BreakingOut.NET

Scott Gerber at nevergetarealjob.com made some good points about the reality of the modern jobs market in the West.

Scott points out that there are currently over 81 million young people unemployed throughout the world.

And the problem is especially acute in the developed western economies, particularly those of Western Europe.

Why There Aren’t Any More Jobs – And What We Can Do About It

At the same time young people are still being quoted the same old mantra by parents, teachers and society.

“Go to college or university. Study hard. Graduate with good grades – and a big debt. Then send out resumes by the hundred and land a ‘good job’ with a large corporation”.

And spend the next decade or more paying off your college debt. Whilst taking on a mortgage at the same time – yet more debt for you to service.

People are still being presented with the view of the world as understood by old people as it was back in the 50s, 60s and 70s.

The problem is that the world isn’t like that anymore.

The World of Work Began To Change In The 1980s

Three things have happened since the 1980s which are having a major impact on the economies of the developed countries. And it’s these events which have changed the nature of employment markets in the West.

The Opening Up of China

Before the 1980s doing business with the Chinese world meant Hong Kong or Taiwan. Mainland China itself was a closed out of bounds Communist country.

Then China began to reform and open up it’s economy. Since then it’s pace of industrialization and modernization has been breathtaking. Industries that were once based in Europe have now migrated to China.

The Collapse of Communist Eastern Europe

Next came the collapse of Communism in the USSR and Eastern Europe, together with the reunification of Germany. With this came the opening up of the economies of the ex-Eastern Bloc and their integration into the world free market system.

This meant lower cost resources – in particular labour resources – now became available to multinationals in Western Europe and the US.  As a result, from then on jobs in the Western developed countries would not longer be as secure as they had been up until then.

The Opening Up of The Internet To The Public

Before the 1980s, the Internet was accessible only to education and research institutions and government authorities, in particular the military.

When the Cold War ended, the Internet was opened up to commercial firms and the general public.

This has made possible a massive communications explosion.  Communications were no longer under the control and restriction of Post Office authorities or telephone companies. Global communications are now so cheap that they’re almost free.

But the Internet isn’t just about communication and media.

The Evolution of the Web as a Channel for Marketing and Commerce

The Web makes it easier and cheaper to buy, sell and outsource globally.

It’s now possible to create “virtual firms”,  with staff scattered throughout the world, in some cases even without a conventional office or physical address. Firms can now reach markets anywhere in the world much easier than before.

Result Number One: Globalization

Globalization has begun to shake up the whole of the old economic system.

Jobs are migrating. Economic activity is migrating.  It’s a process that’s going on right now. And it hasn’t even yet reached half way.

Result Number Two: The Old World of Employment No Longer Exists

At the same time the developed countries are producing more and more graduates than ever.  The current goal of the UK government is for 50 percent of all young people to enter higher education.

Yet the old sector of large blue-chip companies can’t create the extra jobs and careers needed to absorb all these new graduates.

In fact, the big corporates are actually going in the opposite direction: cutting and migrating jobs to Eastern Europe, China and India.

Economists, politicians, trade unions, businesses and the public still aren’t sure how to respond. Some aren’t even aware of the full impact of all this. Often they think we’ll just “weather it through” and that it will soon just go back to “business as usual” after a few years of “recession”.

Too many people still look at things the way they’ve become accustomed to over the last 20, 30 or more years.

They’re still pushing the old conventional path of study, debt and mass CV writing in the hope of leading to a long term job.  As Scott Gerber says, faced with all these changes, it’s clear that this is an obsolete model.

The old pre-1980s system of employment can’t help us now nor in the future.

We Need Enterprise Creation First and Foremost, Not “Job Creation”

People in the West have to get more active themselves. They have to create their own jobs by creating their own enterprises.

This means the emphasis has to shift away from “job creation” using the old model, and over to enterprise creation first and foremost.

Trying to rely on getting the existing large corporations to try and create new jobs isn’t going to work. They simply aren’t in a position to do this. The large corporates are seeking to get rid of jobs in the West, not create new ones there.

Jobs can only be generated by small businesses and start-ups. And it’s start-ups that have the greatest potential for creating the largest volume of new jobs overall.

And for small business start-ups, it’s the cost of employing people – and the social taxes that are levied on employees, that figure large in their budgets.

Which brings me to another crucial issue…

Punitive Taxation of Employment Must End

Throughout Western Europe and to a lesser extent in North America, employment is taxed at extremely high rates. I’m not talking about income taxes here – although those too are high in Western Europe.

I’m referring to the bundle of social taxes that are imposed on jobs. These are mostly split between employer and employee.

This includes such things as pension insurance, unemployment insurance, social insurance, disability insurance, long term care insurance and not least of all, health insurance.

These additional taxes typically add around a further 50-75% to the salary cost of employing someone.

Normally when an activity is taxed at such high levels, the intention is to discourage the activity concerned. An observer from another planet would conclude from this punitive tax policy on employment that governments in the West actually want to discourage new jobs and also eliminate the ones that already exist!

Western governments could get away with taxing employment like this when the jobs were largely captive in the West, back in the pre 1980s. But this is no longer the case.

This isn’t to say the services that these insurances pay for aren’t needed or shouldn’t be provided anymore. Of course they are needed. The issue is how we finance them.

We need to start moving this tax burden away from employment and onto other means of financing, such as income taxes, sales taxes, local taxes and so on.

Governments in Europe have at least now begun to realize that the limit has long been reached with their social insurance taxes. The need now is to turn things round and start to quit the employment-taxing habit. So far, very little is being done in this direction. Employment is still being taxed in the old way.

Hostility To Entrepreneurs in Europe Must Cease

A further problem many countries in Western Europe have is that they still don’t see the full importance of enterprise creation.

Too many Europeans and especially government officials regard entrepreneurship and entrepreneurs with suspicion, if not downright hostility. I’ve had first-hand experience of this myself.

Too many people in Europe regard entrepreneurship as too risky, as a low-status activity or somehow as “enemies of the social system”. The public sector in Europe still enjoys far too much status and comfort at the expense of the private.

Yet it’s the private sector that produces the wealth for the public sector to come along and tax to pay for their social programs.

Tax regimes, regulation, hire and fire rules, employment contract systems in Western Europe are still structured to fit with how things were in the pre 1980s economy.

But if we want to create new jobs both now and in the future, then these can only come through raising our levels of entrepreneurial activity.

In the West we have to change our attitude to jobs, enterprise,  and employment taxation if we are to be able to respond sufficiently to the problem of disappearing jobs.

Image courtesy of Labour Youth