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JOBS AND GROWTH: THE EVOLUTION IN IMF THOUGHT
PrakashLounganiChief,DevelopmentMacroeconomics,ResearchDepartment,IMFFormerCo-Chair,IMFJobs&Growthworkinggroup
ViewsexpressedarethoseofthepresenterandmustnotbeattributedtotheIMForconsideredtobeIMFpolicy.IthankZidongAnandJunGeforputtingtogetherthispresentation.
ETUI/ETUCconference,June2016
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Structure of talk
A. EvolutioninIMFthoughtonemploymentissues
B. Implicationsofthisevolution
forthethemeofthisconferenceandpanel
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EVOLUTION IN IMF THOUGHT ON EMPLOYMENT ISSUES
PartA: 3
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Evolution in IMF thought on employment issues
A1) Greaterattentiontodistributionalconsequencesofeconomicdevelopmentsandpolicies.
A2) Increasedrecognitionthatlabormarketpoliciesneedtostrikeabalancebetweenpromotingefficiencyandprotectingthebasicneedsofworkers.
A3)Increasedimportanceonunemploymentinpolicydiscussions.
Plus:‘Two-handed’approachtotacklingunemployment:recognizeimportanceofbothaggregatedemandandaggregatesupplyandadvocates
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A1) Greater attention to inequality
• WorkofJonathanOstryandco-authors:
– Inequalitylowersthedurabilityofgrowth(Berg&Ostry)
– Redistribution,unlessextreme,doesnotlowergrowth(Ostryetal)
• Driversofincreasedinequality:– Declinesinunionization(Jaumotte&Osorio-Buitron)
– Capitalaccountliberalization(Furceri&Loungani)– Fiscalconsolidation(Ball,Furceri,LeighandLoungani) 5
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A2) Role of labor market institutions Blanchard,JaumotteandLoungani:• Roleoflabormarketinstitutionsistopromoteefficiencywhileprovidingadequateprotectiontoworkers
• Formicroflexibility(abilityofeconomytomatchworkerstojobs):– Generousunemploymentinsurancecombinedwith
employmentprotectionthatisnotexcessive
• Formacroflexibility(abilityofeconomytomakelargechangesinresponsetoeconomy-wideshocks)
– Collectivebargaininginstitutionsarecritical– Trustamongsocialpartners
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A3) Taking unemployment seriously
• Elevatingimportanceofunemploymentinpolicydiscussions
– Landmark2011ILO-IMFOsloconferenceonunemployment
– IMFpaperonhumancostsofunemployment(Dao&Loungani)
• Promotionoffullemploymentrequiresa‘two-handedapproach’:needtoboostaggregatedemandasmuchasaggregatesupply.
– VerysupportiveoftheactionstakenbythemajorcentralbanksduringtheGreatRecessiontostimulateaggregatedemand.
– SupportedcoordinatedglobalfiscalstimulusgivenattheonsetoftheGreatRecession;advocatedaphasedratherthanabruptwithdrawal
– Calledforanincreaseinpublicinvestment
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IMPLICATION OF EVOLUTION IN IMF THOUGHT FOR THE THEME OF THIS CONFERENCE AND PANEL
PartB: 8
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“…the time is not far distant when everything that machinery and cheap labor can produce will crowd every market. The millions of China, with the millions of India, will offer the cup of cheap machine labor, filled to the brim, to our lips, and force us to drink it to the dregs, if we do not learn wisdom.”
Concern that ‘others’ will take away ‘our’ jobs is not new:
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− The Atlantic, volume 44, 1879
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1920s
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“WillMachinesDevourMan?”(Right)“AVisionoftheMachineAge”(Left)
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1930s
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“Wearebeingafflictedwithanewdisease...technologicalunemployment.”−JohnMaynardKeynes(1930)
1940s
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1950s
12 “PromiseandPerilofAutomation”(1957)
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1960s
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1970s
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2000s
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1980s
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2010s
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ThelastjobonEarth:imaginingafullyautomatedworld
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Impact of digital economy on employment
• Ageneraloverviewofthevariousareasofimpactwouldbeasfollows:
– jobcreation:newsectors,newproducts,newservices;
– jobchange:digitalization,human/intelligentmachineinterface,newformsofmanagement;
– Jobdestruction:automation,robotization;
– jobshift:digitalplatforms,crowdsourcing,‘sharing’economy.
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Jobs in the digital economy…
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Some people do get hurt by automation…
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Economists have a
43% chance of
being automated
Cashiers have a
97% chance of
being automated
Clergy have a
1% chance of being automated
WebsiteLink
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Job destroyer?
Tellers:probabilityofcomputerization=98%(Frey&Osborne,2013)
AsmoreATMswereinstalledintheUnitedStates,thenumberoftellersemployed
didnotdrop.
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0
100
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300
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500
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700(thousands)
TellersemployedATMsinstalled
1970 1980 1990 2000 2010
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Hollowing out the Middle…
-14.9
-12.1 -12
-10.9 -10.8 -10.7 -10.6 -10.6 -10.4 -10.3-9.6
-8.6 -8.5
-7.6
-6.7
-4.9
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0
Change in Occupational Employment Shares in Middle-Wage Occupations in 16 EU Countries,
1993–2010 IRL BEL ESP GBR LUX GRC FIN ITA AUT DNK SWE FRA NOR NLD DEU PRT
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Dwindling Middle Class in the US…
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9
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61
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10
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4
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1971
1981
1991
2001
2011
2015
Share of adults living in middle-income households in the United States (%)
Lowest LowerMiddle Middle UpperMiddle Highest
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Trade and technology: long-run gain vs. short-run pain
• Tradeandtechnologycontributetonationalandgloballong-runefficiencyand–morearguably–tolong-runequityaswell,atleastatagloballevel.
• Bothforcesleadtoadverseconsequencesforanumberofpeopleintheshort-tomedium-run.Ithinkmanyofusinmainstreameconomicshavebeenguiltyofeitherignoringthesecostsorpayinglip-servicetotheneedtoredressthem. 22
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A ‘caring’ IMF Whetherthesourceoflossofjobsforsomepeopleistradeortechnology--orindeedsomeother‘megatrend’:
►Treattheunemploymentthatresultsfromdisplacementduetotradeandtechnologyasaseriousdevelopmentthatposesgravecostsfortheindividual,hisorherfamily,andforsociety;
►Supportadequateunemploymentbenefitsorotherformsofassistancetoreplacesomeofthelostincomeofthosedisplaced.
►Recognizethatevenifsupply-sideremedies--suchasprovisionofre-trainingandskillsdevelopment--arethedesiredsolution,thesewillnotworkwellinanenvironmentofweakaggregatedemand
►Looknotjustattheaggregateorefficiencyeffectsoftheremediesweprescribebutattheirdistributionalorequityeffects.Donotbefearfulofredistributionasoneoftheremediestoconsiderinordertocompensatethosewholoseout.
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