Force = number of employed + number of unemployed.  Not in the labor force includes those who fit neither of the first two categories, such as a full time student, homemaker, or retired.  Also not counted in the labor force are people classified as discouraged workers for they are people who are not looking for work. Many of these individuals have tried to find and they have given up after an unsuccessful search. In February 2016 there were 599,000 discouraged workers along with another 1.2 million who had not looked for work during the past month.

12.  The BLS defines labor force = Number of employed + Number of unemployed  The BLS defines the unemployment rate as the % of the labor force that is unemployed:  UR = Number of unemployed x 100 __________________________________ Labor Force

13.  Labor Force = 155,063,000 142,974,000 Employed 12,088,000 Unemployed  Unemployment Rate =  12,088,000/155,063,000 = 7.8%

15. Types of Unemployment: 1. Frictional - people between jobs or just entering or reentering. 2 to 3% of the work force. (students, homemakers, military, quit, fired) 2. Seasonal – It is the slow season. 3. Cyclical- Due to the business cycle. 4. Structural- person out of work for a longer period of time due to the change in technology and consumer taste. One’s skills do not match the openings. 2 -3%

16.  Total 16+ 4.9%  Adult Men (20+) 3.9%  Adult Women (20+)3.9%  Teenagers (16-19) 13.9%  White 4.3%  Black8.8%  Asian3.8%  Hispanic/Latino9.8%

17.  Less than a H.S. diploma 8.8%  H.S. graduate no college5.4%  Some college5%  Associate degree3.8%  Bachelor’s degree 2.8%  Masters Degree2.4%  Doctoral Degree1.7% 2015 stats

18.  Roughly 7.9 million jobs lost (Dec. 2007 to June 2009)  Since March 2010 there have been about 5 million jobs created.  Broad category of professional and business services there were 16.8 million Americans working in this category when George W. Bush took office in Jan. 2001.

19.  That grew to just over 18 million when the GR began. It fell sharply to 16.4 million during the first 6 months of Obama’s first year. In August 2013, almost 18 million American were employed in this white collar category.  The story for jobs that require less formal education is much different.  More than 6.8 million Americans were employed in the construction sector in Jan. 01 and that number soared to 7.5 million by Dec. 07.

20.  Today the number of Americans working in construction has fallen to 5.5 million. This loss is directly tied to the housing bubble collapse. As the recent housing industry revival and somewhat improving conditions in the commercial real estate, one hopes that construction jobs will increase.

21.  A generation of young workers who are in danger of being permanently sidetracked in the labor markets.  The long term unemployed tend to be depressed, suffer greater health problems and even have shorter life expectancy.  When they return to work they will earn 20% less over the next 15 to 20 years than their peers who were employed.

22.  Much more difficult to find a new job.  Take almost a year to find another job.  Tend to have greater financial commitments  Less able to move for they are tied down with a mortgage or a spouse’s job. In the 1980’s about 1 in 5 workers moved each year now it is 1 in 10.

23.  In the past decade, the flow of goods from factories in the USA has increased by about a 1/3. The USA is either 1 st or 2 nd in the World in manufacturing output. China?  U.S. manufacturing employment had steady grown from the end of the Great Depression to the early 1980’s when the numbers began to drop. Things stayed flat until 1999 when the number of manufacturing jobs just collapsed.

24.  In the ten years ending in 2009, factories shed workers so fast that we came close to erasing all the gains of the past 70 years. 1 out of every 3 manufacturing jobs – about 6 million in total – disappeared. There were about 11.7 million employed in manufacturing in June 09. Today about 11.9 million.  About as many people today work in manufacturing as did at the end of the Great Depression, even though our population today is twice as large.

25.  Domestic manufacturers make and sell more goods than ever before. Their success is based on an incredible increase in productivity where factories are producing more with less workers.  Only through productivity growth can the average quality of human life improve.  Globalization and computer aided productivity is causing income inequality to grow as the rewards for being skilled grow and the opportunities for unskilled Americans diminish.

