UN Expert Group on the Challenge of Building Employment for a Sustainable Recovery Geneva 23 ‐ 24 June 2011 A Macroeconomic Framework for Employment Creation by Dr Linda Low
Statement of the problem • Frame for economics gone awry or missing in action • No policy operates in standalone silos • Checks ‐ & ‐ balances by Karl Polanyi’s (1957) double movement of state ‐ social relations follow great transformation (1944) • Is greed fundamental ill of market capitalism complicated by globalisation? • Emiprical ‐ based 800 years of financial crises • Asian financial crisis (AFC) 1997/98 • Arab Spring in First Quarter 2011 • Economism, HRD, attitude ‐ skills ‐ knowledge (ASK)
World Bank study 2011 • Post ‐ global financial crisis (GFC), World Bank study of different types of workers in 17 middle ‐ income countries: – variations by country – only weakly related to severity of GFC shock • Policy lessons for macroeconomic framework for jobs – Jobs easily decimated in crises beyond any state’s control – Prevention in boom is better than cure, hone comfort zone by crisis ‐ mentality keeps reforms going, reforms in crisis add to chaos, more so when leadership is compromised – Those economically prepared fare better to recover post ‐ GFC, national idiosyncracies & crisis management matter
Macroeconomic framework: eclectic toolkit Non ‐ definitive 1. Phillips curve 2. Population ‐ demography ‐ labour symbiosis 3. Economics of welfare state • Triple ‐ play framing broad issues in job creation • Synergy in value ‐ added & tradeoffs – Cyclical, structural – Youth or elderly employment – Market laissez ‐ faire or dirigiste induced – Sustainable jobs with continuous education training
Phillips curve • Phillips curve shows inverse relationship Inflation % between rates of inflation Stagflation ? & joblessness as a Phillips curve shifts out? potential policy tradeoff Both higher inflation & • Non ‐ accelerating inflation structural joblessness? rate of unemployment (NAIRU) • Mobilise Keynesian idle resources till full employment as frictional Unemployment + structural % unemployment
Phillips curve relevant in China Export ‐ led pre ‐ GFC Domestic ‐ led post ‐ GFC • Global factory • Global marketplace • Most aggressive globaliser • Post ‐ GFC, triad US, EU, • Joined WTO, leveraged Japan vs BRICS rules • Chronic global imbalances • Tapping DFI, TNCs, MNCs in balance of payments • Leapfrog more ways than overtake Japan in GDP • Rising wages & inflation • Knowledge & technology • Rising middle ‐ income class transfer • Social unrest, jobs & income • Induces, digests & imposes local content requirements distribution to upgrade transfers • 6.3 m university graduates • Surplus labour vs mobilising •
Phillips curve in MENA? Unemployment Inflation 2007 ‐ 2008 • Domestic, demand ‐ pull, housing • Locals, double ‐ digit rate shortage, rent control as help? – Quotas • Parallel imports for basic – Public sector foodstuff vs UAE sole agency law – Private sector • Imported inflation, fixed $ ‐ – Low FLFRP pegged exchange rate • Foreign labour, no visa • Monetary policy mimics recession US vs GCC boom, diametrically within 1 month opposite conditions – Humanitarian ‐ based • No fiscal policy, no taxation, – Skilled vs manual government spending crowds out – Sponsorship private sector, adds inflationary pressure
Population is destiny • China’s one ‐ child policy to two ‐ child? • India same falling birth rates, female infanticide • Malthusian trap vs S&T, green revolution • ASEAN, Malaysia & Singapore • East Asia, Japan & Korea • Passive vs proactive, long ‐ term, procrastinate • MENA population ‐ immigration policy
Rights turn wrong, state ‐ PAYG • Cradle ‐ to ‐ grave chain letter effect • Upside ‐ down demographics • Old age dependency • Fully ‐ funded defined ‐ benefit (DB) • Fully ‐ funded contribution ‐ based (CB) • Post ‐ GFC austerity measures coinciding with population time ‐ bombs in OECD • Asian & MENA family ‐ based welfare • Pension systems in MENA • Health insurance: adverse selection, moral hazard
Population pyramids & lntergenerational PAYG
