Value ... the value of a lost job!

Dear Colleagues

What is the value of having a well paid job? If the remuneration is $50,000 a year, the value is actually much more because there is also the prospect of having such a job into the future.

What value is lost when that job is lost? If the prospect of getting a new job like the one before is high ... then the value lost is merely the money lost for the interim period.

But what is the value lost when the job is lost and the prospect of getting a similar job is zero. Then the value lost is the whole of the value of the well paid job and its future less the value of whatever job might be available.

When a company reduces its payroll and increases it profits, the stockmarket looks with favor on this and rewards the company by bidding up the price of its stock. But there is no accounting and no reporting so that the value lost in the society is taken into account. At most profit goes up by the money amount of remuneration saved ... but stockmarket value goes up by this amount and a multiplier ... the price/earnings ratio. This is inherently a destabilizing set of metrics because profit increase has become an incentive for socio-economic decline.

So we need to quantify the value elements in this.
... The base value of a job is the amount of the annual remuneration.
...... Add the discounted present value of the future earnings from this job
.......Discount this by the probability of keeping a job of this remuneration into the future
... Add the value multiplier elements in the family that arise because of remuneration
...... The family has buying power for all its immediate basic needs
...... The family has buying power for education for the children
...... The family has buying power for the cost of healthcare
...... The family has buying power for the purchase of discretionary items like entertainment
... Add the value multiplier elements as the family spends in the community
...... Taxes are paid
...... Suppliers of goods and services are paid
...... Education gets funded
...... Healthcare gets funded
...... Travel and entertainment supplies get paid.

If one person with a remuneration of $50,000 a year becomes unemployed ... the economic value loss has a value multiplier that is usually more than five, and likely to be ten. This value does not figure in the usual flow of data about the economy ... yet is is a huge matter, and totally missing.

The following is a rough calculation to give some idea of the order of magnitude of the matter. If one million people are out of work with no prospect of new work ... and the remuneration per job would be $50,000 ... and the value multiplier is 10, then the total lost value becomes a whopping 50,000 X 10 X 1,000,000 or $500,000,000,000 or $500 billion. If 10% unemployment in the USA is equivalent to some 15 million people without jobs and remuneration the total value loss for society is about $1.5 trillion. One wonders why economic leaders ... specifically bankers ... do not understand this more clearly, and accordingly why they do not seem to be interested in addressing the matter seriously. I guess the same goes for the business media!

Peter Burgess