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Subject: The Wrong Way to Boost Jobs and Incomes
Date: Wed, 19 Jul 2006 19:12:36 -0400
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~~~~~~~~~~~~~~~~~~~(((( T h e B u l l e t ))))~~~~~~~~~~~~~~~~~~
A Socialist Project e-bulletin .... No. 29 .... July 19, 2006
___________________________________________________________
The Wrong Way to Boost Jobs and Incomes
John Peters
In the early 1990s, with rising unemployment and widespread economic
recession, the Organisation for Economic Cooperation and Development
(OECD) and the International Monetary Fund (IMF) began to analyse
unemployment, job growth, and labour market policies, and to push a
rather malicious theory which they call the 'jobs/unemployment
trade-off' in order to justify all kinds of regressive policies and
reforms. These analyses became central to the spread of neoliberalism
in the advanced capitalist countries and the agenda of 'structural'
labour market reform.
In a series of 'Jobs Study' reports, published over the past ten
years, the OECD has consistently argued that employment performance
would improve as soon as governments reformed their 'unfriendly'
labour market institutions.
The unemployed, the OECD claimed, have only themselves and too strict
labour laws and unions to blame for their predicament. With technical
progress rocketing, workers and the less skilled have to become more
'flexible' and accept lower wages and more part-time employment if
they want to work. This is the only way employers will hire them in
the 'new economy'.
In real terms, this theory might be far better seen as the 'less pay
or fewer jobs-for-the-suckers-trade-off.' The rich get more. The
majority of workers get the dregs, and they can take it or leave it.
But just to make sure they accept their lot in life, governments
should do all they can to roll back a century's worth of labour and
social policy in order to make sure workers make the proper 'choice'
of less pay.
It 1994, the OECD made 10 policy recommendations, including making
wage and labour costs more 'flexible" by restricting unions or
significantly restructuring or reopening collective agreements; as
well as reworking employment standards and employment protection laws
in order to increase the flexibility of work-time. It also argued that
wider trade and investment deals would promote competition and
investment.
The 2006 OECD Employment Outlook
Twelve years later, the OECD has recently reassessed its original
recommendations and their impact. In its 2006 Employment Outlook
report 'Boosting Jobs and Incomes', released in Toronto June 15-16,
it examines the labour market performance of leading advanced
industrial countries (including job growth and unemployment), and
develops a comprehensive listing of the changes countries have made
to their labour market policies and institutions over the past
decade. This is supplemented by reports analysing whether or not
countries have fully implemented, partially implemented, or ignored
OECD recommended reforms.
The report then goes on to make further recommendations or
'refinements' of earlier policy recommendations. These include a
number of common neoliberal economic prescriptions.
Among the key recommendations are tax cuts and social security
reductions to 'increase the rewards from work and encourage labour
market participation', as well as 'lower public spending to ensure
fiscal stability'.
It also claims that work-for-welfare, two-tier minimum wages, and the
ending of mandatory retirement will make more people work and work
longer, and improve the economy.
On the surface, 'Boosting Jobs and Incomes' appears to make 'common
sense' arguments that are intended to appeal to all and offend none.
Couched in high sounding rhetoric, it makes a number of draconian
policy recommendations sound innocuous, beneficial, and reasonable.
It also tames a number of its sharper edges by underlining the
importance of training, and saying that there is no 'one golden road'
to success.
But the underlining theme throughout the report is that unemployment
is due to 'protective' labour market institutions, like 'generous'
unemployment benefits, employment protection laws, and trade unions,
and that job growth will only improve if governments reform their
'unfriendly' labour market institutions.
This follows in the footsteps of a large body of mainstream liberal
economics that has long claimed labour markets will only 'clear' and
workers will have only more 'incentive' to work, if there are no
unions, unemployment insurance, or minimum wages. In addition, the
report operates on the assumption that removing legislation that
protects workers from being easily fired will only improve employer
incentives to invest and hire new workers.
The Limits of Neoliberalism
The OECD study goes on to claim that neoliberal deregulation and
reforms in labour market institutions and policies over the past ten
years account for almost two-thirds of the recent fall in
unemployment. But as a number of scholars and union researchers have
pointed out, this is highly questionable conclusion.
What makes the analysis most problematic is that nowhere does it
mention the benefits of public services to workers or to the economy.
Nor anywhere does it recommend investing in public services instead of
privatizing them.
The report also avoids any mention of the causes and consequences of
falling unionization in the 'market reliant' countries of the US, the
UK, and Australia such as low-wage work, more inequality, and
worsening public services. And while it discusses inequality, it
fails to address how the declining influence of unions has allowed
employers to get away with record profits, while paying their
employees less.
Much better solutions like suggesting people be given a living wage
or be provided with more opportunity to unionize -- each of which
would also substantively raise the money in people's pockets -- do
not appear anywhere in the report's final recommendations.
It is also hard to see how the neoliberal model of attacking union
rights, cutting unemployment benefits, workfare, and slashing social
assistance can in anyway be called a 'success' for working people.
Poverty has increased, public services jobs have been lost, and more
people than ever are working in bad, part-time jobs.
In Canada, for example, job growth has increased over the past
decade. But 32 percent of all jobs are now 'flexible' part-time or
self-employment. 42 percent of women work in poor, low-paid jobs.
Over a third of new immigrants -- who now make up the bulk of new
workers -- are stuck in low-income positions.
No Single Model of Labour Market Policy
However, what makes the 2006 report different is its recognition that
there is no single model of successful labour market policy. Unlike
the earlier 1994 analysis, 'Boosting Jobs and Incomes' also
acknowledges that there have been two successful sets of labour
market packages: those of the 'market reliant countries' (as used in
the Australia, Canada, New Zealand, Switzerland, the United Kingdom
and the United States) and 'other successful performers' (by which
they mean the social democratic countries of Austria, Denmark,
Norway, and Sweden).
