On the Government’s Jobs programme and economic uncertainty

First Published: 2011-10-10

Labor economics functions on the same underlying logic of supply and demand. We are unfortunately still in a period of slack in aggregate demand. Our hotels, gas stations, banks, liquor stores, food stores, flower shops candy stores can all employ as many workers as they want to soften the blow of high unemployment but, it will be to much waste as sluggish sales cannot sustain the labor costs per worker. The question is, will these companies operate at a loss to satisfy the idea of a job for all?

The government’s initiative is indeed noble as elected officials have little choice but to act in the interest for the majority of their electorate. Paychecks for them come in the form of votes and too many unhappy voters means no paycheck.

The issue is the government and others seem to conclude the reason for the high unemployment rate is the absence of skills to perform various tasks on the job, particularly among young workers. Hence, the creation of a public sector led program where the labor cost of the company is subsidized by the government as an inducement to the company to take on additional labor with the hope that full time unsubsidized employment is achieved.

Well, some questions arise:

  1. At the end of the year what happens if sales have not improved to justify the hiring?
  2. During downturns, are not highly skilled and experienced workers laid off too? Stories abound of 55 year old financial analysts and yes, journalists who had been let go (US).
  3. Is the Employment Act set aside?

Also, these price floors cause market distortions that fail to address the root cause. That comes directly out of the economic textbook supported by many real life examples. If these businesses truly needed labor, the supply is already high. Sadly even college graduates struggle to find work. But, creating a false demand only collapses when the floor is ripped out which is the primary cause of our woes-lack of demand.

It seems that the government and others miss the cause of high unemployment and how to correct it.

Broadly speaking, the financial crises is acknowledged as the problem but in my view, high unemployment numbers can remain very stubborn in the short run because our current problem is also structural. The skills the program hope to develop may not be the on the job skills needed for sustainable employment.

The skill set of the current job market is adequate to sustain the service level jobs that make up our economy. We have many kids that do graduate who can fill the job openings out there. Any shortage of ‘skills’  can easily be corrected at COB where two year degrees in journalism can ease lack of supply of reporters for example. Companies themselves have to have a true need to increase staff compliments! If they did, the need for this program would not exist. They don’t have a need because right now, the future for the foreseeable is still uncertain. I have a hard time accepting that high unemployment exists because of inadequate skills…..not with the volume of quality high school and college graduates unemployed. Something deeper is at play.

Many think that the same jobs will come back after american tourists start spending money again. Everyday I wonder how much off the mark this thought is! We may be at what’s described as the new normal! Perhaps the forces of creative destruction have unfolded. Perhaps our job market is at a new equilibrium, albeit lower!

Whatever it is, our workers should be prepared for a new type of model where skills will be needed in computer engineering, IT,  high tech construction etc.  In the case of Grand Bahama, ship maintenance and repair, chemical production, and oil specialists.

How many workers Baha Mar, Grand Bahama Shipyard, BORCO etc. import just to satisfy the shortage of SKILLS in the domestic labor force? The point is, there are pockets of our current economy that count as lost opportunity because of the fact that our skill set does not match the jobs that are out there which I would like to distinguish as different from providing skills to younger workers only because a subsidy induced employment in the first place and where in many cases, the job does not require extensive skills.

Taxpayer money would be better off spent investing in BTVI and COB creating real skills for real jobs currently out there now and in the future, not the ones we have depended on for years! The writing is on the wall with respect to the trajectory of the industries of the future. Technology will continue to make many jobs obsolete or reduce the need for as many human labor as capacity is increased.

Governments do not have unlimited resources and the money that is called upon heavily by citizens during slower economic periods in the name of public spending to replace private demand has to be re payed by citizens. Government cannot buy all the flowers out of the flower shop because nobody else wants to then ask everyone to pay for it in the form of taxes.

No matter the intent of public spending, it has to be paid for by you and everyone else if the plan fails or not. The burden is inescapable! It’s wealth redistribution considering that the weight of tax contributions come from not necessarily the rich but from the most productive segments of society. We do not want to create disincentives for the most productive.

During slower periods, austerity measures taken by any government becomes really unpopular….but our government is huge, hopefully future cuts to its size also cuts the deficit. Its size won’t be cut until those civil servants find work of equal or better value in the private sector.

I have no idea what the outcome will be but the results of the program should be examined if only to guide future policy makers on the merits or demerits of past decisions.

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