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Fw: UPI The Labour Divide - I. Employment and Unemployment by Daniel Pinéu 13 March 2002 23:40 UTC |
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From: "Sam Vaknin, Ph.D." <palma@unet.com.mk> To: <Undisclosed-Recipient:@queue.unet.com.mk;> Sent: Wednesday, March 13, 2002 7:58 PM Subject: UPI The Labour Divide - I. Employment and Unemployment > If you wish to be removed from my mailing list or to reprint this > article, please write to: > palma@unet.com.mk or vaknin@link.com.mk > > ================================= > > The edited version of this article was published by United Press > International (UPI): > > http://www.upi.com > > It is also published on my web sites: > > http://www.balkanlands.com > > http://samvak.tripod.com/guide.html > > http://www.intellnet.org/topics/balkans/ > > Feel free to forward of reprint this article. > > To reprint - kindly write to: palma@unet.com.mk > > > > The Labour Divide > > I. Employment and Unemployment > > Sam Vaknin > > UPI Senior Business Correspondent > > Skopje, Macedonia > > > > Communism abolished official unemployment. It had no place in the > dictatorship of the proletariat, where all means of production were > commonly owned. Underemployment was rife, though. Many workers did > little else besides punching cards on their way in and out. > > For a long time, it seemed as though Japan succeeded where communism > failed. Its unemployment rate was eerily low. It has since climbed to > exceed the United States' at 5.6%. As was the case in Central and > Eastern Europe, the glowing figures hid a disheartening reality of > underemployment, inefficiency, and incestuous relationships between > manufacturers, suppliers, the government, and financial institutions. > > The landscape of labour has rarely undergone more all-pervasive and > thorough changes than in the last decade. With the Cold War over, the > world is in the throes of an unprecedented economic transition. The > confluence of new, disruptive technologies, the collapse of > non-capitalistic modes of production, the evaporation of non-market > economies, mass migration (between 7.5% - in France - and 15% - in > Switzerland - of European populations), and a debilitating brain drain - > altered the patterns of employment and unemployment irreversibly and > globally. > > In this series of articles, I study this tectonic shift: employment and > unemployment, brain drain and migration, entrepreneurship and > workaholism, the role of trade unions, and the future of work and > retirement. > > I. The True Picture > > According to the ILO ("World Employment Report - 2001"), more than 1 > billion people - one third of the global workforce - are either > unemployed or underemployed. Even hitherto "stable" countries have seen > their situation worsen as they failed to fully adjust to a world of > labour mobility, competitiveness, and globalization. > > Unemployment in Poland may well be over 18% - in Argentina, perhaps 25%. > In many countries, unemployment is so entrenched that no amount of aid > and development seem to affect it. This is the case in countries as > diverse as Macedonia (35% unemployment) and Zimbabwe (a whopping 60%). > The much heralded improvements in the OECD countries were both marginal > (long term unemployment declined from 35% of the total to 31%) and > reversible (unemployment is vigorously regaining lost ground in Germany > and France, for instance). > > Official global unemployment increased by 20 million people (to 160 > million) between the nadir of the Asian crisis in 1997 and 2001. The > situation has much deteriorated since. The ILO estimates that the world > economy has to run (i.e., continue to expand as it has done in the > roaring 1990's) - in order to stay put (i.e., absorb 500 million workers > likely to be added to the global labour force until 2010). How can this > be achieved with China unwinding its state sector (which employs 13% of > its workforce) - is not clear. Add to this stubbornly high birth rates > (esp. in Africa) and a steady decline in government hiring al over the > world - and the picture may be grimmer than advertised. > > But the rate of unemployment is not a direct and exclusive result of > growth or the lack thereof. It is influenced by government policies, > market forces (including external shocks), the business cycle, > discrimination, and investment - including by the private sector - in > human capital. > > The problem with devising effective ways of coping with unemployment is > that no one knows the true picture. Taking into account internal, > rural-to-urban, migration patterns and the growth of the private sector > (it now employs 5% of the labour force) - China may