sexta-feira, 28 de março de 2014

And counting

Frank Roels

The fallacy of “investing”
In many discourses, “investment for growth” is proposed as an answer to the crisis. However, “investment” has various meanings. Often it is equated to job growth; but this is erroneous in most cases in today’s economy. Indeed, the biggest investments nowadays, totalling dozens of billions each year, are fusions or take-overs of one corporation by another, resulting in overlap or synergies that require fewer personnel. Jobloss is the result. For a shortlist, see.
A second common type of large investment is restructuring, in order to increase productivity and/or lower production capacity in response to a slack of demand; the explicit goals are fewer jobs to reduce labour cost, and to maintain or improve net profit.
Increasing competitiveness is another credo in political and business circles. But it always results in jobloss in the lesser competitive enterprise, and in a smaller number of jobs where productivity is higher. In the internal European market, job creation is zero. And when considering the exports out of Europe, are there truly some businessmen who hope to beat the Chinese and Indian working conditions?
In fact, substantial job growth in the private sector is always dependent on significantly higher demand on condition that the latter exceeds the existing production capacity; because it is the clients who must pay for the bill. If future demand is uncertain, hiring will be postponed; instead personnel will work overtime, and/or clients are asked to have patience. At present, many businesses have an unutilized capacity.
What type of investments do really create novel jobs? Innovation? Again, it depends. Not so, if a computer program replaces employees (example: pc banking). More of such developments are predicted to be forthcoming. Job creation does result in case the investment simultaneously raises its demand: the most evident example is building works, either for private or public clients: roads, bridges, houses, schools, hospitals, homes for the elderly, energy plants, as well as renovation and insulation of the same. And of course, military expenditures, which are ordered and paid for by governments.
It is important to note, that for almost all of these jobs, public funding or public support is the motor (keep this in mind, for the subsequent chapter on employment). So, investments in each specific case should be questioned in terms of job creation.
The fallacy of activation
Most European governments continue to propagate and organize so-called activation of the unemployed. This includes a) short-time training, in languages, skills, and stages in enterprises; b) mandatory uninterrupted applying for jobs; c) sanctions if an individual does not fully comply. In addition, in some countries, unemployed must carry out unpaid jobs.
Unemployment benefits are being lowered in several ways. For example, next year, Belgian youngsters will lose their benefits if they have not compiled 312 working days in 3 years; widows and widowers under 45 will lose their widow’s pension after 1-2 years, “to motivate them for work”. While training is always useful, and is a must for youngsters leaving school without certificate (which requires special programs, with dedicated teachers), this activation policy does not create jobs. Advocates of this policy ignore the permanent disproportion between the number of unemployed seeking jobs, and the (small) number of vacancies. The latter are in part for workers with years of experience in a very specific task, or for highly qualified employees. Training on the floor of the company should remedy so-called “bottleneck vacancies”; but in their advertisements employers rarely offer training, and then complain about lack of candidates.
According to the EC, there are 2 million vacancies in Europe. Even if true, the figure shows the discrepancy. The 27 million unemployed in Europe can never find jobs in this way because the jobs simply are not available. The inefficiency of activation to solve unemployment is clear from the unemployment figures: the latter have not decreased while activation was stepwise extended over the years and sanctions became more systematic.
Recently the activation policy in The Netherlands was evaluated by Rutger Bregman. The government spents over 6.5 billion euro a year on a series of measures, but their effectiveness is not tested nor visible, given the persistence of 700.000 unemployed.