Like a Russian doll of misery the jobs crisis has layers on layers. We all know about the problems in Britain, with an estimated seven million people who would like full time employment either out of work or working part time. Then today there is a report from the ILO questioning the effectiveness of austerity strategies and predicting widespread social unrest, and showing the number of jobs across the global economy to be still fifty million below the pre credit crunch level. Then looking into the medium term Jim Clifton, head of Gallup, has shown that employment is the single factor most strongly correlated with well-being across the world but has estimated that of the three billion formal jobs for which there is demand the global economy is currently creating only 1.2 billion.
There are many factors which determine how successful an economy is at generating jobs, not least of which is its underlying strength and level of demand. But picking and mixing from countries which do relatively well – like Germany, Austria and Uruguay – a broad approach suggests itself combining three factors: tax policies which encourage investment and job creation, active industrial policy directed particularly to areas with the greatest job creating potential, and industrial partnerships through which Government, employers and employee organisations work together on a core commitment to avoiding high unemployment. Our own Government is doing some very small things in the first area, but nothing that is likely to release the huge stocks of capital sitting in corporate bank accounts; there is also some talk of industrial strategy in the second area, but again it is very limited reflecting the Conservatives’ continued scepticism. As for the third, there has been little or no evidence of high level industrial partnership in the UK for over thirty years.
Much of this is fertile territory for Labour, although it is less vocal on the problem of weak and out-dated trade union leadership. But despite the rolling omnishambles the next election won’t be for three years. Mr Cameron could do with reasserting three things right now:
He is focused on the issues which most matter to people
He can be bold
He can do what it is the interests of the country even if it makes his party uneasy
On the initiative of our Chair Luke Johnson the RSA held its own reasonably successful Jobs Summit a few weeks ago. If I was advising Mr Cameron I would suggest he take a leaf out of our book. How about a major Number Ten jobs summit involving not just the Conservatives’ usual favourite business people but a much wider range of experiences and views (including, for example the ILO and TUC). Like the RSA event the summit could have sessions looking at both the short and the long term but with strong emphasis on solutions.
There are risks. Not just in what people will say but also the acknowledgement that the Coalition hasn’t got all the answers and in the implication that Government might be willing to explore some kind of new ‘post bureaucratic’ mechanism for industrial partnership.
As I know from my own time in Government, one good aspect of a crisis is that sometimes the left field suggestions to the Prime Minister which were previously discarded get called up from the records and re-examined in a fresh light. Who knows they might even look at obscure blog suggestions too?
By the way, it may only have been a subsidiary consideration but when the RSA decided to go ahead with our House redevelopment one factor was the sense that we should make our own contribution to generating economic activity and jobs in these austere times. As an RSA fan (if you are) you can make your own small contribution to the Society’s mission and to economic recovery by sponsoring my insane bid to run a marathon up a mountain.
As RSA Chairman Luke Johnson announced in his FT column yesterday, the Society is to hold a Jobs Summit in January at which a range of experts will offer ideas to get today’s labour market moving and to prepare the way for the jobs of tomorrow.
Some new data from the United States offers interesting food for thought ahead of the summit. As Robin Harding explains in the FT, the key figure is 58%…
‘That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the Second World War and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their post war average share of 63%, workers would earn an extra $740bn this year, about $5000 per worker.’
This is not only an issue of fairness, it also impinges directly on the economic crisis. For while many corporates are sitting on cash mountains (which they are not investing because of low demand and uncertainty about the future), were that money in the hands of workers they would presumably be out spending it.
The causes of this trend are complex but it seems reasonable to conclude that a combination of globalisation, technological change, and neo-liberal policy has led to a fundamental shift of power from workers and their agents on the one hand to owners, investors and their agents on the other.
The factors which govern the balance of power and wealth between owners and workers are all pointing to a further shift away from the latter. Tight labour markets favour workers but apart from some pockets of the economy high unemployment means the power lies with buyers – not sellers – of labour. Outside the public sector trade unions are now very weak. The Coalition is committed to less not more labour market regulation. Rising wage levels in developing countries will eventually lessen the impact of globalisation on developed world employment and wages, but only in the long run.
Perhaps one answer– and here I am well outside my comfort zone – is to provide carrot and stick incentives for companies and investors to put their money to work, especially in ways that boost wages or create jobs. One way is the idea floated in the Autumn Statement of investing pension funds in infrastructure projects, but the problem here is that this is a slow solution to an immediate crisis. Another – which could work much more quickly – would be some kind of deferred ‘use it or lose’ tax on company liquid assets.
As always, I am hoping for some enlightening comments on this post but I will also be nervously scanning my inbox. The last time I ventured into economic policy I got a polite but firm late night email from Jonathan Portes, Director of the National Institute of Economic and Social Research. I can’t recall the precise words he used but it was something like; ‘Hi Matthew, I really enjoyed your recent post about a bond to create jobs. Sadly, it was economically illiterate’.