Global Employment Model Garry Jacobs Chair WAAS Global

Global Employment Model Garry Jacobs Chair, WAAS Global Employment Program 1

Factors Impacting Employment 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Demography: population growth and increasing life expectancy * Transformation of work: from agriculture to manufacturing to services * Mechanization and automation * Globalization of trade and outsourcing * Rates of economic growth * Income distribution * Patterns of investment – speculative vs. productive * Increase in quality of jobs * Higher educational requirements * International labor mobility * Labor policies * Public policies and regulation Entrepreneurship Self-employment Vocational training Virtualization of work 2

Pop & Employment 1950 -2007 3

Demography • Trends – – – – – Employment growth relative to population and labor market growth Impact of rising population on global economic demand Labor market growth in developing countries increases labor supply Aging of the population in OECD Greater longevity will push retirement ages higher Labor shortages are projected in some economically advanced countries Urbanization Migration of workers from developing to developed nations Potential impact of international labor policies such as minimum wage • Issues What will be the impact of aging on labor markets? Where will it create shortages and to what extent? How are shortages likely to be filled? What will be the impact of aging on retirement age? How will society harness the capabilities of more experienced older workers who wish to continue working? – What will be the economic impact on a declining percentage of working age population on pension and welfare systems? – How will worker sex ratios change? What factors will most affect them? – – – 4

Economic Growth • Trends – Projected national and global economic growth rates and their impact on total employment – Rising living standards in emerging markets will create enormous demand in future – “Job Exports” –jobs created overseas from domestic growth – Impact of growth of tourism, medical tourism generate jobs in all regions • Issues – What will be the relative contribution of financial capital, technology and human capital to future economic growth? – Income and Employment Multiplier Effects – Impact of tradeoffs between technology and labor, e. g. farm employment – Relationship between economic growth and domestic and international job creation 5

Globalization of Markets • Trends – Growth of manufacturing trade since 1990 shifts jobs internationally – Outsourcing of services shifts jobs to developing countries – Globalization of Labor Markets/Flows/Labor mobility – Effects of the unification of the EU market on employment may be obscured by other factors • Issues – To what extent can global markets be regulated nationally or internationally? – What are the crucial regulatory decisions that would have maximum impact on employment? 6

Finance • Trends – – – Globalization of financial markets Growing divorce between finance and economy Rising unutilized international financial reserves International capital investment flows Interest rates Currency stability and valuation • Issues – The role of money and capital and its impact on employment – What is the public good impact of financial markets – The huge cost of global financial instability is not being priced – the public is paying for instability and the right to speculate • Bailouts • Instability reduces long term productive investments • Need for huge unproductive foreign exchange reserves – Potential impact of policies to reduce non-productive investment and incentivize productive investments, e. g. Tobin Tax – Impact of incestuous relationship between major corporations and investment funds on corporate decisions, including employment 7

Human Capital Formation • Trends – Multiplier effect of human capital formation on economic growth and employment – Impact of underemployment and unemployment on Human Capital – Financial capital vs. human capital – Investment in human capital formation 8

Education • Trends Levels of education are rising dramatically worldwide, e. g. Korea, China Impact if education on employability Relationship between education, employment and unemployment. Relationship between education and income Labor market educational requirements Rising levels of education on aspirations, consumption patterns and effective demand – Educated unemployment in developing and industrialized countries – Life-long learning – – – • Issues – – – Educational curriculum and employability Firewall between universities and labor market in Europe Why MBAs are more employable? Accountability of universities Education and immigration 9

Skills shortage • Trends – Emerging skill shortages and skill mismatches in industrialized and developing countries – Projecting future skill needs – Trends in vocational education and training • Issues – Alternative training delivery systems – Education, apprenticeship, employment programs 10

Business Strategy • Trends – Globalization of sourcing and distribution systems – Globalization of business ownership – Globalization of MNC employment strategies – Shift of capital investment to growth markets and low wage producers – Shift of production to low wage countries – Shift of production to fast developing markets – Outsourcing of services • Issues – Reduced effectiveness of national level policies on business 11

Technology • Trends – Dissemination of new products and technologies at all time high – Rate of process and product innovation more rapid than before – Impact of process and new product development on employment in manufacturing and services – Factors influencing the substitution of capital and technology for labor • Issues – Attitudes, policies and business strategies impacting investment in technology 12

Ecology • Trends – Energy prices and their impact on employment vs. capital investment – Pressure to change technological base from fossil fuels creates problems and opportunities – Pressure to improve energy consumption at a time of rapid economic growth 13

Getting prices right Pricing labor and capital Are we pricing capital correctly? Pricing to reflect the actual cost of unemployment Policies to get prices aligned Pricing of resources Distinguish between extracting cost and ecological value of different resources • Assigning ecological cost of water will dramatically change agricultural and other prices • • • 14

Social Costs of Unemployment & Underemployment • Impact on human capital • Impact on social capital – neighborhoods, community • Impact on social unrest, crime, violence, peace and stability 15

Emerging economic opportunities • Historical analysis of the impact of new needs, products and services on employment • Project future profile of new services and job requirements in developing and developed countries • Factors influencing new business development • Scope for less developed nations to adopt services prevalent in economically advanced nations • High Potential Industries • Insurance as a driver – positive causal impact on economic growth 16

Evolution of Social Organization • Impact of social organization on new business opportunities • Future impact of the Internet on the way work is carried out • Social Development and Macro psychology – Impact of changing social attitudes on growth and employment – Trust deficits – their causes and remedies – Impact of trust on social development, economic growth and employment • Potential role of new types of insurance to promote trust, security and development 17

Law, Human Rights & employment Law and Human rights Property rights vs. the right to work The value of human security The challenge of food security is really about ensuring access to employment opportunities. • Social attitudes toward unemployment • • 18

Public Policy • Trends – – – – Public Sector as a major part of the economy Policies regulating new job creation Policies restricting entrepreneurial activity and employment Public investment in stimulus Welfare and social security Employer of last resort programs Guaranteed basic income – 4 Pillars • Issues – Need for political economic theory that reflects the large role of government in economy – Reconciling free markets with public good – Vested interests of financial markets and investors impacting employment policies – Public investment to crowd in private insurance, e. g. New Orleans – Reliance on classical macroeconomic strategies to address employment 19

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India – China GDP Growth (PPP) 21

India – China GDP Growth (Market) 22