As bad as the unemployment numbers are globally, this layoff-fest is remarkable for introducing some new aspects of economy shrinkage. More importantly, there are serious questions about what emplymant will look like on the other side of this recession.
For too many folks, there were already targets on their backs when the slowdown began. Much of the employment gains in the past decades have been in the ranks of contractual labor, or as I like to think of it: 1099 World.
Structural changes in Europe’s labour markets suggest that jobs will go faster than in previous downturns. Temporary contracts have proliferated in many countries, as a way around the expense and difficulty of firing permanent workers. Much of the reduction in European unemployment earlier this decade was due to the rapid growth of these contracts. Now the process is going into reverse. In Spain, Europe’s most extreme example of a “dual” labour market, all the job loss of the past year has been borne by temps. In France employment on temporary contracts has fallen by a fifth. Permanent jobs have so far been barely touched.
Although the profusion of temporary contracts has brought greater flexibility, it has laid the burden of adjustment disproportionately on the low-skilled, the young and immigrants. The rising share of immigrants in Europe’s workforce also makes the likely path of unemployment less certain. As Samuel Bentolila, an economist at CEMFI, a Spanish graduate school, points out, the jump in Spain’s jobless rate is not due to fewer jobs alone. Thanks to continued immigration, the labour force is still growing apace. In Britain, in contrast, hundreds of thousands of migrant Polish workers are reckoned to have gone home.
Despite having few immigrants, Japan is also showing the strains of a dual labour market. Indeed, its workforce is more starkly divided than that of any other industrial country. “Regular” workers enjoy strong protection; the floating army of temporary, contract and part-time staff have almost none. Since the 1990s, the “lost decade”, firms have relied increasingly on these irregulars, who now account for one-third of all workers, up from 20% in 1990.
As Japanese industry has collapsed, almost all the jobs shed have been theirs. Most are ineligible for unemployment assistance. A labour-ministry official estimates that a third of the 160,000 who have lost work in recent months have lost their homes as well, sometimes with only a few days’ notice. Earlier this year several hundred homeless temporary workers set up a tent village in Hibiya Park in central Tokyo, across from the labour ministry and a few blocks from the Imperial Palace. Worse lies ahead. Overall unemployment, now 4.1%, is widely expected to surpass the post-war peak of 5.8% within the year. In Japan too, some economists talk of double digits. [More]
Another unusual facet of this downturn has been the elimination of an astonishing number of very high-paying jobs indeed in the financial sector (if we still have one).
Geneva: There have been over 325,000 announced layoffs in the financial sector since August 2007, the International Labour Organization said on Monday, noting that 40 percent of those cuts, or about 130,000 jobs, were made since October of last year. More job cuts in the financial sector were to be expected as the full extent of the economic crisis became clear, the ILO said. The numbers did not include independent contractors and subcontractors.
Some of the largest announced cuts have come from US-based banks including Bank of America and Citigroup, together making up over 35 percent of global job cuts. The Swiss bank UBS, the largest wealth manager in the world, also announced 11,000 layoffs. In a report released ahead of a two day conference set to begin on Tuesday about the future of the 20 million jobs in the global financial sector, the ILO said that while the entire world's economy would feel the fallout, centres like New York and London were to bear the immediate brunt of these layoffs. "The impact will be major, considering that jobs in New York City's finance, insurance and real estate sectors account for one-third of personal income earned in the city," the report said. "The combined New York metropolitan area alone is expected to lose up to 100,000 financial services jobs." The impact on London and other hubs would be similar. Moreover, for each financial sector job lost, one to two other layoffs would be expected, feeding a vicious cycle of economic downturn. In the US, some 4.1 million people worked in the sector while in Europe, in 2006, 5.6 million people were employed in finance. [More]
If you cross these two trends, and then add in spiraling employee health care costs, wouldn't it be reasonable to predict any recovery would point toward a vastly different workforce structure? Will there be so many unemployed highly-skilled workers that companies can draw from a pool without offering any benefits or promises for the future? For that matter, what promises would folks believe after this job-shedding?
