That's all very well and Hamish McRae does his cheerleader role to keep up everybody's spirits. He says that there are still great growth areas in the services such as health and there is room for more opportunities. However, the fallacy of this argument is that as re-training has to ascend to higher and higher skills, the ability ladder has only a finite length -- namely the intrinsic ability and trainability of those who are displaced from former jobs which go overseas.
This is the real crunch. What happens when there are no more people of the required intelligence available to learn the new, higher skills that could, in theory, be grafted on to the economy? For example, because more and more people are getting older, the number of hip replacement and heart bypass operations -- to speak of just two demands -- could be doubled, trebled, or even quadrupled perhaps. But where are all the extra surgeons going to come from? If they come from abroad then we are doing the source countries no favours, nor will we be helping the unemployed here at home.
Unlike Parkinson's whimsical Law devised some 30 years ago which says (of bureaucrats) that work can always expand to fill the time available, here we have a truly Draconian one: high skill jobs can't be created if the ability level is not available.
Orthodox economists can give no answer to the problem that now faces America, Japan and the developed countries of western Europe, try as you will. The Keynesians among them can talk about increasing government spending in order to create more public service jobs, but if he were alive today Keynes wouldn't dare give that answer. His strategy was only meant to be a short-term solution and more government spending has to be paid back later either in terms of higher taxation or inflation, both of them throwing people out of work and thus only postponing the problem.
So what will happen? Or, should we say, what will happen in those countries which will successfully solve this problem? If any do, of course.
It is quite clear that new jobs of a public service nature must be created. However, they cannot be created by the sort of centralised nation-state governments of today because such jobs are simply too expensive. Also large public service organisations with largely invisible layers of bureaucrats nestling within them and largely invisible clusters of state-supported agencies attached to them like limpets encourage too many free loaders. The public service utilities in England that were privatised a couple of decades ago now employ only a third of the personnel that they did then. Free-loading and inefficiency can only be prevented if there is adequate visibility and supervision by those they are supposed to be serving. This cannot be done in large highly centralised public service organisations.
The new jobs can only be created by much smaller communities and paid for by their own direct taxation, set by themselves and spent by themselves . This can only mnean a complete reversal of what has happened over the last 200 years. However, as energy (for commuting) starts to become expensive, as methods are developed for distance-working via the internet, and as local sustainable energy production technologies are developed, such a reversal will not only be possible but become more economic as time goes by. It will also mean that such smaller governances can choose their high-intelligence individuals on the spot and not have to trawl for them, as governments and big business does now, by means of the present nation-wide selection systems which are hugely expensive because last for many years longer than necessary. (For just one example, think of people with university degrees getting their first jobs at 21 or 22 as checkout people at the supermarket.)
This development will not be inevitable. If it doesn't happen by means of governmental encouragement and appropriate taxation strategies, then small scale communities will break away anyway by the high-earning high-intelligence proportion of the population itself who are able to detach themselves from the orthodox economy and work from home. (In England, it is calculated that a million self-employed individuals have already done so, though they have not yet started communities.) The intelligentsia will become frustrated by having to work longer and longer hours, as they are increasingly having to do now, in order to sustain centralised nation-states and the wasteful methods of high taxation followed by a high proportion of transfer payments going to the increasing numbers who are unable to take any part in a high-skill economy.
Hamish McRae mentions that England has a low unemployment economy compared with western Europe. So we have -- in terms of the 'officially unemployed'. But this number can already be tripled or perhaps quadrupled by the number of those young people who never register, the number of illegal immigrants (employed in the black economy who don't pay taxes), the number of those who are supposed to be disabled, and the number of those who have retired early, don't register for being available for work and, when their money runs out, expect to be supported by the state.
KSH <<<< UNION MILITANCY HELPED THE BRITISH ECONOMY
It has helped the UK to come through this cycle in better shape than any other large industrial economy
Hamish McRae
The danger is not "firebrand union leaders", as they were billed yesterday, but workers in China and India who will do the job much cheaper.
To judge by the reasonable welcome that Digby Jones, the director general of the Confederation of British Industries (CBI), received at the annual Trades Union Congress (TUC) conference, the majority of union leaders don't buy the fight-the-government-on-the-beaches line of some of their fraternity.
That is good news. There is a sufficient folk memory of the catastrophe of union excess in the 1960s and 1970s for any union unrest to send shivers down the spine.
But with hindsight -- and this is a deeply unfashionable thing to say -- it may be that union militancy did the country a service. It led to a more rapid run-down of jobs that would ultimately be unsustainable than would otherwise have been the case. Had we not run down manufacturing employment so rapidly we would not have freed resources for the booming service sector. The surge in employment in private sector services has enabled us to have more people in jobs than ever before, and a higher proportion in employment than in most continental countries.
