Thursday, 3 September 2015

More jobs, but a growing gap between good and bad jobs

Paul Sweeney: An important EU institution, which is based in in South Dublin and does valuable work, is Eurofound. It has just released “The European Jobs Monitor 2015” , an interesting report on the type of jobs which are being created. In spite of the recovery, the news is not all good.

TASC is concerned with growing inequality. A key antidote to poverty and low incomes is more quality jobs. The popularity of Thomas Piketty’s book - a great tome of 700 pages - has fortunately generated a new interest in inequality. The largest meeting on economics ever held in Ireland was when TASC hosted Piketty and over 650 people paid to hear him speak.

Such is Piketty’s impact that even mainstream economics is waking up to the issue. In fairness to most mainstreamers, they were so deep in their silos that they did not realise that their belief in free markets (which had actually been self-correcting on inequality for some decades thanks to institutions and taxation) had ceased to work in the past 30-odd years in most countries. Jobs are a key to the reduction in inequality and so what is happening in the labour market internationally and over time is important.

This study takes a ‘jobs-based’ approach to describe employment shifts quantitatively (how many jobs were created or destroyed) and qualitatively (what kinds of jobs these were). “This approach has been used, in particular, to assess the extent to which employment structures in developed economies are polarising, due to the decline in mid-paid jobs, or upgrading as a result of growth in high-paid, high-skilled jobs.”

The increase in jobs in the 7 countries studied, which includes Ireland, finds that there is “a transition from the more polarised employment shifts of the peak recession years to a flatter, more equal distribution of employment across the wage distribution, with, if anything, a downward skew – in other words, greater growth in lower-paid employment.”

This means that there may be increases low-productivity employment, and this means in turn that output does not rise. And so, in spite of the increase in jobs, living standards no longer rise.
The jobs growth over the past three years has been asymmetrically polarised with “the greatest growth in well-paid jobs, some modest growth in the lowest-paid jobs and declining employment in jobs in the middle of the wage distribution.”

This reflects the growth in incomes of high earners - the professionals, top executives etc and the decline of wages for those with little education. Studies of the falling labour share of national income have found this polarisaion within the labour side of national incomes, including my own work.  Some of those on the labour side were maintaining or even gaining income share along with the owners of capital, while most others were losing incomes shares.

Eurofound finds that “Employment growth has strengthened, particularly in low-to-mid-paid jobs. Throughout the crisis and its immediate aftermath (2008–2013), employment grew only in jobs accounting for the highest-paid 20% of workers. As the recovery has become more established, lower-paid services jobs have accounted for a large share of recent growth.”

It found that the increase in the part-time share of employment has been “the main cause of the trend of destandardisation in employment relationships.” It divided jobs in the EU into five categories of equal size (quintiles) based on wage, and found “that growth in permanent, full-time employment is increasingly confined to top-quintile, well-paid jobs; in all other quintiles of the wage distribution, it is decreasing.”

More specifically the study found that “employment structures in Germany and the UK have been polarising since the early 1980s, whereas in Ireland, Spain, Sweden and Switzerland they have been more-or-less consistently upgrading since the 1970s.”

It found that “employment continued to polarise in 2011–2013 (albeit asymmetrically with an upward skew), after the peak years of the crisis. This was a consequence of continuing employment destruction in the construction and manufacturing sectors”. Simultaneously, services employment grew in the top quintile.

As Ireland had a huge construction bust, it hit middle paying jobs severely. Industry and construction saw a collapse of jobs from 580,000 at end 2007 to 331,000 in early 2012 - a fall of a quarter of a million jobs - or a 43% collapse in a few years. It is now up a bit at 371,000 in Q2 of 2015.

Interestingly the study found that gender employment gaps were closing across the countries covered. This is because the changes in occupations has tended to favour women, to “the extent that employment in many well-paid, predominantly female jobs, often in the public services (such as educators and medical professionals), has been expanding, while predominantly male-employing jobs (manufacturing) have been in decline.”

In the longer term, the study found that while there was great diversity across countries, there were important common trends. “Most importantly, there was a consistent expansion of employment in high-paid jobs across countries and periods, contrasting with a very significant decrease in mid-paid and low-paid occupations across countries and periods.”

Paul Sweeney is Chair of TASC's Economists Network 

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