Thursday, 15 September 2016

An Interesting Thing You Might Not Realise About Unemployment

Unemployment figures are often bandied around by Cassandra-types who portend doom on the state of society. But there are at least two conditions under which slight peaks of unemployment give exhibition to societal progression.

One is when a firm closes down due to competition elsewhere. This will hike up the unemployment figures for a short time, but it also means that in industry there has been an improvement in efficiency (I explain this in more detail here).

The other is when worker productivity means people need to work fewer hours to enjoy the same, or in many cases, a better standard of living (ditto when goods become less expensive).

Compare the working hours of domestic tasks in 1916 to those of 2016, or compare the average time spent working in 1916 to that of 2016 – it’s clear that we do a lot less work in the present age yet we have a vastly superior standard of living.

If you went back in a time machine and invited the average citizen from 1916 to look at the equivalent standard of living in 2016 they would be astounded. As times progress we continually see increased standard of living for less human energy expended, which translates into fewer working hours per year.

Thus it is quite possible, as is the case in America, to have more industrial production than ever before but fewer people employed in manufacturing than ever before. Or to put it another way, our great-grandparents worked a lot harder than us to obtain a standard of living well below ours.

Sometimes it’s true that more jobs equals better standards of living, but not always: there are times when fewer jobs and less working time equals more prosperity and improved standards of living.

Here's another thing you may not have considered. Increase in unemployment could mean that there are lots more people out there unwilling to work, but it more likely means that people looking for work are rational jobseekers.

For example, take every unemployed person in the country. Many of them could increase their chances of work if they lower their standards, but what they are trying to do is strike the balance between the length of search and the type of job.

A rational searcher will hold off taking just anything to increase the chances of finding a more desirable job, up until the point where the costs of the search are not greater than the gains. The unemployment pool makes up a lot of these rational searchers.

On top of all that, there is always this big question, which doesn't get considered often enough - Is Employment Always Desirable For Everyone?