Further, it has helped the UK come through this cycle in better shape than any other large industrial country, with lower unemployment and no dip into recession. Had we been more dependent on manufacturing we might be back in recession as the eurozone is now -- output shrank by 0.1 per cent in the last quarter.
If that all sounds reasonably encouraging, there is a sting in the tail. We have managed, maybe more by luck than judgement, to replace manufacturing jobs with service jobs. But what happens if and when service jobs move overseas?
Well, actually this is not an "if" or "when" question; it is happening right now. Call centres are being moved onshore, frequently to India. BT alone plans to employ 2,200 people in Bangalore and Delhi by spring next year. A lot of back-office accounting and IT functions have gone to India too. Indeed India seems to be doing to mass services what China has done to mass manufacturing: become the workshop of the world.
So how do we compete? The conventional answer, which we heard something of from Gordon Brown, the Chancellor, yesterday, is that we increase our productivity We get paid more than workers in China or India (or indeed eastern and central Europe) so we have to have higher productivity to compensate. That's fine as far as it goes, but higher productivity means fewer people, which means fewer jobs.
The key issue, therefore, is: will what has happened to manufacturing also happen to services?
To generalise, while manufacturing has lost jobs overall, it is the mass-manufacturing jobs which have gone first, while craft manufacturing jobs have been retained. We are hiring people to assemble Bentleys and Rolls-Royces, and have sacked people assembling Fords. But overall, we have been saved by service jobs.
Now, the same thing is starting to happen in services. I am confident that we will keep highly-skilled service jobs: what might be called "craft services" will be fine. Other service jobs will be protected by the need to be carried out physically in this country. It would be cheaper to get a haircut in Bangalore than in Brighton but of course you can't go to India every few weeks for that. (Though a former colleague of mine on this paper did once go to New York for a haircut, it was, she assured me, a very special one.)
It seems to be pretty inevitable that many of what might be called the "mass-service" jobs will indeed be exported. In any human sense that is extremely desirable. Anyone who cares about living standards in the less developed world should welcome this trend. Far better to create thousands of jobs in developing countries than to send aid that will be used to build dams that are not needed and line the pockets of the corrupt politicians who get the contracts.
So what will we do? We can't all be family support development co-ordinators for Sure-Start, or whatever new posts the public sector is busy creating.
I think there are two answers to this. The short one is that we cannot know what the jobs of the future will be. We could not have predicted in 1990 that there would be a job called a web page designer, for the simple reason that there was no internet.
The longer answer is that we need to look at the areas where the new jobs are likely to be and make sure that we as a country grab as many of those as possible. This ought to be the main concern of the delegates at the TUC: how to position the workforce for the future.
We can say some sensible things about our competitive advantage in the world -- ours as a country and ours as a rich developed nation, for all rich countries face the same challenges. The starting point is to look areas of service industry where we are already strong. One is education: our universities are second only to the US in attracting foreign students. The issues here are surely how do we maintain and improve our reputation, get more money into higher education, increase the size of the industry -- if that can be done without dropping quality -- and so on.
Another area of success is the creative industries: design, fashion, advertising, books, music, television and so on. The Department of Trade and Industry has started to focus on this but I suspect its most useful role will be in removing blockages to growth rather than creating any top-down strategy.
Still other top-of-the-range service industry areas include, most obviously, financial services and medicine. The City can look after itself provided it is not mucked about by Government, but medicine needs new thinking. Inevitably perhaps, we think of medicine in terms of sorting out, or at least patching, the National Health Service (NHS). This is a worm-eye view of the industry: the big issue really ought to be what share of the world market in health care we have and whether we could increase that by developing a stronger health-related export industry.
Put another way, we should be asking what are the blockages that prevent us doing in medicine what we are doing in education. Both are huge growth industries, where we should be able to increase our global market share. That is how we replace jobs that will inevitably be lost in other service industries.
There is a further question: should this be the concern of the unions? There is an organisational reason why it is not. The structure of a union, responsible to its existing members, is to protect the jobs and working conditions of those members. Thinking about the areas of new jobs, where there is no tradition of unionism because the jobs are new, does not fit into the union mindset. But if the unions don't think about these new jobs, their role becomes one of resisting structural change, seeking to slow down job losses, rather than encouraging their creation. That may be the inevitable outcome but it is a dispiriting one for the movement.
If the future role of the unions is cloudy, at least the task of Government is very clear. It is to look at the way jobs are created -- and not public sector ones, for it is harder to create jobs that raise tax revenue, than it is to create ones to spend it. And when the Government has thought a bit about the potential new jobs it should make sure that it is not getting in the way by, for example, creating figurative roadblocks in the way of universities or indeed creating literal road-blocks on the M25.
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Keith Hudson, 6 Upper Camden Place, Bath, England, <www.evolutionary-economics.org>
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