Growth, Jobs and Consumption

GDP growth is not necessarily translating into a reduction of unemployment says The Economist in a Sep 15th 2011 article on  Growth and Jobs.

The San Jose metropolitan area, for instance, enjoyed scorching growth in 2010, yet somehow managed to raise employment by just over 1%. Houston's growth, by contrast, is remarkably job-intensive.

The article suggests (over simplistically I believe) the following reason:

...growth in some metropolitan areas is focused in less productive industries. Growth in high-tech manufacturing in the Bay Area, for instance, might not translate into the same level of labour demand as growth in the health care sector in Texas.

...leading the author to recommend (erroneously in my view) that:

If America could find ways to make San Jose just a little more like Dallas, that might make a meaningful dent in America's employment problems.

I say erroneously not because there is anything wrong with the logic, but because I think we risk not noticing that a major economic disruption may be occurring in developed economies; a disruption in the traditional correlation between economic growth and job creation.

It is conceivable that having outsourced a great deal of our traditional production, our new economy is simply not job-intensive and perhaps shouldn't be. This possibility is evidenced by the 30,000 job reduction announced by Bank of America without simultaneously (as far as I know) planning to close or dispose of any of its businesses. One has to ask, "what have these 30,000 people been doing if you can manage without them?" Nationally we have seen corporate profits rising and stock prices recovering without denting the national unemployment rate. Once again, might this mean that we simply need fewer people than ever before and that we can grow our businesses successfully without employing more people? Perhaps for the first time, the high unemployment figure is not a function of recession as much as it is a function of a new economy jerked into existence by the recession; an economy that is not heavily dependent on employees.

Even though "our people are our most valuable assets" is our management mantra, we all know that most managers would far prefer to run businesses that don't need employees. So now, if technology is making this possible, why would we want to employ more people...just to bring down the national employment statistics? Would that be sustainable business practice and would it promote our global competitiveness?

If we are witnessing a disruption of the type I am suggesting the solution will not be to make San Jose just a little more like Dallas. The solution requires seismic shifts in society's values and massive changes in way of life. Two things need to happen:

  1. The full onus of job creation should not vest only with employers. Governments at all levels, trade unions and prospective employees should make employment a more enticing prospect for potential employers. While continuing to protect workers from abuse, the emphasis should be more on employees' responsibilities to contribute to wealth creation and provide services for customers than on employee entitlements. Employees who add value are less likely to be laid off, abused or even taken for granted than those who are easily replaceable. It is the onus of the employee to do all he or she can to become indispensable to their employers.
  2. Society will need to evolve into one that is less consumer driven. For this to happen people will need to find fulfillment, status and security in intangible accomplishments not only in the acquisition of tangible symbols of wealth and status. If we are not exclusively reliant on material wealth for our sense of identity and security we will begin to downsize of our financial expectations. We might eventually even be willing to work fewer hours for more time to pursue our other passions which may include some altruistic and philanthropic activities too. All of this will help spread available work opportunities to more people. Changes like these are more than economic or life-style changes, they are a change in values and in the way we prioritize what's really important to us.

These changes in attitudes and values will not happen over night. However, looking at the values and preferences of the new generation we might have a better chance now than ever before to redefine what we stand for, what we fight for, what we spend our money on, and most important: what we spend our time on.

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