have a real > unemployment rate of 9.5% (compared to the official figure of 3.1%). > Egypt's official rate is 8% -but it masks vast over-employment in the > public sector. Lebanon's is 9% - due to a one-time reconstruction > bonanza, financed by the billionaire-turned-politician, Hariri. > Algeria's unemployed easily amount to half the work force - yet, the > published rate is 29%. In numerous countries - from Brazil to Sri > Lanka - many people are mainly employed in casual work. > > The average unemployment rate in Central and Eastern Europe is 14% - but > it is double that (more than 30%) among the young (compared to 15% for > West European youths). The average is misleading, though. In Georgia the > rate is 70% - in the Czech Republic 16%. > > Even in the OECD, the tidal wave of part-time workers, short term > contracts, outsourcing, sub-contracting, and self-employment - renders > most figures rough approximations. Part time work is now 20% of the OECD > workforce (German attempts to reverse the trend notwithstanding). > Temporary work and self-employment constitute another 12% each. No one > knows for sure how many illegal economic migrants are there - but there > are tens of millions of legal ones. > > II. The Facts > > IIa. Labour Mobility > > "Mobility", "globalization", "flextime" - media imagery leads us to > believe that we move around more often, and change (less secure) jobs > more frequently. It is not so. By many measures, the world is less > globalized today than it was a century ago. Contrary to popular > perceptions, job tenure (in the first 8 years of employment) has not > declined, nor did labour mobility increase (according to findings > published by the NBER and CEPR). Firms' hiring and firing practices are > more flexible but this is because "sarariman" jobs are out of fashion > and many workers (80% of them, according to the Employment Policy > Foundation) prefer casual work with temporary contracts. > > Workers keep moving, as they always have, among firms and between > sectors. But they are still reluctant to relocate, let alone emigrate. > The subjective perception of job insecurity is high, even after the most > prosperous decade in recent history. Witness the sparse movement of > labour among members of the EU, despite the existence, on paper, of a > single labour market. Still, rising systemic unemployment everywhere > serves to increase both the efficiency and productivity of workers and > to moderate their wage claims. > > IIb. Collective Bargaining > > Studies linked collective bargaining to an increased wage level, > decreased hiring and more rigid labour markets. But unionized labour has > greatly contracted in almost all OECD countries. Why has unemployment > remained so persistently high? > > In France and the Netherlands collective agreements were applied to > non-unionized labour (close to four fifth of the actually employed in > the latter). Employment increases only where both union membership and > coverage by collective agreements are down (USA, UK, New Zealand, > Australia). > > There are different models of wage bargaining. In the USA and Canada > agreements are sometimes signed at the firm or even individual plant > level. Throughout Scandinavia (though this may be changing in Norway and > Denmark now that centre-right parties have won the elections), a single > national agreement prevails. There is no clear trend, though. Britain, > New Zealand and Sweden decentralized their collective bargaining > processes while Norway and Portugal are still centralized. > > Both types of bargaining - centralized and decentralized - tend to > moderate wage demands. Centralized bargaining forces union leaders to > consider the welfare of the entire workforce. Either of the pure models > seems preferable to a hybrid system. The worst results are obtained with > national bargaining for specific industries. Hybrid-bargaining Europe > saw its unemployment soar from 3 to 11% in the last 25 years. > Pure-bargaining USA maintained a low unemployment rate of 5-6% during > the same quarter century. > > IIc. Unemployment Benefits > > Blanchard and Wolfers studied 8 market rigidities in 20 countries > (including the EU, USA, Canada, and Japan) between the years 1960-96. > The unemployment rate in an imaginary composite of all the studied > countries should have risen by 7.2% in this period. But unemployment > increased by twice as much in countries with strict employment > protection laws compared to countries with laxer labour legislation. > > Unemployment in the country with the most generous unemployment benefits > grew five times more than in the most parsimonious one. It grew our > times faster in countries with centralized wage bargaining than in > countries