Friday, 19 April 2013
More jobs, not more "stuff", needed.
The Reinhart and Rogoff theory, that a Debt/GDP ratio greater that 90% causes economies to shrink by 0.1% per year rather than grow, has now been blown out of the water. Apparently they got something wrong in their spreadsheet and, had they used the tool correctly, they should have come up with a growth figure of +2.2%. So bang goes the philosophy underpinning George Osborne's economic policy of putting deficit reduction above all else.
It is amazing that the Reinhart-Rogoff theory ever had any credence. After all the Debt/GDP ratios of most of the countries involved in the Second World War were way over 100% in 1945, and all of them, using Keynesian policies, have grown spectacularly since then. All that is lacking today is the will.
However, today's problem is a very different one to that of 1945, or even 1975. Most developed economies have now quite enough "stuff" for all their citizens to enjoy a comfortable and fulfilling life. Indeed, there is now evidence that demonstrates to the satisfaction of many that, beyond a certain point (estimated to be a per capita income of about the equivlaent of $US17 000,) more "stuff" doesn't acutaly increase happiness and fulfillment at all. And there is also ample eveidence that continued over-exploitation of our planet's scarce resources and the reusltant poisoning and degredation will make continued comfortable living unsustainable.
Our "mature" economies have now therefore reached the stage where what we need is more jobs rather than more "stuff." Rather than by more growth what we now need is a more equitable sharing of the jobs.
In Britain this week unemployment is reported to have risen by a further 70 000 in the last quarter, and youth unemployment is edging towards 1 000 000. That latter figure represents about one in five of our young people. A job represents not just a means of obtaining "stuff" but also a sense of identiy, usefulness and self-worth.
I have no idea at what stage the sociology equivalents of Reinhart and Rogoff think the unemployment/employment ratio in society becomes unsustainable, but I suspect we are approaching the crisis point. The sense of uninvolvement felt by unemployed people must surely also be exacerbated by the publication of the obscene rewards which those at the top of our society are granting themselves.
If society is to remain cohesive we must as a matter of urgency address ourselves to sharing the work as well as the rewards more equitably. This surely implies some of us (Dinkies?) working less in order to enable others to achieve the self-respect engendered by contributing to, rather than being supported by, society.
This issue hardly appears at all on today's political agenda, and it should.
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But wasn't the theory just what the Tories wanted to hear to give impetus to cutting spending on welfare and the public good?
ReplyDeleteOn the question of jobs, isn't the parallel freeing of the retiral age to enable the over 65s to go on working and the propaganda about this group needing to work anyway incurring the law of unintended consequences by restricting the availability of work for younger people both directly and indirectly?
Thanks for your comments, Richard. I agree with you entirely on the first count. The Tories seized on the myth of the "dangerous" levels of UK government debt and unjustified comparisons with Greece, as justifications for implementing their ideology of cutting back the state and handing over resources and areas of provision to the private sector. I've recently heard it argued that they are now so convinced that they haven't a hope of winning the next election that they're privatising as much as possible regardless of public opinion and any electoral consequences.
DeleteOn your second point I have more mixed feelings. I certainly don;t wish to see we elderly crowding the young out of the labour market. I think there is room for us both, provide that we work fewer hours, take longer holidays and, for the elderly at least, are prepared to accept more modest rewards. Even some older people need to feel useful.
Peter I recognise the point about wanting to feel useful and indeed like most things it's a question of balance. Before I retired I was Head of Personnel in a remote area and we had some iterations with folk who wished to continue working beyond 65 and the line we took was to have a dialogue along the lines of you've a full and perfect right to carry on working but do you wish to think over the point that you'll be in a job that someone with a family (or starting out in work) might do and will not be able to do.
Deletesehr guter Beitrag
ReplyDeletePeter, what's your view on the economics of the idea that older workers block job opportunities for younger recruits? I understood that most economists reject this view ('the lump of labour fallacy') however commonsensical it may seem. At the least the story is more complicated than the argument Richard deployed with staff who wanted to work beyond retirement, isn't it?
