Unemployment is a red herring

More specifically, the need for outside employment is a farce.

There is NOTHING. AT. ALL. to prevent a bunch of laid off workers from starting a cooperative and becoming self-employed.

There are a few trades, like factory workers, where it's impractical due to economies of scale and the cost of land of machinery.

But why in the world would a bunch of electricians, IT guys, plumbers, or even mechanics, have to rely on outside employment at all? What prevents a coupla cooks and a coupla waiters from opening up a restaurant? I just don't get it.

There's a gazillion of trades that don't have much in the way of barriers to entry. Unemployment will remain structural as long as people don't start creating their own jobs.

What are your thoughts on the issue?

Uh, supply and demand? Lacking resources?

I have had the same thoughts, but now I realise it's thought too simple. On a macro-level, what economies do is basically creating and refining resources (yes, even the service branch, on a meta-level, so to say). If there are not enough raw resources to either mine or refine, then you can't have enough production... gah. That sounded way more awful than I had planned, I hope I could get my point across...

On the micro-level, it's demand and supply. A town can only keep so and so many restaurants prosperous, to use your example.

Nothing prevents them except of all the goverment regulations and burreaucracy. If you've ever tried to start a company in Poland, you'd know how obstructive the administration is. Not to mention corporate taxes...

That's not as easy as you make it.

Starting a business involves quite a big initial investment, and a lot of red tape.

Do you want to open a restaurant? Perhaps $300,000 might be enough for the initial investment, but that'd be cutting it close. Most people don't have that kind of money to risk, and if they do they cannot afford to try such a high-risk enterprise as this one.

edited 9th Jun '11 12:41:14 PM by Carciofus

But if people are getting laid off doesn't that suggest that there is less room in the market for them?

Take the restaurant thing. A bunch of cooks and waiters getting together and opening a restaurant (assuming they had the collective funding to get property and whatever else) would only work if there was a local demand for that restaurant (otherwise it wouldn't have any business). If there was enough demand for that business to justify opening a new restaurant then their previous employers probably wouldn't have had to lay them off to begin with.

EDIT: Ninja'd like hell, good Lord.

I'll use your restaraunt example, and the difficulties that sprang to my head immediately.

First, they have to lease a suitable place and outfit it with all the stuff they need. To do so, they might have to secure a loan or a credit line from a bank. A bunch of unemployed people trying to get a loan might prove to be difficult to do that.

Second, is there a desire in the market for whatever restaraunt they wish to run? If they're wanting to open up a Tex-Mex place in a market that is already saturated with Tex-Mex places (I like Tex-Mex), what differentiates them from the other ones so they cna get business? I'd imagine that the'd look into that prior to starting it, but it might be that there is no market desire for the service or product they're best suited at.

Yes, they might have all the talent and skill needed to operate the restaraunt at a profit, but there's barriers they may have to deal with that might make the idea a non-starter.

edited 9th Jun '11 12:43:44 PM by pvtnum11

Capital investment is actually a real issue. You think opening a restaurant is a matter of just knowing how to cook? You think a factory is something ready to go?

Hah. And no, blaming all your woes on the evil obstructive government isn't going to work. If anything, the government could help by making available resources that wouldn't otherwise be available. Take Germany for example, their approach can be quite effective. They have loans and other programs for people who want to start businesses.

edited 9th Jun '11 12:43:34 PM by blueharp

Well you discount how unemployment occurs in the first place (I also love the random ass, the government stops you! Because let's ignore all the small business grants and tax cuts they give to starting businesses and how many of them pay zero tax for the beginning of their operation. Incorporating costs $100, yes what an obstacle blocking people!)

• What demand is available in your geographic location?
• Do you have the skills available to supply to that demand?
• Is there already sufficient supply meeting that demand?
• Do you have the resources to be able to create supply to meet a demand? (Just because you are a cook doesn't mean you have a restaurant to cook in and if it takes 200 poor people to scrounge up enough money to make a restaurant, there's no amount of profit to make the venture viable for any of them)

Of course...

• Are you just switching through jobs?

edited 9th Jun '11 12:49:30 PM by breadloaf

Don't something like 75% of entrepenuers fail with their first business? That might be a consideration why they don't start their own business, as well.

Not to mention you'd have to get sales away from established businesses that are much better funded and can undercut the shit out of you.

And you have to pay for your own professional education somehow.

And healthcare. The lack of a public healthcare system is a major impediment for some people.

We need to eliminate corporate welfare and start strong government backing of cooperatives.

While I appreciate and agree with the general sentiment of that, it's harder than it sounds to get to work. Small businesses are pretty high risk investments and dumping too much money into them can very quickly turn into a financial black hole.

edited 9th Jun '11 12:58:19 PM by Pykrete

I'd imagine that some skilled tradesmen woudl have it easier to strike out on their own. You'll always need A/C repairmen and plumbers; buy a used van and rig it up with all the tools and stuff you need to do the job, and do some low-cost ads to get noticed. Get a phonecall that someone needs repairs, make an appointment, fix their stuff, get paid. It would pay strictly off of comission or whatever you can reasonably charge, but I'd see less risk for that sort of work than opening up a restaraunt.