with utterly decentralized bargaining. Labour market > rigidities all amplify the effects of asymmetrical shocks - which bodes > ill for the eurozone. > > Other studies (e.g., the 1994 OECD one year study, the more substantial > DiTella-MacCullouch study) seem to support these findings. The > transition from a rigid to a flexible labour market does not yield > immediate results because it increases labour force participation. But > the unemployment rate is favorably affected later. > > IId. Minimum Wages > > In the USA, the minimum wage is 35% of the median wage (in France it is > 60%, in Britain - 45%, and in the Netherlands it is declining). When > wages are downward-flexible - more lowly skilled jobs are created. A 1% > rise in the minimum wage reduces the probability of finding such a job > by 2-2.5% in both America and France, according to the NBER (Lemieux and > Margolis). > > The proponents of minimum wages say they reduce poverty and increase the > equality of wealth distribution. Their opponents (such as Peter Tulip of > the Federal Reserve) blame them for job destruction, mainly by raising > the NAIRU. The OECD's position is that wage regulation cannot remedy > poverty. As "The Economist" succinctly puts it, "few low paid workers > live in low-income households and few low-income households include low > paid workers. (Thus), the benefits of the minimum wage, such as they > are, largely bypass the poor." > > Again, it is important to realize that unemployment is not universal - > it is concentrated among the young, the old, the under-educated, the > unskilled, and the geographically disadvantaged. One in eight of all > workers under the age of 25 in the USA are unemployed, more than twice > the national average (the figure in France is one in four). A 10% rise > in the minimum wage - regardless of its level - reduces teenage > employment by 2-4%, calculates the OECD. > > Many countries (USA, UK, France) introduced "training wages" - actually, > minimum wage exemptions for the young. But even this sub-minimum wages > still represent a high percentage of mean youth earnings (53% in the USA > and 72% in France) and thus have an inhibiting effect on youth > employment. > > Minimum wages do reduce inequality by altering the income distribution > and by equalizing wages across ages and genders - but they have no > effect on inequality and poverty reduction, insists the OECD. "The > Economist" quotes these figures (in 1998): > > "In American households with less than half the median household income, > only 33% of adults have a low-paid job. (compared to 13% in the > Netherlands and 5% in the UK). In most poor households no one is > employed in a regular job. Many low earners, on the other hand, have > well-paid partners, or affluent parents ... Only 33% of those Americans > who earn less than two-thirds of the median wage live in families whose > income is less than half the national median. (In the UK the figure is > 10% and in Ireland - 3%). Over a 5-year period, only 25% of low paid > Americans are in a poor family at some point; in Britain 10% are." > > Thus, minimum wages seem to hurt poor families with teenagers (by making > teenage employment unattractive) while benefiting mainly the middle > class. > > Still, the absolute level of the minimum wage seems to be far more > important that its level relative to the average or median wage. > Hungary's unemployment went down, from 9% to 6%, while its minimum wage > went up (in real terms) by 72% in 1998-2001. During the same four year > period, its economy grew by an enviable 5% a year, real wages > skyrocketed (by 17%), and its inflation dropped to 7% (from 16%). > > IIe. Structural Unemployment > > Most unemployment in Europe is structural (as high as 8.9% in Germany, > according to a 1999 IMF study). It is the ossified result of decades of > centralized wage bargaining, strict job protection laws, and > over-generous employment benefits. The IMF puts structural unemployment > in Europe at 9%. This is compared to the USA's 5% and the UK's 6% (down > from 9%). The remedies, though well known, are politically unpalatable: > flexible wages, mobile labour, the right fiscal policy, labour market > deregulation, and limiting jobless benefits. > > Some hesitant steps have been taken by the governments of Germany and > France (cut jobless benefits and turned a blind eye to temporary and > part-time work), by Italy (decoupled benefits from inflation), and by > Belgium, Spain and France (reduced the minimum wage payable to young > people). > But piecemeal reform is worse than no reform at all. In an IMF Staff > Paper, Coe and Snower describe the Spanish attempt to introduce fixed > term labour contracts. It established two de facto