In addition, if our auto industry fails, eviscerating one of the last union fortresses, we will have reduced employment security across the spectrum of workers. Economists often argue that such binding employment arrangements are cartel-like in nature and bad for the overall economy. I agree, but in the absence of any job security, I'm not sure we know how bad productivity could get.
More uncomfortable yet is the growing realization that technology and other forces are conspiring to reduce the amount of workers needed. Look at our farms, for one example.
So if consumption returns at a much lower pace as permanently frightened citizens save much more, I think is unreasonable to expect employment to match population growth. Maybe as Boomers shuffle slowly off-stage more openings will occur, but this 401k-evaporating recession has undoubtedly postponed that overdue event.
I think Time got it right. Your number one asset is now a job - not your investments or house.
Human capital is worth quite a lot. Gary Becker, the Nobel Prize-winning University of Chicago economist, figures that in a modern industrialized economy, 75% to 80% of a person's economic output comes from human capital (as opposed to, say, land or machinery). Of course, during the bubble years (first stocks, then housing), the noneconomists among us didn't exactly think about it that way. "People became mesmerized by how rich they were," says Becker, "and didn't realize the crucial asset they had in their earning power."
The tide is now turning. To see how, let's check back in with the savings rate. After it went negative in late 2005, it meandered back into minimally positive territory. Then, last year, it started bounding upward. By the fourth quarter, we were saving 3.2% of what we brought in. In January we hit 5%. No longer are we disrespecting our paychecks, treating employment income as an also-ran source of wealth. "People are realizing their job is their real source of financial stability," says Ellison, "that they have to live within the means of their job, not within the means of their assets. We're relearning how to create wealth."As we do this, we'll start looking at our jobs differently. If that thing you do at the office every day is suddenly your sole financial lifeline, you'll approach it more cautiously. When you've got only one chip left, you're much less willing to put it on the table. In this new era, a predictable salary is more appealing than the chance of scoring big with bonuses and stock options. And having a government job — one of the last bastions of security — looks even better. One day soon you might find yourself perusing a list of the fastest-growing, best-paying professions, trying to picture yourself as an actuary. And instead of spending thousands of dollars to build a new deck, you're more likely to use that money to take a class.
Careers expert Dick Bolles sees another shift coming. If as a society, we turn our attention back to work — if we dote on our jobs as much as we did on our homes and portfolios in an earlier era — then we'll have to start asking deeper questions about why we do what we do. In December, Bolles noticed that a book he wrote in 1970 was back on the best-seller list. What Color Is Your Parachute? is about job-hunting and career-changing, but it's also about figuring out who you are as a person and what you want out of life. "Why are people rushing out to buy a book that talks about more meaningful work?" asks Bolles. "They're realizing they have to rethink work if they've got no Plan B. It reframes the whole issue of, What type of work am I willing to do?" [More]
This is why I think successful farmers will outsource LESS of their business activity, contary to the ag media paradigm of a team of experts informing every decision. At some point the producer simply becomes a general contractor arranging for subs to do work. It strikes me as better plan to constantly invest in in-house human capital via education and expansion into services now "off-shored".
In other words, farmers who can do double entry accounting, spot nematodes, program yield monitors, and troubleshoot hydraulic systems will have the human capital to compete more powerfully with those who hire out. I know, the constant promise is such service providers "more than pay for themselves", but absent any serious effort to try, we never really know. I think it's worth testing, as I have run into several producers whose in-depth knowledge far surpassed hired expertise.
At the very least, cooperative efforts between even competitors to share experise could be another tactic. This captive-capacity approach could be the core of farming companies I think will arise to dominate grain production here in the US.
For individuals, work will be the new "wealth" for the near future. [I just realized this new axiom implies that staying healthy then becomes absolutely paramount!]
This imperative to make your human capital as deep and high-utility as possible. While specialization may still be a strategy, being able to adapt and take on different types of work could be more career-stabilizing. Especially on farms.