Can You Answer This Word Problem?

Rodney Johnson | Monday, October 14, 2013 >>

Do you remember those word problems from Algebra?

“If a coffee seller has 300 lbs of coffee at $5 per pound, how many pounds of $9-per-pound coffee should he add so that his blend averages $6 per pound?”

That was the sort of thing I lived for in high school. A math problem wrapped up in words was right up my alley, which is probably how I got into this profession of writing about all things financial.

Over the years I came to realize that not everyone shares my love of such problems. In fact many people run from them. However, I was not aware until recently that people bad at math are also writing about economics.

The trend in part-time jobs is a case in point.

Writers from Bloomberg to Moody’s have been addressing the question of part-time job growth over the last month, pointing out that it’s common for part-time jobs to flourish immediately after a recession.

This might be true, but for all of those going by establishment figures (which we don’t), the recession formally ended in July of 2009.

That’s not recent.

In a business cycle, four years and three months is ancient history.

There is no way that our economy should be creating a bunch of part-time jobs right now. Instead, we should have had part-timers converting to full-time work more than two years ago, if we retraced what typically happens after a recession.

And how many of our recent jobs are part-time? “Not too many,” these bad-at-math people claim. Over the last year only three out of five new jobs created were part time, they say.

Hmmm.

The current employment structure of our economy has 20% part-time workers. Last time I checked, three out of five is 60%. This sets up a word problem from Algebra!

If your existing labor force is 20% part-time, and you add (a very questionable) 1.8 million jobs that are 60% part-time, is part-time employment in your labor force shrinking, growing, or remaining the same?

For those of you who hate word problems, I’ll give you a hint: Our labor force is quickly adding low-paying, low-skilled, part-time jobs that are diluting the existing structure of employment.

While we’re not a part-time nation by any stretch of the imagination, adding more such jobs – particularly four years after the recession officially ended – is a travesty.

We keep talking about such points to highlight the lack of progress in our economy. It’s not that we delight in this sort of thing. We want people to be very clear, not only about the current state of the nation, but also about what lies ahead.

If a majority of the jobs we’re creating are part-time, then how are the workers in those jobs supposed to support their families?

Or pay taxes?

Or grow their savings?

The slowly changing nature of our economy today has very long-term implications for the structure of our nation tomorrow.

We would all do well to take a minute and consider another, yet related, word problem:

If millions of young people join the economy and cannot earn enough income to support themselves, then how will they contribute to support the wellbeing of the millions of Boomers as they retire in the years to come?

Rodney

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Categories: Purchasing Power

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.