classes of workers - > the temporary vs. the permanently employed - and, thus, reduced labour > market flexibility by granting increased bargaining power to the latter. > France introduced a truncated, 35-hours, working week. Other countries > imposed a freeze on hiring with the aim of workforce attrition through > retirement. Yet, these "remedies" also led to an increase in the > bargaining power of the remaining workers and to commensurate increases > in real wages. > > IIf. Unemployment and Inflation > > Another common misperception is that there is some trade off between > unemployment and inflation. Both Friedman and Phelps attacked this > simplistic notion. Unemployment seems to have a "natural" (equilibrium) > rate, which is determined by the structure and operation of the labour > market and is consistent with stable inflation (NAIRU - Non Accelerating > Inflation Rate of Unemployment). > > NAIRU is not cast in stone. Employment subsidies, for instance, make low > skilled workers employable and lower NAIRU. So do unilateral transfers > which raise incomes. According to Phelps, big drops in unemployment need > not greatly increase permanent inflation. Stiglitz calculated that > America's NAIRU may have dropped by 1.5% due to increased competition in > the markets for jobs and goods. These findings are supported by other > prominent economists. Stiglitz concluded that NAIRU, in itself, is > meaningless. It is the gap between the estimated NAIRU and the actual > rate of unemployment that is a good predictor of inflation. > > IIg. The Rhineland Model, the Poldermodel, and Other European Ideas > > The Anglo-Saxon variant of capitalism is intended to maximize value for > shareholders (often at the expense of all other stakeholders). > > The Rhineland model likes to think of itself as "capitalism with a human > face". It calls for an economy of consensus among stakeholders > (shareholders, management, workers, government, banks, other creditors, > suppliers, etc.) > > Netherlands, too, has an advisory Social and Economic Council. Another > institution, the Labour Foundation is a social partnership between > employees and employers. Both are relics of a corporatist past. > > But the Netherlands saw its unemployment rate decline from 17% to less > than 5% while ignoring both models and inventing the "Poldermodel", a > Third Way. Wim Duisenberg, the Dutch Banker (currently Governor of the > European Central Bank), quoted in an extensive analysis of the > Poldermodel prepared for "The Economist" by Frits Bolkstein (a former > Dutch minister for foreign trade), attributed this success to four > elements: > > Improving state finances > Pruning social security and other benefits and transfers > Flexible labour markets > A Stable exchange rate > > According to Thomas Mayer and Laurent Grillet-Aubert ("The New Dutch > Model"), the "Dutch Miracle" traces its beginnings to 1982 and the > Wassenaar Agreement in which employers' organizations and trade unions > settled on wage moderation and job creation, mainly through > decentralization of wage bargaining. The government contributed tax cuts > to the deal (these served to compensate for forgone wage increases). > These cuts generated a fiscal stimulus and prevented a contraction in > demand as a result of wage moderation. Additionally, both social > security payments and the minimum wage were restricted. Wage increases > were no longer matched by corresponding increases in minimum social > benefits. Working hours, hiring, firing and collective bargaining were > all incorporated in a deregulated labour market. > > Small and medium size businesses costly regulation was relaxed. Generous > social security and unemployment benefits (a disincentive to find work) > were scaled back. Sickness benefits, vacation periods, maternal leave > and unemployment benefits were substantially adjusted. > > The Netherlands did not shy from initiating public works projects, > though on a much smaller scale than France, for instance. The latter > financed these projects by raising taxes and by increasing its budget > deficit. The Dutch preferred to rely on the free market. > > Long term (more than 12 months) unemployment in Europe constitutes 30% > of the total. About half the entire workforce under the age of 24 is > unemployed in Spain - and about one quarter in France and in Italy. > Germany, Austria and Denmark escaped this fate only by instituting > compulsory apprenticeship. But the young unemployed form the tough and > immutable kernel of long-term unemployment. This is because a tug of > war, a basic conflict of interest, exists between the "haves" and > "have-nots". The employed wish to defend their monopoly and form "labour > cartels". This is especially