Labour market reallocation in the wake of Covid-19
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Re: Labour market reallocation in the wake of Covid-19
#2The UK's Coronavirus Job Retention Scheme (where people are put on furlough and the government contributes to wages) seems to have damped the creative destruction usually seen in recessions. To use a basic example, assuming there will be more remote work in the future compared to pre-COVID times, there will likely be fewer people who commute and fewer people who buy sandwiches at Pret.
Perhaps a better solution is to make furlough portable, so that workers can read the writing on the wall and be part of the reallocation we are soon to see. [1]
[1] https://blogs.lse.ac.uk/covid19/2020/11/05/making-furlough-p...
Re: Labour market reallocation in the wake of Covid-19
#3This seems right, but I think we're seeing how resilient the real economy is, given appropriate financing. It's almost always the financial/monetary side that's the problem.
An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately.
Monetary policy, currently, finds itself oddly theoryless. I think this has actually made for better decision making. The own goal of trying to save and/or reduce debt in response to a shock hasn't been scored.
So... I agree that the economy has had to do a lot of resource, shuffling. Some prices have gone up in the real economy. People are still unemployed, in sectors like travel that really got shut down. In others, there's are some struggling to find labour. Mostly though, it's a case of "look how easy that was." In the financial economy, credit is available, keeping everything ticking.
Re: Labour market reallocation in the wake of Covid-19
#4This seems right, but I think we're seeing how resilient the real economy is, given appropriate financing. It's almost always the financial/monetary side that's the problem. An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately. Monetary policy, currently, finds it…
> An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately
Isn't money just an abstraction over resources? In essence i think you're saying that creating goods is not a problem assuming there are sufficient resources to make the goods and sufficient resources to compensate the people making the goods.
While i don't disagree, doesn't that kind of go without saying?
Re: Labour market reallocation in the wake of Covid-19
#5Maybe occasional shocks to the labour market would be a good policy going forwards. It seems a lot of people have suddenly found much better jobs just by being forced to look...
Re: Labour market reallocation in the wake of Covid-19
#6The UK's Coronavirus Job Retention Scheme (where people are put on furlough and the government contributes to wages) seems to have damped the creative destruction usually seen in recessions. To use a basic example, assuming there will be more remote work in the future compared to pre-COVID times, there will likely be fewer people who commute and fewer people who buy sandwiches at Pret. Perhaps a better solution is to…
It will be interesting to compare with Germany and France, their wage support schemes are more flexible than the all-or-nothing UK furlough one.
Re: Labour market reallocation in the wake of Covid-19
#7This seems right, but I think we're seeing how resilient the real economy is, given appropriate financing. It's almost always the financial/monetary side that's the problem. An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately. Monetary policy, currently, finds it…
The financial aspects you mention has a cost - there is no free lunch. No doubt the financing is also causing some of the delay in efficient reallocation.
But the piper must be paid in the end. Ideally it’s similar to 2008 where the govt unwound all the extra money, over time, relatively painlessly.
Of course that’s not guaranteed at at all. If inflation gets out of control then you could see a major economic shock as the govt quickly unwinds.
Re: Labour market reallocation in the wake of Covid-19
#8Maybe occasional shocks to the labour market would be a good policy going forwards. It seems a lot of people have suddenly found much better jobs just by being forced to look...
I work as a software developer in Norway. I've long had the impression that there are a lot of workers in my industry – particularly older people but not exclusively – who simply don't seem to care that much about their salary or total compensation package, don't put a lot of effort into salary negotiations and who tend to be happy with annual salary increases just above what's necessary to keep up with inflation. Good for them, but they harm everyone else by bringing down the mean salary in the industry. If there are lots of older developers who are perfectly happy with earning $80,000 10+ years into their career then it's very hard to justify why you should earn $120,000 with three years of experience, even though the value you bring to the company is much greater than that.
This is exacerbated by the fact that it's very hard to fire people and that most developers work for relatively large and stable companies that rarely go out of business. Both of these factors are pleasant for the workers (including myself), of course, but they can have a negative or stabilising effect on salaries. Regular shocks which would cause poorly run companies to go bankrupt without changing the aggregate demand for developers would help push developer salaries upwards.
Re: Labour market reallocation in the wake of Covid-19
#9This seems right, but I think we're seeing how resilient the real economy is, given appropriate financing. It's almost always the financial/monetary side that's the problem. An economy can usually make more of stuff, or substitutes, and/or consume relatively painlessly. The pain kicks in when the financial sector feels pain. The real economy reshuffles if it's financed adequately. Monetary policy, currently, finds it…
The financial aspects you mention has a cost - there is no free lunch. No doubt the financing is also causing some of the delay in efficient reallocation. But the piper must be paid in the end. Ideally it’s similar to 2008 where the govt unwound all the extra money, over time, relatively painlessly. Of course that’s not guaranteed at at all. If inflation gets out of control then you could see a major economic shock a…
I don't think it's going to be painless. There are asset bubbles in multiple sectors ranging from real estate to collectibles. Either these will pop and many will be left holding the bag or more serious inflation is on the way.
Re: Labour market reallocation in the wake of Covid-19
#10Maybe occasional shocks to the labour market would be a good policy going forwards. It seems a lot of people have suddenly found much better jobs just by being forced to look...
I work as a software developer in Norway. I've long had the impression that there are a lot of workers in my industry – particularly older people but not exclusively – who simply don't seem to care that much about their salary or total compensation package, don't put a lot of effort into salary negotiations and who tend to be happy with annual salary increases just above what's necessary to keep up with inflation. Go…
If you think you're worth 120k to some company, you should find that company. Or found it.