Patterns of employment emerging in the wake of the crisis include startup deficits in employment, widening dispersion of productivity growth among industries, higher job vacancies at a given unemployment rate after the global financial crisis.
1. The share of employment by startups decreased. New jobs are created most by startups. The startup deficits in employment reflects failures of the society. If the society is cohesive enough, it will be able to provide young people with opportunities to develop skills and competence. Companies moved less profitable manufacturing processes abroad while keeping home the high value-added part of the supply chain - research and development, designs, etc. Some moved factories close to markets. Others moved factories to emerging market economies where low-skill workers are in abundance. But, manufacturing factories at home are platform for exposing youths to learn basic skills for production and production-related services. They are platforms for incremental innovation too. Knowledge spillovers between production sites and research centers will be larger if they are geographically located nearby.
2. Productivity of ICTs and finances increased rapidly where that of energy and steels remained lagging further behind. The former has benefited from globalization. Financial integration benefited some banks. US R&D centers have benefited from brain drains in other parts of the world. They make breakthrough-innovations. The latter, industries depending on more or less traditional technologies, has less benefited from globalization. The latter industries faced catching up by those in emerging market economies. Manufacturing moved out of the country. "One of the consequences is political polarization (Professor Autor)."
3. At a given unemployment rate, job vacancy rates are higher after the crisis than before the crisis. The grownup firms demand more of highly skilled workers, which are in short supply because most American youths are learning in Starbucks rather than in manufacturing factories or manufacturing-related service providers. A young person who had no choice but to take temporary job in Starbucks, will not have developed the skills in shortage in the labor markets probably in three years. Labor market flexibility in the short run results in structural unemployment and skill mismatches in the medium run.
The above stylized facts in the US economy evince that the youths are the first to lose opportunity to learn skills and to learn by doing in manufacturing and production sites. Mobility of capital across borders in this case created structural unemployment. This represents mal-adjustments of the U.S. economy, representing a 'non-coordinated' market economy, to globalization especially China shocks.
A clue to enhancing social cohesiveness and innovation capabilities of the economy together can be found in the German 'coordinated market economy.'
Proposition 1: If an economy is built up upon strong social cohesiveness, then it will stay competitive in response to the disturbances in labor markets caused by international integration of trade and finance. Despite facing increased competition in the product markets, employees and employers remain cooperative. Instead of layoff workers, employers continue the company's long-term perspective. The respond to the challenge by coming up with innovations in terms of new products and better processes. Innovation requires time and commitment. Relationship banking provided by community banks will finance the innovative efforts by regional small and medium size enterprises (SMEs).
Proposition 2: Community banking is regional institutional infrastructure. It develops symbiotic relationship with SMEs in the region taking advantage of regional proximity. The community banks help SMEs in the region to remain competitive through improving products and processes. Then financial integration may work for all. Free-fall of labor markets in France and Italy does not necessarily prove that international integration of markets, not of policy, is not good every where and not for every body. It may work for all but with a caveat - only if all preconditions are met. One of the preconditions is development of community banking for SMEs.
* A reflection
BOK International conference "Employment and Growth: Roles of Macroeconomic Policy and Structural Reform" 2016 May 30-21, 2016.
1. The share of employment by startups decreased. New jobs are created most by startups. The startup deficits in employment reflects failures of the society. If the society is cohesive enough, it will be able to provide young people with opportunities to develop skills and competence. Companies moved less profitable manufacturing processes abroad while keeping home the high value-added part of the supply chain - research and development, designs, etc. Some moved factories close to markets. Others moved factories to emerging market economies where low-skill workers are in abundance. But, manufacturing factories at home are platform for exposing youths to learn basic skills for production and production-related services. They are platforms for incremental innovation too. Knowledge spillovers between production sites and research centers will be larger if they are geographically located nearby.
2. Productivity of ICTs and finances increased rapidly where that of energy and steels remained lagging further behind. The former has benefited from globalization. Financial integration benefited some banks. US R&D centers have benefited from brain drains in other parts of the world. They make breakthrough-innovations. The latter, industries depending on more or less traditional technologies, has less benefited from globalization. The latter industries faced catching up by those in emerging market economies. Manufacturing moved out of the country. "One of the consequences is political polarization (Professor Autor)."
3. At a given unemployment rate, job vacancy rates are higher after the crisis than before the crisis. The grownup firms demand more of highly skilled workers, which are in short supply because most American youths are learning in Starbucks rather than in manufacturing factories or manufacturing-related service providers. A young person who had no choice but to take temporary job in Starbucks, will not have developed the skills in shortage in the labor markets probably in three years. Labor market flexibility in the short run results in structural unemployment and skill mismatches in the medium run.
The above stylized facts in the US economy evince that the youths are the first to lose opportunity to learn skills and to learn by doing in manufacturing and production sites. Mobility of capital across borders in this case created structural unemployment. This represents mal-adjustments of the U.S. economy, representing a 'non-coordinated' market economy, to globalization especially China shocks.
A clue to enhancing social cohesiveness and innovation capabilities of the economy together can be found in the German 'coordinated market economy.'
Proposition 1: If an economy is built up upon strong social cohesiveness, then it will stay competitive in response to the disturbances in labor markets caused by international integration of trade and finance. Despite facing increased competition in the product markets, employees and employers remain cooperative. Instead of layoff workers, employers continue the company's long-term perspective. The respond to the challenge by coming up with innovations in terms of new products and better processes. Innovation requires time and commitment. Relationship banking provided by community banks will finance the innovative efforts by regional small and medium size enterprises (SMEs).
Proposition 2: Community banking is regional institutional infrastructure. It develops symbiotic relationship with SMEs in the region taking advantage of regional proximity. The community banks help SMEs in the region to remain competitive through improving products and processes. Then financial integration may work for all. Free-fall of labor markets in France and Italy does not necessarily prove that international integration of markets, not of policy, is not good every where and not for every body. It may work for all but with a caveat - only if all preconditions are met. One of the preconditions is development of community banking for SMEs.
* A reflection
BOK International conference "Employment and Growth: Roles of Macroeconomic Policy and Structural Reform" 2016 May 30-21, 2016.
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