true in dirigiste Europe. > > While, in the USA, according to McKinsey, 85% of all service jobs > created between 1990-5 paid more than the average salary - this was not > the case in Europe. Add to this European labour immobility - and a > stable geographical distribution of unemployment emerges. > > The Dutch model sought to counter all these rigidities. In a report > about "The Politics of Unemployment" dated April 1997, "The Economist" > admiringly enumerated these steps: > > The Dutch reduced social security contributions from 20% (1989) to 7.9% > and they halved the income tax rate to 7% (1994). > They allowed part time workers to be paid less than full timers, doing > the same job. > They abandoned sectoral central bargaining in favor of decentralized > national bargaining. > They cut sickness benefits, unemployment insurance (benefits) and > disability insurance payments (by 10% in 1991 alone - from 80% to 70%). > They made it harder to qualify for unemployment (from 1995 no benefits > were paid to those who chose to remain unemployed). > The burden of supporting the sick was shifted to the employer / firm. In > 1996, the employer was responsible to pay for the first year of sickness > benefits. > > Even the Dutch model is not an unmitigated success, though. More than > 13% of the population are on disability benefits. Only 62% of the > economically active population is in the workforce. > > But compare the Dutch experience to France's, for instance. > > The Loi Robien exempted companies from some social security > contributions for 7 years, if they agree to put workers on part time > work instead of laying them off. Firms promptly abused the law and > restructured themselves at the government's expense. > > The next initiative was to reduce the working week to 35 hours. This was > based on the "Lump of Labour Fallacy" - the idea that there is a fixed > quantity of work and that reducing the working week from 39 to 35 hours > will create more jobs. > > In Spain, hiring workers is unattractive because firing them is > cost-prohibitive. The government - faced with more than 22% unemployment > in the mid-90's - let more than 25% of all workers go on part time > contracts with less job protection, by 2001. > > Still, no one knows to authoritatively answer the following substantial > questions, despite the emergence of almost universally applied > UN-sponsored Standard National Job Classifications: > > How many are employed and not reported or registered? How many are > registered as unemployed but really have a job or are self-employed? How > many are part time workers - as opposed to full time workers? How many > are officially employed - but de facto unemployed or underemployed? How > many are on "indefinite" vacations, on leave without pay, on reduced > pay, etc.? > > Many countries have a vested interest to obscure the real landscape of > their destitution - either in order to prevent social unrest, or in > order to extract disproportionate international aid. In a few countries, > limited amnesties were offered by the state for employers' violations of > worker registration. Firms were given a few, penalty-free, weeks to > register all their workers. Afterwards, labour inspectors were supposed > to embark on sampling raids and penalize the non-compliers, if need be > by closing down the offending business. The results were dismal. > > In most countries, the unemployed must register with the Employment > Bureau once a month, whether they receive their benefits, or not. > Non-compliance automatically triggers the loss of benefits. In other > countries, household surveys were carried out - in addition to claimant > counts and labour force surveys, which deal with the structure of the > workforce, its geographical distribution, the pay structure, and > employment time probabilities. > > Yet, none of these measures proved successful as long as government > policies - the core problem - remained the same. Faced with this > trenchant and socially corroding scourge - governments have lately been > experimenting with a variety of options. > > III. The Solutions > > IIIa. Tweaking Unemployment Benefits > > Unemployment benefits provide a strong disincentive to work and, if too > generous, may become self-perpetuating. Ideally, unemployment benefits > should be means tested and limited in time, should decrease gradually > and should be withheld from school dropouts, those who never held a job, > and, arguably, as is the case in some countries, women after > childbearing. In the USA, unemployment benefits are not available to > farm workers, domestic servants, the briefly employed, government > workers and the self- employed. > > Copious research demonstrates that, to be effective, unemployment > benefits should not exceed short-term sickness benefits (as they do in > Canada, Denmark, and the Netherlands). Optimally, they should be lower > (as they are in Greece, Germany and Hungary). Where sickness benefits > are earnings-related, unemployment benefits should be flat (as is the > case in Bulgaria and Italy). In Australia and New Zealand, both sickness > benefits and unemployment benefits are means tested. Unemployment > benefits should not be higher than 40% of one's net average monthly wage > (the "replacement rate"). > > Most unemployment benefits are limited in time. In Bulgaria, to 13 > weeks, in Israel, Hungary, Italy and the Netherlands to 6 months and in > France, Germany, Luxemburg and the United Kingdom - to 12 months. Only > Belgium offered time-unlimited unemployment benefits. In most countries, > once unemployment benefits end - social welfare payments commence, > though they are much lower (to encourage people to find work). > > In many countries in transition (e.g., in Macedonia), the unemployed are > eligible to receive health and pension benefits upon registration. > This - besides being an enormous drain of state finances - encourages > people to register as unemployed even if they are not and distorts the > true picture. > > Some countries, mainly in Central Europe, attempt to provide lump sum > block grants to municipalities and to allow them to determine > eligibility, to run their own employment-enhancement programs, and to > establish job training and child care centers. Workers made redundant > can choose to either receive a lump sum or be eligible for unemployment > benefits. > > A third approach involves the formation of private unemployment, > disability, and life, or health insurance and savings plans to > supplement or even replace the benefits offered by the relevant state > agencies. > > An intriguing solution is the municipal "voucher communities" of > unemployed workers, who trade goods and services among themselves (in > the UK, in Australia, and in Canada). They use a form of "internal > money" - a voucher. Thus, an unemployed electrician exchanges his > services with an unemployed teacher who, in return tutors the > electrician's off-spring. The unemployed are allowed to use voucher > money to pay for certain public goods and services (such as health and > education). Voucher money cannot be redeemed or converted to real > money - so it has no inflationary or fiscal effects, though it does > increase the purchasing power of the unemployed. > > IIIb. Enhancing Employability > > In most such schemes, the state participates in the wage costs of newly > hired formerly unemployed workers - more with every year the person > remains employed. Employers usually undertake to continue to employ the > worker after the state subsidy is over. Another ploy is linking the size > of investment incentives (including tax holidays) to the potential > increase in employment deriving from an investment project. Using these > methods, Israel succeeded to absorb more than 400,000 working age > immigrants from Russia in the space of 5 years (1989-1994) - while > reducing its unemployment rate. > > IIIc. Encouraging Labour Mobility > > Workers are encouraged to respond promptly and positively to employment > signals, even if it means relocating. In many countries, a worker is > obliged to accept any job on offer in a radius of 100 km from the > worker's place of residence on pain of losing his or her unemployment > benefits. Many governments (e.g., Israel, Yugoslavia, Russia, Canada, > Australia) offer the relocating worker financial and logistical > assistance as well as monetary and non-monetary incentives. > > The EU is considering to introduce standard fixed term labour contracts. > They would reduce the insupportable costs and simplify the red tape now > involved in hiring and firing. The only country to buck the trend is > Germany. It is looking to equate the rights of part time workers and > full time ones. Similar ideas are debated in Britain. In France and most > countries in Central and Eastern Europe, to dismiss a worker, the > employer has to show that it has restricted hiring, applied workforce > attrition, and reduced overall overtime. The EU's "social chapters" - > now on of every member's law books - provides sacked employees with > recourse to domestic and European courts against their employers. In > other parts of the world, the two parties are subject to conciliation, > mediation, or arbitration. > > IIId. Reforming the Minimum Wage > > Minimum wage hinders the formation of new workplaces - and yet almost > all countries have it. Both the USA and the UK have just increased it. > Many are considering a scaled minimum wage, age-related, means