Transcript Some Reflections on the Job Scene

Some Reflections on the
Job Scene
Danny Leipziger
Professor of Int’l Business, George Washington University
NYU Jobs Conference, Sept. 25-26, 2011
S
Basic Themes
S What do we learn from the Latin American experience?
And from Chile in particular?
S What is there in the advanced countries’ experience that
should raise cautionary flags for middle income countries in
Latin America and beyond?
S How do we connect the dots on the Great Recession and the
longer run in terms of jobs and economic growth?
Latin Lessons
S Maintenance of fiscal space, a new development for many
countries in the region, has served them well
S Jobs, even if lower paying, provide an entry point into the
formal or quasi-formal sector and are the only way to deal
with persistent income inequality
S Some hybrid between the US labor model that was
associated with rapid job creation and the Euro-model that
protects more in the downturn is probably best course
S Poor educational outcomes and weak innovation systems
separate the region from the best performers in East Asia
Latin American Concerns
S All Latin Am. countries are well below average in the OECD
PISA scores, with Chile ranked the highest at #43, despite
expenditure levels that are not markedly low
S Most countries participating in PISA are in the 5th or 6th decile of
respondents. Same is true for science & mathematics rankings
S Regional labor productivity 1990-2005 was 1.5% on average, well
below advance countries and far behind East Asia’s 4 percent
S Youth unemployment is three-times the overall average
Issues Most Relevant to Chile
S Chile’s U-rate rose 2% in 2009 but reverted close to its 2008
level by 2010; still U-rate for the age cohort 24-29 tended to
average 12% over the past decade
S Female labor force participation rates lag those in Brazil,
Argentina and Uruguay ( Growth Commission Special
Report) and part-time employment impediments are a
problem and this may worsen the income distribution
S Income distribution is stubbornly unequal as seen in Gini
coefficients above .5 despite low absolute poverty rates
S The innovation system, including links between business
and government, has been difficult to remedy despite efforts
Some OECD Lessons
S OECD Jobs Strategy speaks of innovation and technology
diffusion policies to accompany education and training
S Most countries now embrace knowledge-based industries
S The externalities from major university centers is apparent
S Governments have a fundamental role to play in
coordination, management of science, functioning of
financial and labor markets, and increasingly in providing
signals if not a clear vision
S Once jobs are lost, they are not likely to be regained
Long Run Implications of
Factors Affecting Labor Market
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Education has longest term effect in terms of skills enhancement and
adaptability of the labor force
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Innovation policy has a strong effect via TFP
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Infrastructure investments influence efficiency and labor productivity
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Those with better education, innovation record and infrastructure, ceteris
paribus, survived the crisis better—Australia, Canada, Finland (OECD)
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During prolonged recessions, hh expenditures on education slip (WB evidence
for Eastern Europe) and firm R&D expenditures on innovation fall (OECD
evidence) with long-term effects on potential growth rates. Infrastructure
evidence uncertain.
Existing trends that the Great
Recession exacerbated
S In the US, poor distribution of income, got worse, and real wage
declines of blue collar workers was extended to others
S Incidence of shorter work weeks (Kurzarbeit), more reliance on
part-time employment, that reduced real incomes
S Evidence is not yet clear on whether gender disparities were
exacerbated, depending on countries and sectors
S Youth unemployment rose, especially in Europe—it doubled in
Spain between 2008 and 2010 for aged 24-29 cohort!
Short-Medium term factors
affecting the Long-Run
S Collapse of venture capital markets, already not robust in some
countries, and directly linked to innovative investment
S Prolonged unemployment spells that restrict labor market re-
entry—high percentage of long spells
S Delayed entry by the young limits long-term earnings and asset
accumulation.
S Asset collapses reduce confidence and the efficacy of fiscal
stimulus and the usefulness of monetary easing
Some Modest Final Thoughts
S Australia and Korea had among the largest stimulus
packages ( % of GDP); among the best rated innovation
systems (OECD), and had among the lowest upticks in
additional unemployment during the crisis
S The crisis is an outlier in Obstfeld and Gourinchas and we
should therefore expect the labor market to also react badly
S The Reinhart & Rogoff analysis tells us that this time is not
so different historically, but for some it certainly has been,
and the political economy of joblessness will be profound
S The economic and social costs of joblessness in countries
with limited safety nets are such that globalization may take
a hard and irreversible hit