According to a new report by the United States Congressional Budget Office, Barack Obama’s choice for raising the United States’ minimum wage could cost the country over 500,000 jobs by the end of June 2016.
The CBO, a governmental agency, believes that raising the federal minimum wage – a nationwide minimum hourly wage that determines the price floor for all states – is unlikely to result in a significant change to the gap between rich and poor people in the United States.
In the recent report, the CBO stated that as many as 16.5 million American workers would see their wages increase under the new regulations. This could lead to a large increase in consumer spending and an improvement of economic conditions.
But the office agency also warned that many Americans could lose their jobs due to unaffordability. Projections indicate that employers would “shed workers” as costs increased, or replace staff with technology.
In a recent press release, the CBO stated that: “The large majority would have higher wages and family income, but a much smaller group would be jobless and have much lower family income.”
The report on potential job losses is the second time this year that the CBO has dealt a blow to the White House’s plans. The agency previously calculated that the cost of the subsidies in the President’s health care reforms could create incentives for many US workers to leave their jobs instead of using employer-provided health care.
White House plans have hinted at an eventual federal minimum wage rise to $10.10 – a significant increase from the existing $7.25 minimum wage. The CBP suggested a smaller increase, to $9 per hour by June 2016, that would have a smaller impact on the economy.
Republicans have staunchly opposed increasing the minimum wage due to its cost on employment. Several Republicans claim that raising the minimum wage is not a smart policy during a period of slow economy growth and high unemployment.Read more
Sluggish economic growth has affected several Eurozone economies over the past three years. In this brief economic comparison, we look at two of Europe’s largest markets – France and Germany – and compare their recent performance using two nearby but very different cities.
The BBC recently profiled the French city of Chalons – an interesting city in which circus trainees take part in government-subsidised trapeze training as part of an amazing French effort to keep the circus alike.
As bizarre as it may seem, the subsidised programme has its benefits – the circus is an important French tradition and, in the form of tourism benefits, it pays for itself over time while employing young French workers.
France’s reputation for administration is well known and many commentators have expressed their concerns about the state-heavy country’s economic future. Across the border in the German twin town of Neuss, attitudes are a little different.
TI Automotive managing director Oliver Schmeer – a German – believes that France faces numerous challenges in reaching its economic potential; a task Germany has largely accomplished over the past decade.
France’s “ultra-complex” labour code and high taxes – not to mention the country’s famously difficult unions – limit its potential and make it harder for industry to get ahead. Schmeer believes that the French Socialist government “doesn’t understand industry” and can’t comprehend that businesses rely on customer to place orders.
The French leadership has made several attempts in recent months to improve its economic situation. President Hollande recently promised to reduce social charges for French companies if they employed more workers.
Schmeer believes that it’s an empty stunt that showcases the government’s lack of understanding for industry. He said: “We can’t offer jobs to people to build things that no-one wants.”
Many in France believe that change is required, and that the country’s significant unemployment benefits and unions should be the first to change. However, with a record unemployment rate and few job opportunities, France’s economic woes are unlikely to be fixed with sudden cuts to unemployment benefits.
Business September 28, 2013
New regulations will require individuals on long-term unemployment benefits to work in order to qualify for financial assistance. Chancellor George Osborne used the Conservative Party’s annual conference as an opportunity to explain changes designed to reduce ‘something for nothing’ plans within the benefit system.
People that have been unemployed for three years or more will face severe changes to the way their benefits are issued. Mr Osborne announced that, from April of next year onwards, long-term jobless will need to either attend a job centre every day or take part in workplace training in order to qualify for their benefits.
Other options include taking part in work placements designed to improve output and reduce the ‘something for nothing’ system that critics claim is costing the UK a great deal in tax revenue. The changes to benefit rules will affect 200,000 people as they come into effect next year.
The cuts to public spending are part of a dedicated effort to deliver a budget surplus, which Mr Osborne has claimed will provide ‘insurance against difficult times ahead’ for the United Kingdom.
Reductions to benefits and other public services could potentially reduce spending by billions of pounds every year. The government has promised that cuts will keep occurring if the Conservative Party wins the 2015 election.
The plans have attracted mixed feedback from the press, with news outlets noting that the change to the welfare system is the largest in recent history. Many of the jobs offered to beneficiaries have been the target of criticism from analysts.
Under the new rules, beneficiaries will need to take part in 30 hours per week of community work, or attend job centres daily. The community work includes job programmes such as cleaning graffiti, picking up litter, and assisting the elderly.Read more
United States businesses added 176,000 new jobs to the economy in August, new data from payroll processing company ADP claims. The new data has given many economists optimistic views of the US government’s upcoming jobs report.
The employment report, which will be released this Friday by the United States Labor Department, is expected to show a short-term increase in jobs after many private sector growth signals diminished in recent months.