tested, > and skills-dependent. > > IIIe. Administrative Measures: Early Retirement > > A favorite of post-communist countries in transition, early retirement > was liberally applied in order to get rid of "technologically-redundant" > workers and thus trim under-employment. > > Romania, for instance, offered its workers a handsome up-front payment > combined with unemployment benefits. A special Early Retirement Fund was > created by setting aside receipts from the privatization of state assets > and from dividends received by the state from its various shareholdings. > > IIIf. Administrative Measures: Reduction of Working Hours > > France has recently implemented the second phase of its transition to a > 35 hours working week, making it obligatory for medium and small > businesses. It is considered by many economist to be a wasteful measure, > based on the "lump of labour" fallacy. > > IIIg. Administrative Measures: Public Works > > The Civilian Conservation Corps (CCC) was established in the USA in > 1932. It offered work for young and unmarried men. They planted trees, > erected flood barriers, put out forest fires, and constructed forest > roads and trails. They lived in semi-military work camps, were provided > with food rations and a modest monthly cash allowance, medical care, and > other necessities. > > At its apex, the CCC employed 500,000 people - and 3 million people > throughout its existence. It was part of a major "public works" drive > known as "The New Deal". This Keynesian tradition continues in many > countries - from deflationary Japan to racially imbalanced South > Africa - to this very day. Such workers are usually paid a salary equal > to their unemployment benefits (Workfare). > > The Encyclopedia Britannica has this to say about public works: > > "The weakness in the proposal to use disguised unemployment for the > construction of social overhead capital projects arises from inadequate > consideration of the problem of providing necessary subsistence funds to > maintain the workers during the long waiting period before the projects > yield consumable output. This can be managed somehow for small-scale > local community projects when workers are maintained in situ by their > relatives - but not when workers move away. The only way to raise > subsistence funds is to encourage voluntary savings and expansion of > marketable surplus of food purchased with these savings." > > Public works financed by grants or soft loans do serve as an interim > "unemployment sink" - a countercyclical buffer against wild upswings in > unemployment - but, for all we know, they may simply be displacing > existing employment at great cost to the public purse. > > IIIh. Administrative Measures: Public Education and Dissemination of > Information > > Employment Bureaus throughout the world - spurred on by stiff > competition from the private sector - have transformed themselves from > mere registries to active (and computerized) labour exchanges. Many also > strive to educate workers, retrain them, and enhance their employability > through the acquisition of new skills. The unemployed are taught how to > prepare a professional bio, a business plan, a marketing plan, > feasibility studies, credit applications and interview skills. > Employment Bureaus now organize job clubs, labour exchanges and > employment fairs. > > IIIi. National Employment Contract > > Many countries - especially in Latin America and in Central and Eastern > Europe - have signed "National Employment Contracts" between government, > trade unions, employers (represented by the Chamber of Commerce), and > Central Bank. > > In this neo-corporatist approach, employers usually guarantee the > formation of new work places against a freeze on employee compensation, > the exclusion of part time labour from collective bargaining, and added > flexibility on minimum wages, job security, hiring and firing > procedures, social and unemployment benefits, indexation of wages and > benefits, the right to strike, and wage increases (increasingly linked > to productivity gains). > > Trade unions, in return, are granted effective control of the shop > floor - issues like unemployment insurance, employment protection, early > retirement, working hours, old age pensions, health insurance, housing, > taxation, public sector employment, vocational training, and regional > aid and subsidies to declining and infant industries. > > In Sweden and Germany there is co-determination. Workers are represented > even in non-wage related matters (such as the work organization). > > Wages and unemployment benefits are perceived as complementary economic > stabilizers. Many countries instituted an "Incomes Policy" intended to > ensure that