As it appeared in the Sunday Standard, Botswana on Sunday Nov 4, 2012 edition.
Labour is a cost
It can assist to generate revenue but it is firstly, a cost. When we add them up, it can rack up into billions of dollars. Easily.
Hence a situation of ‘that we have labour’, will not be enough reason why ‘jobs will be created’. The jobs need to be paid. When the money dries up, including borrowings, so does the job. This will happen in the same way for any country.
The supply of labour however remains unchanged. They are either more who are employed or more who are unemployed.
Next, think bottleneck.
When the supply of labour exceeds the demand for it, the demand becomes the ‘neck’ of the bottle. It narrows the uptake of the supply. Competition and waiting for jobs are the inevitable consequences of the bottleneck. As we release the bottleneck competition disappears. And so would unemployment.
We would therefore require solutions on both sides of the ‘neck’ to solve the problem of persistent unemployment.
In the past two week’s editions of this column, we introduced two factors that influence persistent unemployment. Should we create new jobs (i.e. there is demand for labour), unemployment goes down. Should however, the numbers of births and immigration (i.e. the supply of labour) go up over time, so does unemployment.
We also discussed that the ability of sectors to create jobs is influenced by the health of profit margins of three interrelated industries, i.e. the primary, secondary and tertiary industries. We discussed when the primary industry grows; they help to grow the secondary industries which in in turn help to grow the tertiary industries.
At this point, unemployment becomes resolved. Hard as it may sound, it is a solution we cannot ignore. The easy way out, would lead us back in, one way. Back to the problem.
In today’s edition of the column, we explore the story of the supply side of unemployment and its solution.
This becomes important to help us see solutions that are digging us in deeper into the problem. It will be ironical that what we had hoped will help the situation could actually be making them worse. Things become better before they become worse. At that point, we would have a situation spiralling out of hand.
A case in point is, if there are more of us than there are jobs available, skilling people without creating jobs will not make unemployment go away. I know we do not like to hear this. And neither do I.
Jobs do not stay vacant. They are going to others. And yes, while the best man may win, there is another man (or woman) out there. That is the point.
If the problem does not budge despite resources, then it is a sign that all what we have done was to apply a solution to the consequence of the problem but not to its cause. To deal with the cause, we would need to pull ourselves away from the fire to notice where the gas pipe is coming from. A fireman cannot help us at this stage.
Supply of Labour
What causes the increase in the supply of labour?
One might say, well that’s easy. It is caused by migration. Well, that is certainly true. For the short term. Migration is just that. Sometimes they are in. And sometime they are out.
Sustained long-term increase in the supply of labour is caused by the rates at which locals add births to the population numbers within the country. This impact is pre-determined. It cannot be changed, its effects are not felt immediately but they were set into motion twenty years ago. They are felt twenty years later when the babies have grown into young adults and are about to join the employment pool of the country.
We therefore do not connect the problem to the cause since they are both distant in time and space from each other. And when we do not see this relation, we disregard the cause and take the easier way out. We look at immigration. This happens for any country.
And so, if unemployment is persistent today, then this is an indication that numbers of those born twenty to thirty years ago and have now joined the labour pool, had been pushing up slowly but steadily. Yesterday, we rejoiced each birth in our families. Of course, we were not watching their total consequences on the nation for tomorrow. Well, not yet.
As a nation, how many persons have we added to the pool of supply in the past forty years? Yes, it may feel late to ask such a question. It is meant as a way to face reality.
Let us say, should we produce 5,000 children per month, and that makes it 60,000 babies born in a year, then we can reasonably expect that twenty years from now (and 1.2 million people later), when they grow up, we would need to be preparing for an additional 60,000 jobs (given gender equality) for that cohort.
This is in addition to those already employed prior to them. If we are seeing 30,000 retirees, we are still looking at creating an additional 30,000 or more new jobs for the cohort. And do not forget these 60,000 do not stay at producing another 60,000. Yes? How many will they produce in ten to fifteen years from now? That will become tomorrow’s reality.
How much would an additional 30,000 jobs (for that year) cost us? Don’t forget the other years and other employees.
Who created the children? You are right. We did!
Who will create the jobs for them?
In a recent project on unemployment in a country, we saw the population of 35 year olds and younger, ballooned six folds in a thirty-year period. On the other hand, job creation had not risen by anywhere near as much. The population had disregarded these economic factors. Of course, we can say, economic and bedroom choices do not always mix.
At rates of six-fold increases, just that layer of the population would quite easily add over another 1/3 million persons by the next generation. These are figures before immigration.
So what is happening?
In short, we are now attempting to “fight” the problem somewhat oblivious to these realities. We saw the fire. But not what caused it! We had hoped that the supply of labour could influence the demand for labour. But that is just not economics.
Still, I wonder if, as citizens, we can totally absolve ourselves from not understanding these figures and how they play up in our everyday lives. What do you think?
At some point we would no longer be able to shut our eyes to this. The reality would soon wake us up, as as we see our children stay unemployed.
Have we come back full circle here? Who designed this circle of causality? Is this unique for one country?
What should we do today?
As citizens should we know what these numbers look like for the country?
Understanding this trends, profoundly changes the game plan in many ways. Firstly, it allows the problem to be solved where it started (the community), not where it ended (government). There is leverage here, as it allows the greatest changes to happen with the least amount of effort.
I have tended to believe that should citizens understand these numbers, they would become clearer at steering the country out of this problem. Even by themselves. These may include making choices such as coming up to speed in ways to create jobs rather than wait for jobs to be created. Or consider seeking employment outside the country. It is the go-getter attitude by such individuals that will eventually help draw revenue to any country and themselves.
That’s for today. How may we better prepare ourselves for tomorrow?
Families are key
We could actually become better at matching birth with job creation rates. Knowing these trends, may free us as families, to consider channelling resources to the building of the primary industries of the economy. This is a strong system of production of raw materials for all levels of the economy. Farmers, and growers of raw materials, who see this impact beyond putting food on their table for their family, are beginning to pay attention to this systemic reality. Production is now greater than consumption in the country.
When they do so, the family is now taking a step towards ensuring that jobs are more likely to be created at other levels of the economy, for the children we produce. We may find that as more resources are allocated to primary industry production (and less to child production) we become better at learning to manage our population numbers more in line with the capacity of the country to produce jobs for our children. There is an order in which causality happens.
Unemployment, at that point, stops becoming a problem.
How do you see this issue? Given the above, do we need to understand the picture that is happening for the country today? What’s stopping families allocating resources to primary industries?
Go forward another twenty years from now. What trends would you like to see? For our families? The economy? And our country? For employment?
Hope this inspires discussion amongst your family and friends for ways you see us resolve this issue.