More than 3.3 million workers (13 per cent of the workforce) are not confident they will still be in their job in a year's time.
This encapsulates two aspects of our economic problem. Neither are what you might think.
The first aspect is that job destruction - and therefore job insecurity - is an inherent feature of capitalism, because creative destruction is an engine of growth, and because workers are vulnerable to the whims of bosses. This is true in normal times as well as downturns, so for this reason, this survey is no evidence whatsoever of an impending economic downturn. (We‘ll probably get one, but this survey ain't evidence).
This paper shows that even in years of steady aggregate growth, around one-in-seven private sector jobs are destroyed - 51,000 a week. The destruction rate is slightly higher in services than manufacturing. Although this destruction is more than matched in normal times by job creation, we do get a trace of this turnover in the macroeconomic data. Table 10 of this pdf shows that, in the last 12 months more than 200,000 have joined the claimant count every month. Over a year, this is equivalent to one in 11 workers - though of course, not all people who join the count do so because they lose their jobs, nor do all those who lose their jobs join the count.
Job insecurity, then, is a separate issue from the issue of macroeconomic fluctuations. The solution to it, therefore, is not macroeconomic stabilization but better insurance mechanisms. On this point, Robert E. Lucas was explicit in this classic little book:
The first aspect is that job destruction - and therefore job insecurity - is an inherent feature of capitalism, because creative destruction is an engine of growth, and because workers are vulnerable to the whims of bosses. This is true in normal times as well as downturns, so for this reason, this survey is no evidence whatsoever of an impending economic downturn. (We‘ll probably get one, but this survey ain't evidence).
This paper shows that even in years of steady aggregate growth, around one-in-seven private sector jobs are destroyed - 51,000 a week. The destruction rate is slightly higher in services than manufacturing. Although this destruction is more than matched in normal times by job creation, we do get a trace of this turnover in the macroeconomic data. Table 10 of this pdf shows that, in the last 12 months more than 200,000 have joined the claimant count every month. Over a year, this is equivalent to one in 11 workers - though of course, not all people who join the count do so because they lose their jobs, nor do all those who lose their jobs join the count.
Job insecurity, then, is a separate issue from the issue of macroeconomic fluctuations. The solution to it, therefore, is not macroeconomic stabilization but better insurance mechanisms. On this point, Robert E. Lucas was explicit in this classic little book:
Policies that deal with the very real problems of society’s less fortunate - wealth redistribution and social insurance - can be designed in total ignorance of the nature of business-cycle dynamics…and the discovery of better business cycle theories will contribute little or nothing to improved design.
The second economic problem is that this survey implies that 87% of workers are confident they keep their job. This suggests they are over-confident; yes, six in seven workers probably will keep their jobs, but I find it hard to believe they all know who they are.
Instead, I suspect a number of cognitive biases stop people realising how vulnerable their individual jobs are: the optimism bias (“bad things don’t happen to me”); the illusion of control (“if I work hard, they won’t sack me); and the just world illusion (“they can’t sack me; I’m good at my job“).
These biases have pernicious effects. In causing people to under-estimate their vulnerability to the vicissitudes of capitalism, they cause them to support the system more than they should and to neglect potential ways of improving it - for example, better insurance methods or means of reducing bosses’ control over the workplace.
It’s insufficiently appreciated that the research into cognitive biases puts Marxist theories of ideology onto a stronger foundation. And this ideology can obstruct support for improving our economic institutions. This is a bigger problem than a merely temporary recession.
Instead, I suspect a number of cognitive biases stop people realising how vulnerable their individual jobs are: the optimism bias (“bad things don’t happen to me”); the illusion of control (“if I work hard, they won’t sack me); and the just world illusion (“they can’t sack me; I’m good at my job“).
These biases have pernicious effects. In causing people to under-estimate their vulnerability to the vicissitudes of capitalism, they cause them to support the system more than they should and to neglect potential ways of improving it - for example, better insurance methods or means of reducing bosses’ control over the workplace.
It’s insufficiently appreciated that the research into cognitive biases puts Marxist theories of ideology onto a stronger foundation. And this ideology can obstruct support for improving our economic institutions. This is a bigger problem than a merely temporary recession.
It may of course be that people derive more self-esteem from retaining their job in an environment where others are losing theirs than they would if everyone kept their job.
Posted by: Innocent Abroad | August 31, 2008 at 05:19 PM