A colleague alerted me to the Hays Global Skills Index. It is a complex, statistically-based report designed to assess the dynamics of skilled labour markets across 33 countries.
Seven indicators make up the Hays Global Skills Index
- Education flexibility – this indicator relates to how flexible the education system is to meet the changing demands of the labour market. Low score = more likely.
- Labour market participation – greater participation means more potential workers. Low score = larger pool of workers
- Labour market flexibility – this relates to government regulations around employing people. Low score = less red tape
- Talent mismatch – do the skills of the labour force match those of the jobs that are in the market place? Low score = employers find it easier to get labour with appropriate skills
- Overall wage pressure – skills shortages are an issue if wages are growing faster than the cost of living. Low score = wages are not rising quickly.
- Wage pressure in high-skill industries – Some industries require higher‑skilled staff and makes them more vulnerable to skills shortages. Low score = wages in high-skill industries are growing slower than wages in low-skill industries.
- Wage pressure in high-skill occupations – a rise is wages of high-skilled occupations means that there is a shortage. Low score = wages for high-skilled occupations are rising more slowly than those in low-skill occupations.
In looking at the figure below seven indicators above are given equal weight when calculating the overall Index score for each country. Each indicator measures how much pressure different factors are exerting on the local labour market.
Higher scores mean that a country is experiencing more pressure than has historically been the case.
Lower scores mean that a country is experiencing less pressure than has historically been the case.
Skilled labour market conditions vary markedly in different parts of the world. Grouped into large overarching regions, however, it is possible to discern some headline patterns. The overall Index score increased slightly from 2015, as changes in skilled labour market conditions in Europe and the Middle East (EME) more than offset a very slight loosening in the Americas and Asia Pacific. The annual change in Index scores should not mask the overall position that suggests skilled labour markets in the Americas and EME remain tight relative to the past, while Asia Pacific remains little changed from historic trends. Source: Hays Index
Currently covering Labour Markets with my A2 level classes and put together an exercise which tests them on calculating MCL, MRPL etc and also showing why MCL = MRPL is the number of workers a firm should employ. There is an exercise for both Perfect and Imperfect Labour markets – see ‘Word’ document. The excel document is a model answer showing the data in a table and a graphical format. Hope it is of use.
It is nothing new to consider how machines can perform the tasks done by the layout force. Experts believe that it is not blue collar or white collar jobs that are at risk but those jobs that are routine or non routine. Manual labour tasks have been constantly under pressure from technology but now more jobs that have cognitive tasks are now feeling the pinch.
Jobs said to be under threat from computerisation are:
- taxi and delivery drivers
- receptionists and security guards
- cashiers, counter and rental clerks, telemarketers and accountants
It is estimated that the development of machine learning will impact 35% of the workforce in Britain and 49% for Japan. See chart from The Economist – Computerisation of different occupations.
Job Polarisation – Middle Skills Jobs v Low-Skill and High-Skill Jobs
Economists are already worrying about “job polarisation”, where middle-skill jobs (such as those in manufacturing) are declining but both low-skill and high-skill jobs are expanding. In effect, the workforce bifurcates into two groups doing non-routine work: highly paid, skilled workers (such as architects and senior managers) on the one hand and low-paid, unskilled workers (such as cleaners and burger-flippers) on the other.
Source: The Economist June 25th 2016
Universal Basic Income
After two centuries in which capitalism has dominated the western world, this economic system has become desperately dysfunctional: inequality is growing, climate change is accelerating and nations are beset with bad demographics, debt burdens and angry voters.
Paul Mason – Channel 4 economics correspondent and author of ‘PostCapitalism: A Guide to Our Future’ states that:
“information technology has reduced the need for work” — or, more accurately, for all humans to be workers. For automation is now replacing jobs at a startling speed
“information goods are corroding the market’s ability to form prices correctly”. For the key point about cyber-information is that it can be replicated endlessly, for free; there is no constraint on how many times we can copy and paste a Wikipedia page. “Until we had shareable information goods, the basic law of economics was that everything is scarce. Supply and demand assumes scarcity. Now certain goods are not scarce, they are abundant.”
“goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy”. More specifically, people are collaborating in a manner that does not always make sense to traditional economists, who are used to assuming that humans act in self-interest and price things according to supply and demand.
There is concerns in many countries as to what can be done with a growing labour force with limited job prospects. There have been call for more money given towards social welfare to protect those impacted by the changes to the labour market and assist them move to new jobs. Some have favored a universal basic income instead of the welfare system that involves paying a fixed amount each year to all citizens to actually exist – rather than tax to exist. Supporters of this idea argue that:
- People who are not working, or are working part-time, are not penalised if they decide to work more, because their welfare payments do not decline as their incomes rise.
- It gives people more freedom to decide how many hours they wish to work, and might also encourage them to retrain by providing them with a small guaranteed income while they do so.
- Those who predict significant job destruction see it as a way to keep the consumer economy going and support the non-working population.
- If most jobs are automated away, an alternative mechanism for redistributing wealth will be needed.
However those against this idea argue that:
- It is regressive as spending on existing welfare schemes would reduce income for the poorest, while giving the high incomes money they do not need.
- Furthermore funding such a venture would require a much higher tax rate that at present.
- The basic income would discourage some people from retraining, or indeed working at all—why not play video games all day?—though studies of previous experiments with a basic income suggest that it encourages people to reduce their working hours slightly, rather than giving up work altogether.
