After yesterday's unemployment figures I was looking for reasons for the continued rise in employment when the economy is basically flat. I found the article below from October.
In past recessions firms have shed labour and, because the least productive have been allowed to go first, average productivity has risen. This has not happened since 2008.
Because of the much more flexible labour market real wages have fallen for those in work and so firms have not had to reduce their labour force as much as in previous recessions. Therefore the productivity 'jump' has not materialised.
Is that really enough to explain the flat productivity levels reported? Well probably not, but add to this low morale of the workforce given the falling real and nominal incomes and maybe this is enough.
Because of falling wages and no productivity increases firms have had to take on more labour to raise output. They can do this because they can offer lower wages for the higher output levels.
The article compares previous recessions and offers some thoughts.
Subscribe to:
Post Comments (Atom)
Although unemployment has fallen, the cause of this fall is not good. Lower productivity means that more people are needed to produce the same amount of output. While this does have some benefits, with more people getting income by having jobs, there are some problems, with workers not being able to work as much as they would like, with the firms hoarding people in the case of recovery.
ReplyDeleteJason Luong
If companies that are struggling to maintain themselves are resorting to employing more people to match what they previously put out with less, then it seems to be drawing labour away from companies which may have more potential for success than the hoarders, which might hinder the expansion of the economy, as well as possibly scuppering a few smaller businesses because they are deprived of employable people.
ReplyDeleteAlthough more people are needed to produce the same output, unemployment is decreasing. Surely this is a good thing? We can’t be expected to make a load of steps at once. Yes, some aren't working as many hours as they wish, or earning what they had hoped for. But it’s a recovery process and the increase in employment is a good start. Now the firms need an incentive to invest, which they aren't doing currently, so we can boost productivity!
ReplyDeleteArthur Elmes
the fact that full time unemployment has gone up but the economy hasn't grown much is partly explained by 'hoarder' firms with workers willing to work less hours.This is good from the overall worker perspective as less people are out of work. However it is bad for firms and the economy as they have more workers and producing the same amount and this may increase the cost to firms. It seems it would be cheaper to have fewer workers, working at full capacity.
ReplyDelete