----------forewarded message--------------- Gavin Cameron ([EMAIL PROTECTED]) Tue, 26 May 1998 09:19:56 +0100 (BST) While the recent postings on unemployment and inequality have been interesting, I thought an economist's perspective might be helpful. To take unemployment first of all, a good starting point for reading is the work of Steve Nickell. In the latest issue (May 1998) of the Economic Journal, there is a very accessible series of papers on unemployment across the OECD. In general, high unemployment is quite well explained by the following labour market features: 1) generous unemployment benefits that are not time-limited. 2) high unionization with wages bargained collectively and little coordination between either unions or employers. 3) high overall labour taxes or high minimum wages for young people. 4) poor educational standards at the bottom end of the labour market. It is important to note that there is little evidence that trends in globalisation and skills-biased technical change (or weightlessness as it is called by some commentators) can explain trends in aggregate unemployment, although they may be important for particular industries. This suggests that job sharing or a 'work-spreading tax' could not have very much effect on total unemployment. Indeed, economists have a name for the idea that cutting working hours would raise employment: the 'lump of labour fallacy'. Instead, unemployment seems to be driven by other important institutional features of the labour market such as the bargaining system and incentives for people to seek work. An alternative strategy for reducing unemployment would be to focus on improving the search activities and the skills of both the long-term unemployed and the unskilled, as well as reforming the benefit system to increase incentives. Turning to increased inequality, it is both a cause and a consequence of other developments in the UK and world economy. For example, countries with a lot of inequality in educational outcomes tend to have more income inequality, but it is clear that causality could flow in both directions. Ie, poverty reduces the incentive to acquire skills, just as low skills trap people in poverty. Since inequality seems to have increased in most industries and professions since the 1970s, and to have even increased among those with similar qualifications (i.e lawyers, bond-traders, footballers), it does not seem to be significantly driven by the globalisation of production which has only affected certain sectors of the economy. Potential treatments for inequality need to reflect this complex causality. Better quality education at the bottom end of the labour market is an obvious approach. In this context, my own view is that setting a national inequality target would be unhelpful compared with setting a national educational target. I hope these thoughts are of some interest. To summarize, I think that government policies can play a big role in reducing inequality and unemployment, but that such policies need to reflect the substantial (and accessible) body of economic research in the area. Since it appears de rigeur to finish these postings with a reference to a web-site, readers may be interested in a paper I have recently written for the Journal of International Affairs which discusses the effect of globalisation and weightlessness. It can be found at http://hicks.nuff.ox.ac.uk/users/cameron/jia.ps Gavin Cameron ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dr Gavin Cameron Research Fellow Nuffield College, Oxford, OX1 1NF tel: +44 1865 278653 fax: +44 1865 278621 mobile: 0802 441340 http://www.nuff.ox.ac.uk/Users/Cameron/research.html ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ------------------------------------------------------------- Posted to uk-policy, a service of Nexus. http://www.netnexus.org/ Hosting and email provided by new media consultants On-Line Publishing Regards, Tom Walker ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ #408 1035 Pacific St. Vancouver, B.C. V6E 4G7 [EMAIL PROTECTED] (604) 669-3286 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ The TimeWork Web: http://www.vcn.bc.ca/timework/
