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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>
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Sent: Wednesday, March 13, 2002 7:58 PM
Subject: UPI The Labour Divide - I. Employment and Unemployment

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> 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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