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Employment and Unemployment - Part I

Sam Vaknin, Ph.D. - 7/17/2006

Communism abolished official unemployment. It had no place in the dictatorship of the proletariat, where all means of production were commonly owned. Underemployment was rife, though. Many workers did little else besides punching cards on their way in and out.

For a long time, it seemed as though Japan succeeded where communism failed. Its unemployment rate was eerily low. It has since climbed to exceed the United States' at 5.6%. As was the case in Central and Eastern Europe, the glowing figures hid a disheartening reality of underemployment, inefficiency, and incestuous relationships between manufacturers, suppliers, the government, and financial institutions.

The landscape of labour has rarely undergone more all-pervasive and thorough changes than in the last decade. With the Cold War over, the world is in the throes of an unprecedented economic transition. The confluence of new, disruptive technologies, the collapse of non-capitalistic modes of production, the evaporation of non-market economies, mass migration (between 7.5% - in France - and 15% - in Switzerland - of European populations), and a debilitating brain drain - altered the patterns of employment and unemployment irreversibly and globally.

In this series of articles, I study this tectonic shift: employment and unemployment, brain drain and migration, entrepreneurship and workaholism, the role of trade unions, and the future of work and retirement.


I. The True Picture

According to the ILO ("World Employment Report - 2001"), more than 1 billion people - one third of the global workforce - are either unemployed or underemployed. Even hitherto "stable" countries have seen their situation worsen as they failed to fully adjust to a world of labour mobility, competitiveness, and globalization.

Unemployment in Poland may well be over 18% - in Argentina, perhaps 25%. In many countries, unemployment is so entrenched that no amount of aid and development seem to affect it. This is the case in countries as diverse as Macedonia (35% unemployment) and Zimbabwe (a whopping 60%). The much heralded improvements in the OECD countries were both marginal (long term unemployment declined from 35% of the total to 31%) and reversible (unemployment is vigorously regaining lost ground in Germany and France, for instance).

Official global unemployment increased by 20 million people (to 160 million) between the nadir of the Asian crisis in 1997 and 2001. The situation has much deteriorated since. The ILO estimates that the world economy has to run (i.e., continue to expand as it has done in the roaring 1990's) - in order to stay put (i.e., absorb 500 million workers likely to be added to the global labour force until 2010). How can this be achieved with China unwinding its state sector (which employs 13% of its workforce) - is not clear. Add to this stubbornly high birth rates (esp. in Africa) and a steady decline in government hiring al over the world - and the picture may be grimmer than advertised.

But the rate of unemployment is not a direct and exclusive result of growth or the lack thereof. It is influenced by government policies, market forces (including external shocks), the business cycle, discrimination, and investment - including by the private sector - in human capital.

The problem with devising effective ways of coping with unemployment is that no one knows the true picture. Taking into account internal, rural-to-urban, migration patterns and the growth of the private sector (it now employs 5% of the labour force) - China may have a real unemployment rate of 9.5% (compared to the official figure of 3.1%). Egypt's official rate is 8% -but it masks vast over-employment in the public sector. Lebanon's is 9% - due to a one-time reconstruction bonanza, financed by the billionaire-turned-politician, Hariri. Algeria's unemployed easily amount to half the work force - yet, the published rate is 29%. In numerous countries - from Brazil to Sri Lanka - many people are mainly employed in casual work.

The average unemployment rate in Central and Eastern Europe is 14% - but it is double that (more than 30%) among the young (compared to 15% for West European youths). The average is misleading, though. In Georgia the rate is 70% - in the Czech Republic 16%.

Even in the OECD, the tidal wave of part-time workers, short term contracts, outsourcing, sub-contracting, and self-employment - renders most figures rough approximations. Part time work is now 20% of the OECD workforce (German attempts to reverse the trend notwithstanding). Temporary work and self-employment constitute another 12% each. No one knows for sure how many illegal economic migrants are there - but there are tens of millions of legal ones.

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