IT should already be clear why we feel there is not one cause of employment issues but countless.
The set of causes, however, can be conveniently divided into two: those concerned with the overall imbalance between the total numbers of employable economically active people and the total number of employment opportunities (measured for example, in numbers of man-years of labour required) – and those concerned with structural imbalance between the skills, education, experience and aspirations possessed by the labour force and the occupational and other characteristics needed for manning the economy. The two types of imbalance are not, of course, mutually exclusive.
Both the overall imbalance and the structural imbalance are linked to the pattern of economic production, growth, and income distribution. It is for this reason that the employment issues are symptomatic of basic weaknesses in the whole process of development. They are in effect three major interconnections between excessive inequality in the income distribution and employment issues.
I. The more unequal the income distribution, the greater the differentials in wages and consumption levels and thus the stronger the desire for highly paid jobs mainly urban jobs and the greater the dissatisfaction with low paid work. In turn, this encourages migration from the rural to the urban areas. It further increases the pressure for secondary and higher education access to senior jobs within the civil service and large-scale manufacturing, and stimulates general claims for increases in salaries and wages. The structural imbalance becomes more acute.
II.The more unequal the pattern of income distribution, the higher the level of luxury consumption and, in most countries, the higher the expenditure on luxury imports, visible and invisible (e.g. foreign travel). The very rich individuals may also use foreign exchange to acquire assets abroad. This will add to the foreign exchange constraint which, in at least half the developing countries, is a major constraint in economic expansion.
III.The more inequal the level of income distribution, in many cases, the lower the growth of formal sector employment. Here the evidence is less straight forward. The essential determinant is whether luxury consumption leads to a more or to a less labour intensive pattern or production. Higher levels of luxury consumption will discourage demand for food production, which are generally labour intensive. At the same time, the other form of luxury consumption which they encourage, may or may not be labour intensive depending on the type of goods and context.
These three relationships are tendencies rather than universal laws. But with respect to policies, the crucial point is that there is no automatic measure of a judgment which operates in connection with either the overall or the structural imbalance. Thus, imbalances may persist and may indeed worsen without calling into play any offsetting mechanisms. Measures toward balance must, therefore, be made an essential element of policy.
Rev. Jan. A Scholtz
(Opinions expressed in this letter are in his own capacity)
Confidente. Lifting the Lid. Copyright © 2015