employers, pressurized by unions, do not raise wages and > prices. In Sweden, for instance, both labour and management > organizations are responsible to maintain price stability. The > government can intervene in the negotiations and even threaten a wage > freeze, or wage AND price controls. In Holland the courts can set wages. > > Another possibility is a Guaranteed Wage Plan - Employers assure minimum > annual employment or minimum annual wages or both to tenured employees. > In return, firms and trade unions forego seniority (LIFO, last in first > out, firing the newly hired first) and the employer is given a free hand > in hiring and firing employees, regardless of tenure. > > IIIj. Labour Disputes Settlement > > Most modern collective agreements require compulsory dispute settlement > through mediation and arbitration with clear grievance procedures. > Possibilities include conciliation (a third party brings management and > labour together to try and solve the problems by themselves), mediation > (a third party makes nonbinding suggestions to the parties), arbitration > (a third party makes final, binding decisions), or Peer Review Panels - > where management and labour rule together on grievances. > > IIIk. Non-conventional Modes of Work > > Work is no longer the straightforward affair it used to be. > > In Denmark, a worker can take a special leave. He receives 80% of the > maximum unemployment benefits as well as uninterrupted continuity in his > social security rights. But he has to use the time for job training, a > sabbatical, further education, a parental leave, to take old people (old > parents or other relatives), or the terminally ill. This is also the > case in Belgium (though only for up to 2 months). These activities are > thought of as substitutes for social outlays. > > In Britain, part time and full time workers are entitled to the same > benefits if wrongfully dismissed and in Holland, the pension funds grant > pensions to part time workers. In many countries, night, shift and > weekend workers are granted special treatment by law and by collective > contract (for instance, exemption from social benefits contributions). > > Most OECD countries now encourage (or tolerate) part-time, flextime, > from home, seasonal, casual, and job sharing work. Two people sharing > the same job as well as shift workers are allowed to choose to be > treated, for tax purposes and for the purposes of unemployment benefits, > either as one person or as two persons. In Bulgaria, Macedonia, and a > host of other post-communist countries, a national part time employment > program (called in Macedonia the "Mladinska Zadruga") encourages > employers to hire the unemployed on a short term, part time basis > > IIIl. Full Employment Budgets > > The national accounts of many countries now produce a full employment > budget. It adjusts the budget deficit or surplus in relation to effects > of deviations from full or normal unemployment. Thus, a simple balanced > budget could be actually contractionary. A simple deficit may, actually, > be a surplus on a full employment basis and government policies can be > contractionary despite positive borrowing. > > IIIm. Apprenticeship, Training, Retraining and Re-Qualification > > In France, Germany, the UK, the USA, and many other countries, > sub-minimum wages are paid to participants in apprenticeship and > training programs. Most of the unemployed can be retrained, regardless > of age and level of education. This surprising result has emerged from > many studies. > > The massive retraining and re-qualification programs required by the > technological upheavals of the last few decades are often undertaken in > collaboration with the private sector. The government trains, re-trains, > or re-qualifies the unemployed - and firms in the private sector > undertake to employ them for a minimal period of time afterwards. It is > a partnership, with the government acting as educational sub-contractor > for the business sector (with emphasis on the needs of small to medium > enterprises) and a catalyst of skill acquisition. Such programs include > vocational training, entrepreneurship skills, management skills, and > even basic literacy and numeracy. Students are often employed as > instructors in return for college credits and scholarships. > > IIIn. Entrepreneurship and Small Businesses > > Small businesses are the engine of growth and job creation in all modern > economies. Even the governments of rich countries encourage innovative > credit schemes (such as micro-credits) and facilities (such as business > incubators), tax credits, and preference to small businesses in > government procurement. > > > >
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