@pvtnum: The opposite is a problem though. Try to move too far away from established practices, and you won't draw customers. There was a Hungarian restaurant (restaurant examples for the win ) in my town that had to close years ago due to this. A pity, I loved the food there.

Starting a new business is never easy. You have a short time frame to catch on, and if you miss it...well, there you go.

edited 9th Jun '11 12:59:54 PM by TotemicHero

I only picked on tex-mex because I happen to like it, but you have a point.

Pvtnum: I had no idea that opening a restaurant was so absurdly expensive.

Well, that was a bad example. But electricians? Plumbers? Painters? Construction workers? AC repairmen? IT guys?

None of those jobs have any sort of starting capital requirement... And yet you see people on those trades that are unemployed.

The no capital requirement also applies to construction workers: To renovate houses you need some tools, a crew, and materials: The crew can be a bunch of other unemployed construction workers, splittin'the earnings. The tools needed for a renovation are not particularly expensive, and the materials are covered in the price of the renovation.

Why a buncha skilled workers (unless they're assembly line or starting a business on their field is horribly expensive) would remain unemployed baffles me.

@Carciofus: 300 grand? What's that restaurant, 5000 square feet and hyper fancy? In the middle of LA? Leasing a small, shoddy place, making it slightly less shoddy with a paint job'n'all, and making a typical cheap diner can't possibly cost 300 grand.

edited 9th Jun '11 1:13:01 PM by SavageHeathen

@Savage: The other problem, is that plumbers/AC repairmen/electricians do have expensive tools that they need.

Take plumbers for example. You can try to "make do" with a shitty hand cranked snake that only works sometimes and costs $20, or you can attempt to look like a professional and get a powered one that costs well over $500. When it comes to starting up your own business, appearances is key. Nobody is going to pay plumber's rates for some dude in a tee shirt to do something with something they can pick up at Home Depot.

Edit: I'd say the $300k to open a restaurant is accurate if you're going to be in a densely populated metro area. You can probably get away with less if there's a building already set up to accommodate a kitchen, but you're forgetting to factor in employee wages, food prices, etc if you're looking at an actual sit-down eatery as opposed to a taco truck.

edited 9th Jun '11 1:16:44 PM by DrunkGirlfriend

People not being able to pay for their services would be my first guess. Especially in the construction trades.

Also, you're not considering the cost of furniture, decorations, equipment, etc. Think of a dining set, then multiply by 20, and tell me that's not expensive.

edited 9th Jun '11 1:15:27 PM by BlueNinja0

Then you still have to compete with all the existing plumbers, IT guys, electricians, etc. Without a building, you probably won't be listed in the phone book, so you'll be relying on people around town answering your newspaper ad or reading signs you put up, and even then, they'll often wonder if it's legit, and say "eh, fuck it, I'll go to to the one next door to the Dominos." If you don't get any business, you've wasted all that money trying to get it.

Re: Restaurant opening costs.

Take a look at this chart here.

On average, successful restaurant owners payed a total of $451,966 for startup costs if they're leasing the building. That number jumps to $700,866 if they're outright buying the property.

Wow, so 300k was a low figure, then.

There's a number of mobile journeymen running around in Hawaii, trying to make it. Oddly, the ones I see most of are locksmiths. And they will charge you 150 bucks for popping open your house within fifteen seconds of arrival with a stiff piece of plastic. And you'll gladly pay it, becasue it beats beign efectively homeless due to your idiocy of not having your keys on you when you shut the door.

They do that a few times a day, and they should have their costs covered.

We also have a lot of roach coaches. Run around selling cheap food at busy stret corners out of the back of an old US Post Office delivery truck or something like that, drive to another location when that one dies down. One was interviewed as grossing a few grand a day in sales. Sure, material costs take a big chunk out of that, but that's not too bad, and they seemed to have survived the downturn here okay. every so often you see one that you don't recognize - might be a newcomber, or they upgraded their stuff, hard to say.

edited 9th Jun '11 1:30:47 PM by pvtnum11

Lock-busting is actually one of the cheaper ones, since they basically just use a bump key and a screwdriver for most of their jobs, and the former is just a carefully filed strip of metal.

edited 9th Jun '11 1:31:32 PM by Pykrete

Tension wrench and a set of actual picks - seen that once, after the plastic bit didn't work...

Regarding the plumbers/AC guys/etc being a start-up IS a negative because it is so relatively easy. That means a bunch of "Bubba's" with a ratty old truck or van can get into it, set up a few ads, and then proceed to drive prices down but with a comparatively shitty level of quality.

It's not a good thing. It's why some people prefer the business with the fancy vans, uniform, and other signs of professionalism, or why some businesses emphasize being a family business that's been around for decades.

My locksmith friend is glad for one thing though, that instead of hundreds of pages of books on locks, he can now have everything on a laptop. It's saved him lots of gas over the years. But then he's not the kind of guy you call when you just need a slim jim.

edited 9th Jun '11 1:34:41 PM by blueharp