ReplyDeleteFor the lump of labour theory to be true a an awful lot of things have to remain constant, the famous ceteris paribus conditions with which we economists are so fond of qualifying our predictions. For the lump of labour theory to be valid, in particular, the state of technology and the demands of consumers would have to remain constant. But technology is constantly changing, necessitating workers to move out of redundant techniques to new ones which may require different skills, so may involve different people.
ReplyDeleteSimilarly consumer preferences change, sometimes but not always becasue technological changes making new products available (the MP3s. iPads, tablets and lord only knows what else that the younger generation now find indispensable whilst many in my generation, inducing me, don't even know what they are).
If, as advocates of "prosperity without growth" suggest, we should all work less and have more leisure, that could lead to an increase in demand for the products of the "leisure" industries, from theme parks and hotels to hiking boots and fishing rods, and a consequent increase in the demand for labour in those industries.
To respond to your particular query about older people blocking opportunities for the young, there could be some truth in this (eg B and Q taking on older staff and so reducing the opportunities for young shelf stackers) but I suspect that on the whole the two sets of workers are not looking for the same types of jobs: the young want full time (however it's defined) work with prospects, we older ones want part-time work just to add a bit of interest to our clipped and limited lives.
I've done quite lot of part-time work since my retirement, but I doubt if I've prevented any youthful aspirant from getting a job. For example, most recently I've taken three or four tutorials per week at a local university. In the past these would have been taken by full-time lecturers involved in research along with their teaching. It is not my offering to work as a "jobbing teacher" for a few hours a week that holds the full-time aspirants back, but the foolish lack of funding for our universities.
Thanks Peter for this thoughtful reply. The 'lump of labour' argument is also often used to oppose immigration ('foreigners stealing our jobs'). I suppose if it has any validity it is in limited cases such as permanent tenure posts in static public sector bureaucracies.
ReplyDeleteYes, I suppose there are a number of high-flying bankers (Adair Turner perhaps) who are a bit miffed that the Governorship of the Bank of England has gone to a migrant. I wonder how many people think of him as that?
DeleteSimilarly there may be some top-notch business executives who wince when a lucrative chief executive post goes to a foreigner, but this cohort use the international nature of their calling to justify the enormous “compensation” they demand, so they can’t expect to have it both ways. (Polly Toynbee has repeatedly pointed out, though, that the international demand for British executives is not all that high).
I get the feeling that the international market of academic posts is seen as a plus rather than a minus, and that UK academics are in a strong position in this market because so much higher education is in English.
At the more modest levels the situation is by no means as clear-cut as the tabloids (and Ukip?) would like us to think. Immigrants are, by definition, much more geographically mobile that native workers. They have, often temporarily, cut their ties with their home countries and so are unlikely to be particularly bothered as to where they work in the UK. So they take jobs, sometimes for short periods only, where native workers, with perfectly understandable family ties and local connections, may be reluctant to move.
Immigrant workers are for the most part young and healthy so make few demands on the welfare and health services, and probably pay their taxes much more dutifully than some international companies. They add to demand so create jobs (plenty Polish grocery stores have sprung up in this area in the past few years, adding further to the variety of Asian outlets and restaurants which have been established for much longer) and many repatriate part of their earnings to relatives back home; a plus for our balance of payments (which no longer receives anything like the attention it should.)
There can be no doubt that some migrants take jobs which could have gone to native workers, but the major cause of domestic unemployment is lack of demand, which the government should be, but is not, tackling. Rather the reverse.
Two positive economic actions which should be taken by the government in relation to migrant workers are:
a) Much stricter regulation of the ominously named “gangmasters.”
b) Much more energetic policing to ensure the payment of the minimum wage, if not the living wage.
In the social sphere we need to be much more sensitive to the tensions which can arise by the ghettoisation of immigrant communities. I wonder if you live in an"English" ghetto in Brussels. If so, what do the Belgians make of it?
No I don't live in the English "ghettos" (Terveuren, Waterloo), but in a mixed Belgian bourgeois/ex-pat (German, Italian, Asian etc etc) quarter. It is the wealthiest commune in Belgium, but I used to live in the poorest (Turkish/Moroccan/Congo/Polish/younger ex-pat)commune. Brussels is so mixed ethnically and linguistically that it is difficult to talk about ghettos - not even Flemish ghettos as they only constitute about 5% of the population here, even if 60% of the national total.
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