Whether technology will take over jobs and ultimately humanity is dependent on the rate of change and how we live through the long transition from capitalism (the state and the market) – to post capitalism (the state, the market and the shared collaborative economy).
Human nature is not a machine to be built after a model, and set to do exactly the work prescribed for it, but a tree, which requires to grow and develop itself on all sides, according to the tendency of the inward forces which make it a living thing. John Stuart Mill
Source: The Economist June 25th 2016
With Leicester City being crowned as EPL champions it was only time before someone in the media produced data showing the correlation between a club’s wage bill and their final position in the EPL. What is so extraordinary about Leicester’s feat what that it wasn’t a one off victory in the FA Cup or something similar but a competition that involved 38 games in the season. With Leicester just surviving relegation last year the odds on them winning the EPL were 5,000 to 1. What is so unique about their feat is that since the 1995-96 season the champion side has spent 225% more on player salaries as the median team. Arsenal, Chelsea, Manchester Utd and Liverpool have paid the highest wages to its squad of players and finished in the top four positions in the EPL 80% of the time. The total cost of Leicester’s regular team (£25m, or $36m) this season was less than a quarter of what Manchester United spent on new players last summer. Furthermore, if you look at Leicester City’s wage bill this year it is 75% of the league median which makes them, after Newcastle Utd in 2001-02, to break into the top four with a below-median wage bill.
However, Leicester’s success means that affluent clubs will spend even more money on sports science, video analysis and get the best people to work in these departments. No doubt that this will move the transfer market towards ‘perfect competition’ as information will flow more easily and clubs will not be able to benefit like Leicester in picking up players whose value has been underpriced. Therefore an advantage by one club will lead to only a temporary advantage until other clubs catch up. Consequently things will return to normal as talent will be distributed to those who can pay the most.
Click here to go to The Economist website to access their interactive image.
From the blog azizonomics – Union Members and Inequality. Below is a very significant graphic
Union membership and minimum wages are usually thought to reduce inequality by helping the distribution of wages. However although stronger unions and an increase in the minimum wage has the potential to reduce inequality, the fact that wages go above the market-clearing level could mean unemployment increases leading to higher inequality.
Strong unions can persuade political parties to engage in more redistributive policies. By getting workers to vote for parties that promise these policies there is a greater chance of them being implemented.
C = Private Consumption
I = Business Investment
G = Government Demand
(X-M) = Net Exports
With government spending being very liberal and effective in creating growth there is a need for the other components of GDP to do their part – Private Consumption, Business Investment and Net Exports.
Exports in the US have been disappointing equaling 14% of GDP compared to the euro zone’s 26%.
Business investment has also been subdued as lower profits mean less investment.
Private consumption hasn’t been as strong as anticipated even with the windfall gain of the significant fall in oil price and the growth of outstanding consumer credit. The biggest barrier to increasing private consumption is the level of pay to employees. Across the US median inflation-adjusted wages are not higher today than they were pre GFC.
Why are wages so low?
The Economist identified three things that have been behind the slow growth of wages in the US.
1. America’s Unemployment-Insurance
With the US government cutting back on unemployment benefits the wage expectations of workers fell. Businesses took advantage of this cheaper pool of labour and in 2014 a significant proportion of the 31 million jobs created wherein poorly paid industries.
2. The Behaviour of Firms
When the GFC hit firms found it difficult to reduce the wages of their staff but fired their least productive workers keeping the most productive happy. To compensate for the higher wages paid to the most productive firms were willing to offer new recruits only low wages.
3. Persistent Labour Market Slack
As there are worker available to fill jobs that become available firms are able to offer paltry wages. The number of part-time workers who would rather be full timers – called part-time for economic reasons (PTER) – fell much more slowly than the official unemployment rate following the GFC. The same can be said for discouraged workers i.e. the number of those wanting a job but say there is no point in looking. Research has found that a 1% fall in the PTER rate is associated with 0.4% fall in real wage growth. When the PTER is high, workers may feel unable to ask for higher wages, since what they really want is more hours.
It seems that the US economy lives and dies by what happens to consumer spending.
The Economist in their Free Exchange column had an interesting piece on the size of firms and the growing disparity in wages. In America the best-paid 1% of workers earned 191% more in real (ie, inflation-adjusted) terms in 2011 than they did in 1980, whereas the wages of the middle fifth fell by 5%.
Economists have long recognised that economies of scale allow workers at bigger firms to be more productive than those at smaller ones. That, in turn, allows the bigger firms to pay higher wages. This should not, in theory, cause a rise in inequality. If the chief executive and cleaner at a larger firm are both paid 10% more than their counterparts at a small firm, the ratio between their wages—and thus the overall level of inequality—should remain the same.
However two reasons are given for why this has not happened:
1. Larger firms find it easier to to automate tasks than smaller ones and if there is resistance from unskilled workers over the wage rate then mechanisation is always another option.
2. Because of the potential promotional prospects in a big firm workers are more willing to accept lower wages.
But if governments wish to reverse the inequality big firms foment, reforms to the labour market are unlikely to do the trick. Instead, they will have to spur competition by reducing barriers to entry for smaller firms, most notably by improving their access to credit. That should reduce income inequality and boost economic growth at the same time.
Source: The Economist