The online New York Times recently published an article entitled, "As New Graduates Return to Nest, Economy Also Feels the Pain." Written by Catherine Rampell, the article describes an unusual consequence of increasing numbers of college graduates returning home after college because of poor job prospects. In short, it's not just that the unemployed buy less stuff generally (which reduces economic activity); rather it's that the unemployed (particularly the young) also don't start households, which can have a powerful effect on a country's total economic output.
It's an interesting issue, and could prove difficult to fix. The reason is because establishing house-holds appears to require not only consistent and sufficient income, but also confidence that the larger economy is doing well. The problem arises when people with otherwise sufficient means refuse to start their own house-holds because they deem it unwise given the barren and uncertain times. As the article suggests, the combination of high-unemployment among potential house-hold starters, and the low-confidence in people of marginal exacerbates what John Maynard Keynes termed the "paradox of thrift." "Saving is good for the individual," says Ms. Rampell, "but en masse can hurt the economy by reducing demand."
The good news is that some economists believe pent-up housing demand needs only an improvement in employment (or in employment prospects) to reverse the current trend. As it is estimated that such demand could top 1.1 million houses, and that the establishment of a single house-hold adds approximately $145,000 in total output, improvements in this regard could have a pronounced effect on the national economy.
This argument suggests that one way to improve economic growth in the US today is to release the constraints which currently hold back demand in the housing market, namely high unemployment and low confidence. While President Obama's jobs bill seeks to address both issues, the ideological struggles of the government in our time make compromise difficult. Perhaps it's possible to remedy such ills without the government.
One method is entrepreneurship. As a recent post by Washington Post blogger John Harrison describes, while entrepreneurship in US is down 0.3% since 2009 (7.7% compared to 8.0%) necessity-driven entrepreneurship is up 5% (28% compared to 23%) in that same interval. In short, more people are turning to entrepreneurship because they need it to earn a living rather than because they have a stellar idea.
Interestingly, a growing number of bloggers and "netizens" advocate just such an approach for helping the unemployed, underemployed, or otherwise-unhappily employed find work for which they feel passionate. A major advocate of this approach is Leo Babauta, founder of blog Zen Habits, who among other things encourages readers to improve their lives one habit at a time. Keeping things simple, he believes, can help people discover their passion in life, and from there follow it. With technology empowering millions of people as never before, the possibilities for people to contribute to society are great.
In short, it appears that we live in a time when the ability to create our own job has never been more possible or necessary. With anemic economic growth, global uncertainty, and dysfunctional government, the current times appear ripe with danger and opportunity; danger, in that we might find ourselves unemployed, ill-used, or without the means to live creatively; and opportunity, in that the context has never provided so many tools for helping us improve our position. The future prosperity of our country depends on us finding those things we do best, and expressing those abilities with the tools of our times. Your honest passion, given a chance to grow, may not only promote prosperity in the land, but also assist you in living a happy and healthy life. I wish you all much luck.
Happy Friday, friends :)
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