In chapter after chapter, the economists of the report are forced to
grudgingly admit that neither an extensively unionized workforce, nor
good benefits, nor strong public services and employment have been in
way 'barriers' to employment growth or economic performance over the
past twenty years.
Sweden and Austria, with among the most unionized workforces and
comprehensive systems of unemployment insurance and retraining,
averaged annual rates of unemployment between 2-8 percent
(1980-1999), comparable to the lowest rates of the United States, and
also averaged rates of economic growth 2-2.5 percent (1995-2002) that
were again the same as those in the USA.
Sweden and Denmark were also distinguished by much higher levels of
employment among unskilled workers of 70 and 68 percent respectively.
By contrast, despite low levels of unionization and minimal employment
protection laws, Canada and the United States did not exhibit
particularly better levels of employment among unskilled workers,
with only some 55-57 percent of workers with less than high school
education working in jobs.
In addition, in most Nordic countries, rates of employment (the
percentage of the working age population in employment) have remained
at over 75 percent for both women and men. This is due to public
policies that facilitate women's employment.
Many Nordic countries use individual taxation rather than household
taxation, which reduces the disincentives that high marginal tax
rates impose for two-income families. These countries have also
introduced generous parental leave insurance schemes, and expanded
public child care provision. Likewise, the expansion of public sector
employment has promoted female employment.
As a consequence, the report also includes a few more progressive
recommendations. These include better polices to support women,
including more suitable parental leave and childcare services; more
training and more lifelong learning, and the involvement of employers
and workers in training design and implementation (a variation of
Sweden and Denmark's active labour market policies); and better tax
policies that tax individual incomes rather than families, boosting
family income.
Nonetheless, the OECD report tries its best to ignore much of its own
evidence, and downplay more progressive policies. Instead, it looks to
uphold to the economic nostrums of a now standard neoliberal line that
emphasizes the importance of the 'free market' and the need to do away
with the 'rigidities' of collective bargaining, employment standards,
and the welfare state.
Capitalist Competition and Labour Market Insecurity
Sadly these economic policies and the OECD's version of 'modern'
social democratic reforms are becoming the new 'normal'. This is a
tragedy for working people.
Because for the majority of working people, even in countries such as
Sweden and Denmark, the reality of the 'trade-off' is one of losing
good jobs for lower wages; losing secure jobs for more 'flexibility'
and part-time employment; and giving up wages and benefits for
greater business profit.
Faced with intensified competition, employers around the world are
seeking to do away with unions, employment standards, and
redistribution. Threatened by multi-nationals and capital flight,
governments now routinely attack 'labour market rigidities' (by which
they mean everything from collective bargaining institutions to public
sector workers) as the cause of slow economic growth and unemployment.
As a consequence, what we are witnessing is a systematic ratcheting
down of wages, labour rights, and social distribution, and the
growing success of those who own capital and financial assets -- the
'less pay or fewer jobs-for-the-suckers-trade-off'.
Union Alternatives
To counter these dynamics, unions need a good deal more than simply a
better mix of employer-driven social policies and watered-down
employment standards. Rather unions and progressives require more
comprehensive plans and new forms of political mobilization that will
sustain an effective form of egalitarianism appropriate to our global
world.
Workers have to devise plans that will give them a degree of
political control over the global movement of capital, goods, and
finance. Unions must also work towards establishing institutions that
ratchet up wages, working conditions, and labour rights worldwide.
At the very least, an alternative politics will require institutions
such as labour controlled unemployment insurance funds that allow
workers to play a key role in social policy and distribution, and
protect labour rights. Over the longer term, working people must
establish political alternatives that will effectively challenge
neoliberal governments and put in place democratic and social
controls over investment funds and productive assets as well as the
world of work.
A good place to start in making a better world is with policy
arguments critical of standard liberal economic remedies and that
emphasize the need to improve peoples' lives everywhere. This can
begin from the understanding that capitalism tends to produce
unemployment and insecure work as part of the processes of economic
growth, especially so in a context of global production.
Sources Critical of Neoliberal Labour Market Policies
For such a critical perspective, on earlier OECD reports and the
problems with 'jobs/unemployment' trade-off theories, see the recent
work by Andrew Glyn, Dean Baker, David Howell, and John Schmitt. A
number of their papers can be found at the New School website,
including "Unemployment and Labour Market Institutions: The Failure
of the Empirical Case for Deregulation':
http://www.newschool.edu/cepa/publications/workingpapers/archive/cepa200404.pdf
Dean Baker also heads up the Center for Economic and Policy Research.
The Center at
http://www.cepr.net has a number of papers critical of US economic,
social and labour policy.
For those looking for a highly readable and concise book on
globalization and its impacts, Andrew Glyn's Capitalism Unleashed.
Finance, Globalization, and Welfare. Oxford University Press, 2006.
For a Canadian perspective on jobs, employment, unions and the labour
market, Andrew Jackson's Work and Labour in Canada. Canadian Scholar's
Press, 2005
The OECD report "Employment Outlook 2006: Boosting Jobs and Incomes"
can be accessed at:
http://www.oecd.org/document/38/0,2340,en_2649_201185_36261286_1_1_1_1,00.html
--- John Peters has been active in CUPE and now teaches political
science at Laurentian University in Sudbury.
~~~~~~~~~~~~~~~~~~~~~(((( T h e B u l l e t))))~~~~~~~~~~~~~~~~~~~~~
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