GCC, MENA economic landscape • IMF latest 2011 regional outlook • GCC growth 7.8%. • Remittances growth 14% to $74.9 billion in 2011 • Current account surplus $304 billion in 2011 • Two ‐ fold rise in FDI from to $42.7 billion in 2011 • 1% point in GCC real GDP growth raises GDP growth of migrant workers’ countries of origin by 1.3% point • GCC imports 18% growth $578.3 billion 2011 • Overseas development assistance (ODA) mainly by Kuwait, Saudi Arabia and UAE averaging 1.5% of combined gross national income for 1973 ‐ 2008 • MENA plus Pakistan (MENAP) absorbed 10 ‐ 70% of total ODA from others in the region
Caveats in GCC job creation • Productivity growth concept (value added/input) • Profit ‐ motivated private sector • Public sector, government bureaucracy for policy ‐ making and regulation • No clear line defining private and public sector • Autonomous off ‐ budget entities, state ‐ owned enterprises (SOEs), government ‐ related enterprises (GREs) • SOEs &GREs dual mandates for diversification as KBE, presumably globally competitive plus some national service for economy and society
GCC economic integration for jobs • Deeper, widening EU ‐ inspired itself mired in deepening & widening • GCC customs union in 2003 after FTA 1983 • Single market 2008, monetary union by 2010 in abeyance without UAE, Oman • Morocco and Jordan starting negotiation procedures in 2011 • GCC cross ‐ roads vs ASEAN • Two ‐ track ASEAN free trade area (AFTA), no customs union, etc • ASEAN community • ASEAN free trade agreements (FTAs) with Australia ‐ New Zealand, Japan, Korea, China and India • Individual bilateral FTAs, open, globally competitive • GCC nationals same rights as locals in Schengen ‐ like scheme for equal market access & national treatment to register, open business, seek employment
This time is no different • China, Beijing consensus • Japan Inc, lost decade to soft ‐ power, manga comics, anime animation and cosplay • Singapore desperate case for desperate measures, weighing tradeoffs – Twin casinos Malaysia’s Genting &Las Vegas Sands integrated resorts – Imported Malaysian water, rain water, desalinated sea water and recycled NeWater – Sky ‐ high +subterranean rock caverns for hydrocarbon storage as in Norway under Jurong island • Malaysia boleh (can do) has Western Educity in Johor, Nusajaya • Indonesia pioneer post ‐ AFC, street ‐ based democracy before Facebook ‐ mediated Arab Spring • Thailand conscious choice red versus yellow shirts, Bangkok tourism crisis
Future work • Livelihood or social status • ICT ‐ mediated workplaces & opportunities • SMEs &self ‐ employment • Women entrepreneurs • Grameen microfinance • Abu Dhabi ‐ based Khalifa Fund for Enterprise Development • Dubai’s Sheikh Maktoum Foundation for SMEs • Macroeconomic framework congruent to Vision 2030
Final reality check for economism • Europe &US rethink immigration policies • Macroeconomic framework needs social touch, human face • Crisis conditions & double movement • Creative innovative foreign talents for bigger pie • Perceived demise of business cycles • Greater productivity by ICT & globalisation • NAIRU
Singapore financial jobs • A Monster Employment Index tracking for positions in finance and accounting advertised online, Singapore leads world in creating financial jobs next 12 months, overtaking even London • Poll of 297 bankers and hedge ‐ fund staff in London by Astbury Marsden, a recruitment firm • Not surprising as anecdotally, technocrats in Monetary Authority of Singapore read all gargantuan Dodd ‐ Frank financial ‐ regulation act, as they mulls opportunities to be created
Dubai more than real estate play • Real estate bubble pricked, blessing in disguise • Price correction offer affordable premises in 30 free zones + world ‐ class infrastructure to entrepreneurs, talents • Create jobs, revive, competitive again • Emaar Properties as part of outreach build housing quickly, cheaply Angola in exchange for mining concession • Angola’s northwest has diamonds, iron ore and rare minerals • Create Angolan jobs • Business back to 30 free zones , supply chain • Rentier by fees and user charges in most entrepreneurial way
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