26.  Many factory floors look radically different than they did 20 years ago; far fewer people, far more high tech machines, and entirely different demands on the workers who remain.  Lets look at the once dominant cotton mills in South Carolina. For almost 100 years into the early 1990’s, mills had work for anyone willing to put in a full day, no matter the level of education they had.  After NAFTA and, later the opening of China to global trade, mills in Mexico and China were able to produce and ship clothing and textiles at much lower cost.  Those few mills that survived were able to replace their workers with a new generation of nearly autonomous, computer-run machines. There is a job that a modern textile mill employs only a man and a dog. The man it there to feed the dog, and the dog is there to keep the man away from the machines.

27.  Fuel injector replaced the carbuetor for cars needed to be more efficient without sacrificing power. The carburetor sloppily sloshed gasoline around the engine. The fuel injector is a bit like a small metal syringe, spraying a tiny, precise mist of gasoline into the engine in time for the spark plug to ignite the gas.

28.  A car’s computer receives thousands of signals every second from sensors all over the engine and the body. The computer tells a fuel injector to squirt a precise amount of gasoline (anywhere from one to 100 10,000ths of an ounce) at the instant that the piston is in the right position (and anywhere from 10 to 200 times a second).

29.  For this to work, the injector must be perfectly constructed. When squirting the gas, the syringe moves forward and back a total distance of 70 micron-about the width of a human hair- and a microscopic imperfection in the metal, or even a speck of dust will block the movement and disable the injector.

30.  The tip of the Plunger – a ball that meets a conical housing to create a seal- has to be machined to a tolerance of a quarter micron, or 10 millionths of an inch, about the size of a virus.  That precision explains why fuel injectors are likely to be made in the USA for years to come.

31.  Requires up-to-date technology  Strong quality assurance  Highly skilled workers

32.  Running an advanced, computer controlled machine is extremely hard. Today the computer talks to the machine and the operator needs to be able to talk to the computer.  To run the machine: helpful to know the programming language used in manufacturing machines, need to understand calculus and three dimensional visualization.

33.  The combination of skilled labor and complex machines gives American factories a big advantage in manufacturing not only in precision products, but also those that are made in small batches.  In China, factories tend to focus on long runs of single products with no changeovers.

34.  Most companies need at least a 40% savings to move production outside the USA. There are many hassles:  Shipping costs  Time  Chinese companies are not as reliable  Foreign wages are rising 17% yearly  World’s fastest growing economies will not play by the rules.  Unrest in Northern Mexico  Oil price spike – trouble Middle East  Availability of steady electricity

35.  However difficult these problems can be there are continuing signs that US workers will have difficulty finding jobs if they do not have skills. Those people will be replaced by machines and foreign works if not skilled.

36.  There is no room in America for the unskilled.  2008 to 2018 (Georgetown) need for workers with some kind of postsecondary training or education will grow by 139,000 jobs in Wisconsin.  Jobs for high school graduates and dropouts will grow by 52,000 jobs. By 2018, 61% of all jobs in Wisconsin will require some postsecondary training.

37.  3 million manufacturing jobs could come back to the USA but they will be high-skill, high demand jobs.  63% of U.S. jobs will require postsecondary training by 2018. The US economy will produce 14 million new jobs in the next 10 years, but only for workers with at least a community-college degree. These jobs for people to move into the middle class. Problem is that a low % of college students in the US, 30% at four year colleges and 1 and 4 at 2 year colleges finish their degrees.

38.  Nationwide more than 600,000 skilled trades jobs remain open because of a shortage of qualified applicants.  10,000 Americans a day turn 65 and companies haven’t attracted enough young talent to replace their retirees.  Manpower survey showed that 20% of employers cited a lack of soft skills (enthusiasm, interpersonal, work ethic) causing them not to hire.

39.  Some economists like, Harvard’s Rosabeth Moss Kanter, believe that this mismatch accounts for a third of the unemployment rate since the Great Recession.  Tech oriented community colleges with links to industry are obvious solutions. The Obama administration has proposed an $8B proposal to fund this type of endeavor. Political gridlock has stalled the proposal.