The ADP report confirms many of the predictions, showing that a large increase in jobs has occurred in the last month. The majority of the new jobs in the report have been added by small and mid-sized businesses, indicating a possible new trend.
Of the 176,000 jobs added during August, over 71,000 were at small companies and local businesses. An estimated 74,000 were at mid-sized businesses. Finally, 32,000 new jobs were created at large companies, bucking previous employment trends.
As with previous employment progress, some sectors fared better than others. The biggest winners were the professional services sector, with 50,000 jobs, and trade, transportation, and utilities, which added 40,000 new jobs to the US economy.
The increase in housing sales across the United States resulted in 4,000 new jobs in the construction industry. Economists and political commentators have noted that a growing real estate market activity could lead to large-scale US job creation.
While the report has resulted in optimistic assessments regarding the government’s upcoming job report, some analysts believe that there could be a major difference in the findings of the reports. A previous Labor Department report estimated that only 161,000 jobs were created during July, compared to 200,000 from the ADP.
ADP has partnered with Moody’s Analytics to provide the reports, which, despite a range of initial accuracy issues, have come closer to matching US Labor Department reports in recent months.Read more
After months of increasing unemployment, the number of people out of work fell by a modest 4,000 in the three months leading up to June. 2.51 million Britons are out of work, with approximately 1.4 million individual seeking jobseekers allowance in their period of unemployment.
While the unemployment rate remains at 7.8 percent – a figure that still exceeds the target of 7 percent that the Bank of England is aiming for – the number of people on jobseekers benefits has hit a four-year low. At just 1.4 million people, the number of people on jobseekers benefits is at its lowest point since February of 2009.
The drop in unemployment beneficiaries comes with additional good news for many people – employment reached a record high. A growing number of Britons are now self-employed due to the somewhat sluggish economic growth, with over 4 million contractors, freelancers, and other self-employed professionals now in the UK.
Since the surprising progress in employment comes after several months of sluggish growth, the figures have resulted in some rare optimism from economists. Minister of Employment Mark Hoban claims that the new employment and benefit figures ‘paint a positive picture of the UK labour market.’
UK workers are now completing more aggregate hours than they have in the past five years, with total productivity coming close to the level achieved during mid to late 2008. Despite this, many employees are still working on zero hour contracts that guarantee relatively little in the way of stable employment.
The improved employment conditions have also failed to reach several employee demographics. Youth employment – the rate of employment amongst those aged between 16 and 24 – is at its highest rate in recent history, with 973,000 teenage and young adult workers currently seeking employment.Read more
Despite reports of a decline in unemployment in many states, over half of all states polled in a recent Bureau of Labor Statistics report experienced job growth during the month of June. The American national unemployment rate remained steady at 7.9 percent – a figure hides the extreme highs and lows of many state economies.
States with the highest rates of joblessness include Nevada, where over 9.6 percent of formerly working people were unemployed as of June. The state with the lowest unemployment rate was North Dakota, where a resource boom and agriculture are leading major economic growth.
Despite the steady unemployment rate, joblessness increased in 28 states across the nation. The states most affected by the decline in jobs include Tennessee, which lost over 16,500 jobs in then last month as businesses tightened their budgets, and West Virginia, where an estimated 5,000 jobs were shed during the month of May.
Other states, however, saw improved economic activity that resulted in more jobs for once unemployed professionals. California showed the largest improvement in job creation, with a 2.1 percent reduction in joblessness. Texas gained 300,000 new jobs in the last month, setting a record for new job growth in the current economy.
The patchy job growth is indicative of a change in American employment, with the growth states largely driven by resource-based economic advancement and energy industry positions. Midwestern states, once driven by manufacturing, had some of the highest unemployment rates with Illinois and Michigan at 9.2 and 8.7 percent, respectively.
States with large cities, such as New York and California, also have some of the top unemployment rates in the nation. Despite significant improvement, California still has an 8.5 percent unemployment rate, while service capital New York has a total unemployment rate of 7.5 percent.Read more
Growing unemployment in Southern European countries is hurting young people the most, new data from the OECD unemployment survey shows. The latest OECD survey paints a bleak picture of economic opportunity for youth in the struggling countries of Greece and Spain, where 60 percent of young people lack jobs.
Despite moderate economic growth in the UK, many of Europe’s markets are stuck in an unemployment crisis that threatens to reduce job opportunities for the young for over a decade. Overall unemployment in Greece is expected to reach up to 28.2 percent in the next eighteen months, based on economists’ predictions.
Other European nations, including France and Italy, are also faring poorly as youth unemployment continues to worsen. The French unemployment rate will reach 11 percent in the next eighteen months, with Italy’s rate exceeding 12.5 percent in the same time period, according to the report’s economic data.
With an increase in total unemployment, analysts are expecting youth to suffer the most from limited job opportunities. Over 60 percent of young people in Greece are unemployed. Economists and social commentators have predicted that the growing unemployment rate in Southern European countries could lead to civil unrest.
