Transcript the rise of India and China

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Economic Adjustment and the Shifting Nature of
Work
David Coats, Associate Director
©The Work Foundation
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Summary
• Work: myths and realities
• Some unavoidable facts
• Challenges: “globalisation”, technology,
individualisation, inequality
• The rise of the knowledge economy
• “Creative destruction” and managing transitions
• “Flexicurity” v. job protection
• What’s Left?
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Work: Myths and Realities
• What do the “gurus” say?
“The end of work”
“Living on Thin Air”
• Temporary work, portfolio work, the end of “jobs for life”?
• Technology will leave us with “too much leisure”?
• But…
• Most jobs are full-time,permanent and secure
• Job tenures (in the UK) are stable – insecurity is falling
• Least regulated labour markets have the least contingent work?
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Unavoidable facts
• Demographic change
• Ageing workforce – challenge to both employment
and pensions systems
• Gender dimension – more women at work
• Fertility rates – up or down?
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Challenges
• “Globalisation” = rising inequality, tension and stagnation?
• Rise of India and China is applying downward pressure on
unskilled wages in the developed world? (Stiglitz, 2006)
• But…
• Income inequality (measured by the gini coefficient) has fallen in
the UK since 2001
• Neither trade nor technology can explain the growth in inequality
– domestic institutional factors are more important (Berman,
Bound and Machin, 1997) (Glyn, 2000)
• Patterns of inequality vary across developed countries – no
irresistible trend towards “Anglo-Saxon” levels (EspingAnderson, 2005)
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Pre and post-tax income inequality, mid-1980s
to mid-90s % change
(source: Esping-Anderson, Inequalities of Incomes and Opportunities (2005))
35
33
29
30
28
25
25
25
24
23
20
17
16
15
15
14
13
12
12
10
4
4
2
-5
B
Fr
el
-1
an
gi
-2
ce
um
-10
©The Work Foundation
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er
m
10
4
1
1
0
0
Income after
taxes and
benefits
(working
age)
7
7
5
5
11
9
10
an
y
Income
before taxes
and benefits
(working
age)
N
et
-2 h
Ita
ly
-5
-5
D
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m
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k
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nl
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or
w
Sw
ay
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ed
en
K
U
SA
Income after
taxes and
benefits (all
households)
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The “hollowing out” story: job change by income
decile 1979-99 (UK)
(source: Goos and Manning in Dickens et al, The Labour Market Under New Labour
[2003])
80
Percentage change in
employment share
60
40
20
0
-20
1
2
3
4
5
6
-40
-60
-80
Job quality decile
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8
9
10
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But no longer true…?
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So what’s really happening? (Developed
countries) 1
• Intensification of trade within the OECD
• Rising affluence
• Differentiation of tastes
• Customisation
• Niche markets
• Shorter product cycles (from R&D to delivery of product/service)
• Flexible specialisation
• Continuing manufacturing/services shift
• The irresistible rise of the knowledge economy – The really
big story
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The rise of the “knowledge economy” 19952005: Job change by sector % (Source: UK LFS)
50
40
40
27
30
24
20
17
10
2
0
-10
-20
-21
-30
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High/medium tech manuf
High tech services
Business/communications services
Health, education, culture
Financial Services
All knowledge industries
All other industries
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So what’s really happening? (Developed
countries) 2
• Rising inequality a “home grown” phenomenon? Wage share
has not changed much in USA, but gains have gone to the
richest (Dew-Becker and Gordon, 2005)
• “Changes in technology may…be more important than
globalisation in determining the increase in inequality, and even
the decline in unskilled wages” (Stiglitz, 2006)
• There are winners (those who benefit from cheaper goods and
rising incomes) and losers (those who lose well paid unskilled
jobs)
• But…creative destruction is the dynamic of capitalism
(Schumpeter, 1942)
• And unregulated markets always create some casualties
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There’s no “great sucking sound” (See Hutton, The Writing on the
Wall: China and the West in the 21st Century, 2006)
• The USA creates and loses 500,000 jobs every week
• High estimate suggests that 226,000 jobs lost annually because
of trade effects
• Economic Policy Institute estimate: 2.24 million US jobs lost to
China 1989-2005 (100,000 per annum)
• Bureau of Labour Statistics Estimate 2004: 956,357 jobs lost
from mass lay offs 2001-03. 16,073 moved abroad
• UK: 390,000 jobs lost April 2003-July 2006. 16,073 moved
abroad
• “Globalisation is used by economists to frighten the children”.
Richard Layard
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Challenges for “Middle Income Countries”
• Squeezed between low labour costs of emerging
economies and the “knowledge economies” of the
OECD?
• Migration towards the knowledge economy?
• Investment in skills, R&D and social infrastructure (an
antidote to populism)
• Product market and labour market regulation?
• Competition policy
• Enterprise
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The Task
• To make the case for open markets and free trade
• And…
• Ensure that these processes are seen as legitimate
• Which requires…
• Reform of the ground rules of globalisation – WTO,IMF, World
Bank, international reserve system
• Proper integration of emerging industrial economies into global
system – and reform in China (Hutton, 2006)
• More attention to safeguarding the position of the losers
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The response 1
• Embracing the reality of the “knowledge economy”
• Anticipating change – reorienting institutions, managing regional
disparities
• Skills development
• A stronger but developmental welfare state – “A hand up not a
hand out”
• A “flexicurity” model:
- ease of hire and fire
- high benefits
- limited durations and strong conditionality
- effective active labour market programmes
- wage insurance?
• More and better social dialogue? EU Information and
consultation obligations
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The response 2
• What else should countries consider
• Product market regulations and competition policy – critical
elements in the mix of “low unemployment” countries
• Labour market policy broadly conceived:
- Level and coverage of minimum wages (esp youth)
- More diversity in working patterns (and equal
treatment for all forms of employment contract?)
- Limited relaxation of employment protection
legislation (to overall levels of “low unemployment”
countries in the EU?)
- Collective bargaining and wage formation
• But…unless macro-policy is right “structural reform” is a false
prospectus
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Labour Market Regulation and Unemployment
(Regulation: OECD index, range 1-5. Unemployment: % of civilian labour force) (Source: OECD Employment Outlook 2004, OECD Factbook 2006)
Reg Emp
12
Temp Emp
10
Collective
dismissals
8
Overall EPL
6
Unemployment
4
2
©The Work Foundation
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What’s Left?
• We are not at the mercy of irresistible forces of nature
• Ample scope for social and political choices.
• We must sound as if we are speaking for employees rather that
at employees – reflecting the problems that people experience
in their daily lives instead of threatening them with the
challenges of “globalisation”, “the rise of India and China” and
the demands of the “knowledge economy”. Our political task is
not to terrify the electorate but to create an environment where
workers both know that change is a constant and have
confidence that they can influence the pace and direction of
change.
• In other words…The centre-left must have a compelling story
about “good work”.
©The Work Foundation