40.  Caterpillar and Siemens setting up programs with local community colleges. High tech service companies like Mirosoft, Cisco, and IBM are starting 6 year combined high school and community college programs designed to churn out qualified midlevel employees.  KM is partnering with Generac in Eagle is another example.  CAPP and PIE courses now available in high school.

41.  Can we develop an Industrial Policy?  Possible to bring companies and workers together to decide how best to keep jobs at home.  Germany union leaders sat on management boards, corporate leaders worked with educators to churn out workers with the right skills, government offered TEMPORARY subsidies to forestall outsourcing, Germany did this starting in 2000 for they faced the same situation that we are in today.

42.  Does our politically polarized society prevent this from occurring?  Economic changes tend to happen during crises.  2000 to 2007 the USA saw its weakest period of job growth since the Great Depression.  Nobel laureate Michael Spence, author of The Next Convergence, looked at which American companies created jobs at home from 1990-2008, a period of extreme globalization. The companies that did business in global markets, including manufacturers, banks, exporters, energy firms, and financial services, contributed almost nothing to overall American job Growth.

43.  The firms that did contribute were those operating mostly in the USA, immune somewhat to global competition – health care companies, government agencies, retailers and hotels. Jobs in these sectors are lower paid and lower skilled than those that were outsourced.

44.  American firms have seen enormous profits quarter after quarter, but they would think twice before putting their next factory or R&D center in the USA when they can put it in Brazil, China, or India. These emerging market nations are creating 70 million new middle class workers and consumers each year. That’s one reason unemployment is high and wages are down at home.

45.  Globalization used to be a one-way street that led away from America. Now high energy prices, political risk and technological shifts are bringing opportunity back home.  Technological innovations and unfettered free trade would erase historical and geographic boundaries, making the world ever more economically interconnected and alike. (Tom Friedman discussed this notion in his book “The World is Flat.”  It seemed to work that way form the mid 1980’s to 2008 a period of unprecedented market calm that economists call the Great Moderation.

46.  When energy price increase and politcal risks increase, far flung global supply chains make no economic sense.  Low wage workers in China look less attractive as robots operated by highly skilled workers in the USA are able to do their jobs even more cheaply.  Free Trade sounds great until the fastest growing economies won’t play by the rules of the game.  Since the financial crisis, fragmentation rather than unity has become the norm.

47.  Chaos in the Euro Zone Monetary Crisis  Communist Party infighting in China  Argentina renationalized their biggest oil company  Brazilian political instability and the Zika virus  Several nations have put controls over their currencies.  Rich and poor regions from the E.U. to Japan and form China to Turkey are increasing tariffs and export restrictions. There is a rise of protectionism.  Due to all the risks in the world the new norm maybe a 2% increase in the economy per year instead of the 3 to 4% that had been the norm.

48.  IN THE RACE TO FUTURE PROSPERITY, NOTHING WILL MATTER MORE THAN TALENT.

49. Consumer Price Index  Inflation- is the rise in the general level of prices.  Demand-pull inflation  Cost-push inflation  Creeping inflation- low rate of inflation, usually 1 to 3%  Galloping- intense – ranging from 100 to 300%  Hyperinflation – abnormal – excess of 500% per year; last stage of a monetary collapse.  Stagflation- high prices and high unemployment at the same time.

50. GDP- Gross Domestic Product  Recession  Depression

51. The Federal Gov’t attempts to promote:  Steady economic growth  Full employment  Stable prices Tools of Fiscal Policy  Taxes  Spending

52. EXPANSIONARY FISCAL POLICY  An increase in government spending or a reduction in taxes  Benefits:  Increase spending in the economy  Decrease unemployment  Costs:  Can cause inflation

53. RESTRICTIVE FISCAL POLICY  A decrease in government spending or a increase in taxes.  Benefits:  Reduces total spending  Reduces inflation  Costs:  Can cause unemployment to raise

54. IN 2008 WHO WILL YOU VOTE FOR? Candidate 1:  Lower taxes  Less programs Candidate 2  Higher taxes  More programs Candidate 3  Lower taxes  More programs