Are the Cameron ‘crappy jobs’ policies succeeding?
Afterthought: ironically, the clear economic (declining productivity) and social (more non family-wage jobs) degeneration of the UK, caused by the neo-liberal ‘crappy jobs-high asset prices’ policies of (at this moment) the Cameron government are of course the nightmare which according to people like Mrs. T. was supposed to happen to the UK in the seventies. Well, it is happening right now… But at least Mrs T., being the daughter of a grocer, still knew the price of a loaf of bread, unlike Mr. C., the son of a stockbroker.
Is the UK rapidly becoming a proud nation of dog walkers and shopping
boys retirees, subsidized by below minimum living standard pensions which force these people to accept crappy wages, crappy hours, crappy jobs and crappy certainty? It might be. The ONS (the UK Office of National Statistics) has just published an important report about the British productivity conundrum: why doesn’t British productivity increase anymore? Or, to state it less euphemistically: ‘why has British productivity been declining so much and for so long’? In June I published a graph which shows the puzzling development of British labour productivity after 2008 which I republish here. Note, again, that the post 2008 decline is an order of magnitude larger than the decline during the (in)famous ‘winter of discontent’:
If this decline is structural the ‘Output Gap’ in the UK is much smaller than generally assumed which makes the government deficit more of a problem. But a much more fundamental question is: “Is the neo-liberal Cameron ‘crappy jobs policy’ an alternative to more traditional policies aimed at economic, technological and social progress and full employment in combination with a family wage and an increase of productivity and prosperity”? Is the UK productivity decline an example for countries which already have much higher average levels of productivity, like neighbouring Denmark, the Netherlands, Germany, Belgium, Ireland, France and the USA (productivity per hour, 2012, Eurostat data), as less production has to be produced with more toil which leads to lower unemployment but also to lower standards of living? Should these countries lower pensions too, to enable employers to pay sub living standard wages?
According to the ONS study, the answer to the first question, about the UK becoming a country of proud dog walkers, is a tentative “Yes”:
But the most interesting sector is MServ (market services without telecommunication, M.K.), where 2010 witnessed a clear break in the previous pattern of exceptionally strong employment growth over the whole of the sample period, albeit that employment growth remained positive for all but the most productive quartile. The resilience of employment among less productive MServ firms is a consistent feature of the micro-data and a likely contributory factor in the ‘productivity conundrum’.
And this development was caused by a change in Schumpeterian dynamics (not creative destruction but destructive creation: new vibrant high productivity businesses and sectors suck the blood out of old, obsolete and low productivity sectors, the new activities come first):
Figure 35 shows that in MexElec, (manufacturing excluding electrical machinery, M.K.) the average productivity of exiting firms and entrants is consistently lower than that of continuing firms. For entrants this partly reflects the fact that new firms are typically smaller than incumbents. However, drilling down in the ESSlait dataset reveals that the average size of exiting firms is broadly comparable with the average size of incumbents. The drop in productivity of exiting firms in 2008 and 2009 is somewhat counter-intuitive. Other things equal one would expect a recessionary shock to drive better performing firms out of the market compared with normal turnover in the industry, whereas these estimates suggest that exiting firms during the recession were on average markedly less productive than exiting firms in earlier years. This finding is even more apparent for EleCom (electrical machinery and telecommunications, M.K.) and MServ, perhaps suggesting that competitive pressure to exit (sometimes referred to as ‘creative destruction’) has weakened in recent years, despite the recession.
It might indeed be the case that the rules have changed. Maybe all kind of ‘self employed with rich husband/wife’ and ‘an underpaid position for somebody with a pension which is too low to live’ jobs are the future. I still do not change my mind, however. Productivity in services has recently been increasing, in the UK. And I do think that Schumpeterian dynamics in the end will do their productivity increasing work. Which, provided that the government cares about investments which increase sustainability as well as full employment and a full employment level of especially private but if need be also government spending will lead to a prosperous future. Needless to say that wasting money on keeping house prices inflated won’t help.
By the way – even being a professional dog walker requires more skill and private and public investment (a van, roads, parks) than you might think – one of the twisted aspects of the hyper flexible bottom of the labour market is that people do not only have to accept crappy wages, crappy jobs, and crappy hours but also often need to have a crappy car to travel to rather flexible destinations – a car which they can’t really pay.