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URL:  http://boards.fool.com/that-is-why-alan-greenspan-worries-so-intensely-12345061.aspx

Subject:  Re: Ten Mental Exercises Leading To Freedom Date:  4/5/2000  11:35 AM
Author:  hocus Number:  7478 of 756526

That is why Alan Greenspan worries so intensely over the low unemployment figures--thereby implying that a little more unemployment would be a good thing for our society.

That's a great comparison. I'd wager that 50 percent of the population has no idea why Dan Rather is always telling us we should be rooting for people to lose their jobs. If we want to understand what is going on in the world, we need to know this. I have no special expertise in this field, so anyone should feel free to challenge what I say. But I've never let a lack of expertise inhibit me from expressing my views. ;-)

To simplify matters, let's assume that there are only 100 people in the country, 10 are high-pay executives and 90 are average workers. On Day One, nine of the 90 workers are unemployed, so the unemployment rate is 10 percent. On Day Two, three find jobs, and the unemployment rate falls to 7.5 percent.

From my way of looking at things, the economy is clearly better off--84 workers are going to produce more than 81 workers. The only explanation I can come up with for Greenspan's anxiety is that the 84 workers will be a little less worried about losing their jobs on Day Two than they were on Day One. If each of them asks for a tiny raise, it could mean that, despite the increase in productivity from Day One to Day Two, corporate profits might go down a bit and the 10 executives might get paid a little less.

So, to the extent that your pay is dependent on getting workers to accept smaller wages than their work merits, economic growth for the country might produce an economic loss for you personally. I say, so what? I don't mind having my pay cut a little if that is what it takes to get the economy moving ahead. In the long run, I believe that I'll share some of the benefits of the growth that will come from the increased employment.

It could be argued that this discussion strays from the topic of early retirement. I don't think so. The possibility of early retirement arises largely from the increased productivity of our economy. Some see this increased productivity as a problem and have fostered a growing consumerism to keep the old work-until-you-die mentality going regardless of the productivity gains.

But that game is failing now that consumerism is leaving people increasingly stressed, isolated, and depressed (see Post #7456). So people are starting to look for new solutions to the productivity "problem." My view is that the idea of early retirement (broadly defined) is not going to remain an interest of only a small group for much longer.
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