The Continuing Heartbreak of Jobless ‘Recoveries’ and Jobless Growth

Arjun Jayadev

The Triple Crisis blog is pleased to welcome Arjun Jayadev as a regular contributor. Jayadev is Assistant Professor of Economics at the University of Massachusetts, Boston. His research focuses on international and macro economics, development, political economy and economics of distribution.

In The European Economy Between the Wars, a passage describes the experience of an unemployed English mechanic during the last depression. After seventeen weeks of being unemployed, the worker describes his desperation:

“It isn’t the hard work of tramping about so much, although that is bad enough. It’s the hopelessness of every step you take when you go in search of a job you know isn’t there”.

And in this recession, the despair of joblessness is equally palpable in the voices of those searching hopelessly for work. A long-term unemployed woman from Maryland reports:

“I have only had 2 interviews in the last 2 years out of hundreds of applications and postings of resumes. I have now gone 3 months without any income at all. I don’t know what to do now….It just seems to me that our Government and society is not recognizing us and really doesn’t care. What kind of people have we become?”

One of the most perverse features of the recent capitalist economy has been its failure to rapidly reabsorb labor that has been shed in a downturn or to increase employment quickly as output grows. These patterns of ‘jobless recovery’ on the one hand and ‘jobless growth’ on the other suggest a couple of important and not yet completely understood changes in the process of modern capitalist accumulation after 1990. As compared to recessions before 1990, recoveries in the U.S. have seen employment respond only after a long lag. At the same time, in other parts of the developing world, employment elasticities have fallen sharply after 1990 meaning that growth has been less labor absorbing over time.

Three separate bits of recent news suggest that these patterns continue.

In the U.S., it is clear that the recession saw a destruction of about 7 million jobs that appear simply unlikely to return given current levels of demand. Despite some stabilization in job losses, the August jobs report in the U.S showcased the fact that the U.S. jobs deficit continues to grow even as the national income grows. The economy faces a shortfall of approximately 11 million jobs when accounting for job losses and jobs needed to absorb new entrants into the labor force. Despite record profitability over the last few quarters, long term unemployment continues to grow and create destitution and misery. The move to actually reduce government spending in this instance threatens to make the situation worse.

India, meanwhile has been seeing robust growth in economic output over the last 5 years with GDP growth rates averaging around 8% from 2004 onwards. Given this, the results of the latest quinquennial employment and unemployment survey have been deeply worrying. In the period of 2004-2009, India has added a puny 1-2 million jobs, with rising male employment being nearly totally canceled out by falling female employment. Equally worrying is that the majority of employment growth has been in the unorganized sector, and job quality –something that is not measured but can be inferred from the data– is low in the growing sectors. While it is not all bad news (some of the decline in employment can be attributed to increasing enrolment in education, and some of it might be the result of ‘distress employment’ reducing as household incomes rise), the report makes clear that labor absorption will not be simply taken care of by rapid GDP growth. As other bloggers on this site have made clear, such an argument can be made for China as well.  So this pattern is not that of an isolated two or three countries, but has wider implications as well.

Indeed, a recent ILO report suggests that across the entire G-20, there is a looming jobs crisis that threatens to get worse in the next few years. The report notes that at current rates of employment growth, there will be shortfall of 20-40 million jobs across the G-20 by 2015. As the world authorities continue to tack (foolishly) from stimulus policies to austerity, these numbers may be revised upwards.

Critics of the concern about jobless growth point to the fact that in the long term rising labor productivity—the key to long run increases in living standards– means that there will be some growth that is not matched by increases in labor demand. And this is true. However, the fact that job growth rates appear to be lagging output growth rates across the world and that estimates of job loss numbers across the world are in the dozens of millions gives some pause to this. Our very conceptions of what is of value and what we consider development may need some rethinking.

Despite some suggestions by mainstream macroeconomists otherwise, cyclical downturns have real welfare consequences—but these are to be found in the effects of job losses on human life and not simply in output declines. Dudley Seers recognized long ago that having a job is a critical to having a meaningful life. He noted in a classic paper:

“Another basic necessity in the sense of something without which personality cannot develop, is a job. This does not just mean employment. It can include studying, working in a family or keeping house. But to play none of these accepted roles, i.e. to be chronically unemployed, to be chronically dependent on another person’s productive capacity, even for food, is incompatible with self-respect.”

The ability to work, and to be engaged with social life in a meaningful way is critical for any sense of real dignity and freedom. The patterns of accumulation we have adopted increasingly seem chronically unable to deliver on this front.