Investment Contrarians

This Isn’t Just an American Dilemma

By for Investment Contrarians |

240113_IC_leongWe have nearly eight percent of Americans pounding the pavement, but it is more likely double that if you count the workers actually unemployed or underemployed. But the problem of high unemployment is not only an ongoing issue in America; it’s a problem that is found in pockets all around the world, from the rust belt in Ohio to the massive manufacturing plants in China.

Japan, which used to have an unemployment rate of about one percent, is currently struggling to find jobs for its citizens. The country’s unemployment rate stood at 4.1% in November 2012, according to the Ministry of Internal Affairs & Communications. By comparison, Japan’s unemployment rate averaged a mere 2.7% from 1953 to 2012, which is why the current rate is a concern. (Source: “Japan Unemployment Rate,” Trading Economics web site, last accessed January 23, 2013.) Japan’s efforts to lower its unemployment rate continue to be hindered by the country’s stalled economic growth.

The unemployment problems are becoming a global issue. According to the International Labour Organization (ILO), the amount of unemployed in the world could set a record this year and could continue to rise higher until 2017. The report from the ILO estimates 202 million people will be searching for work this year, based on its Global Employment Trends report. (Source: Barnato, K., “World Unemployment to Hit Record High in 2013,” CNBC, January 22, 2013.)

Surging unemployment remains a thorn in Europe’s side, with a super-high unemployment rate encompassing the eurozone and the entire continent. In the eurozone, the unemployment rate was 11.8%, or about 18.8 million unemployed, in November, the highest number since the eurozone was formed in 1999. (Source: Melvin, D., “EU unemployment tops 26 million for 1st time,” Associated Press, January 8, 2013.)

Spain has a staggering 25.0% of its people out of work. Greece’s unemployment stands at 23.1%, while Portugal’s stands at15.7%, Ireland’s at 14.9%, and Italy’s at 10.7%, according to Thomson Reuters. And you thought we had it bad here.

The problem is that the high unemployment rate causes social unrest. Just take a look at the rallies and marches on the streets in Europe.

And with the global economies continuing to show some stalling (especially in Europe), the jobs situation doesn’t look bright for the next few years. The eurozone is in a recession, and no one is hiring.

We are even seeing employment unrest in China, as workers are beginning to fight back and demand higher wages from rich global multinationals that are operating sweatshops in the country. What is problematic is that wages will rise to a certain point before companies, faced with cost pressures, will just move jobs to locales in Latin America and Southeast Asia that offer cheaper labor.

Moreover, the problem with the surging global unemployment rate is not only in the numbers, but it’s also in the quality of jobs being offered. Many jobs are for lower-paying, unskilled labor. Even in countries like China and India, jobs requiring high education levels pay only a fraction of what workers make in America and Europe, which is why there are more jobs moving from the higher-paying countries to lower-paying regions. I expect this trend to continue.

My concern is that unless the world creates jobs—and higher-paying ones at that—there will be mounting social unrest and increased income disparity between the haves and have-nots.

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