Other countries with growing unemployment concerns include Portugal, where a current 26.8 percent unemployment rate is predicted to grow to 18.5 percent in the next eighteen months. Ireland and Slovenia, at 13.6 percent and 11.2 percent each, are also expected to see increased unemployment due to minimal growth.
UK unemployment is expected to stay relatively steady over the next year, with a current figure of 7.9 percent expected to grow to 8 percent by early 2014. Of the OECD countries, only South Korea, Norway, Japan, Austria and Switzerland were recorded as having sub-five percent unemployment rates and real job growth.Read more
The Office for National Statistics has released new data that shows a large drop in the number of unemployed. Over 57,000 formerly unemployed people entered the workforce in the last three months to May, reducing total unemployment figures to 2.51 million.
Ministers have pointed to the study as proof of a long-term recovery, with the total amount of people seeking Jobseeker’s Allowance dropping to 1.48 million. The new data marks the first time in three years that Jobseeker’s Allowance claimants have numbered below 1.5 million.
The report shows a significant rise in the number of employed people, with 16,000 entering new jobs or returning to work in the three months to May. There are 29.7 million people in employment throughout the UK, with the unemployment rate set at 7.8 percent based on current data.
Despite the decrease in unemployed, however, the report indicates a worrying trend regarding long-term unemployment. More than 915,000 people are unemployed for over a year, the report claims – the highest amount since the mid-1990s. The report also showed a rise in ‘economically inactive’ people, who now number 9.04 million.
The rise in long-term unemployed is accompanied by tepid expectations of earnings growth over the next year. Capital Economics, a private sector research group, has predicted that wages will likely increase by 1.5 percent annually as the economy grows.
Compared to retail inflation figures exceeding three percent, the wage growth is one of several signals that British salaries are declining on the whole. Increases in retail pricing, particularly for ‘everyday goods’ such as food and gasoline, have increased at a far greater pace than earnings for the past 40 months.
The drop in real wages has become a major concern for economists as the economic recovery effort runs into issues. Economists predict that wage growth will continue to be slow as employment in the private sector gradually increases.Read more
A government cap limiting benefits to £500 per week will increase labour market participation, the government claims. The cap will limit individuals to £350 every week in total government benefits for housing and income, and families at £500 in overall assistance.
The change in policy reportedly will not affect people claiming benefits while still in jobs. Government officials claim that the change in policy is designed to reduce spending and encourage a greater number of people to participate in the labour market, which has suffered as a growing number of people lose employment.
The Department for Work and Pensions reported last year that 12,000 people had found jobs after claiming unemployment benefits, indicating that the employment opportunities for Britain’s out of work are improving. The changes to benefits will affect over 40,000 households, according to a DWP estimate.
Critics of the benefits cap claim that a reduction in public assistance will hit families with small children the hardest, although supporters of the policy change claim that it will improve labour market participation. The Work and Pensions Secretary, Iain Duncan Smith, has noted that the current benefits discourage people from searching for jobs.
Opponents believe that the reduction in public assistance will cause some families to struggle as rents increase across the nation. The cap primarily affects individuals in London, where almost half of the people affected by the change reside. The changes to policy will come into effect at the end of September across the nation.
The government believes that the cap will reduce its spending by over £110 million in the first year, with a £300 million reduction in spending to follow over two years. Four London authorities have already introduced £500 public assistance caps, but have reported that enforcing them has been difficult due to high rental rates.Read more
UK financial services companies have been hit by severe job cuts as ailing revenue figures have prompted many in the industry to take immediate action. UK financial services firms have cut an estimated 10,000 jobs over the last three months, a new study by PwC has reported.
The job losses were largely predicted by industry groups, which predicted that there would likely be a serious downsizing in many financial firms over the previous three months leading up to June. The downsizing activity has been attributed to a ‘profits dip’ in the sector, with commissions and fees dropping over the last three months.
Despite being accompanied by a significant decrease in operating costs, the industry has been hit hard by reduced commissions. The sectors hardest hit by the recent job cuts include banking and securities trading. Investment management and insurance were also hit hard, with thousands of layoffs across the two industries.
The layoffs have come about despite an increase in confidence in the financial sector that hasn’t been observed since the early 2000s. The PwC survey reported that most people involved in the financial industry expect profitability to increase during the next quarter due to industry-wide growth in business volume.
Others in the industry have theorised that the job cuts were caused by a series of recent regulatory measures from the EU, many of which were targeted squarely at the financial services industry. The bonus cap, which limits the amount that bank executives can be paid via bonuses, is reportedly a major concern for many.
Other issues include proposals to reduce staffing flexibility, which could cause some banks to struggle with maintaining staff numbers. The industry is worried about an increase in public governance that could slow many banks’ ability to do business.Read more