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Pessimism about the labour market is overdone

“THE SHIPPING NEWS”, a novel about family history in Newfoundland by Annie Proulx, includes a passage about work. Jack, a former fisherman, explains how the local economy changed after the province joined Canada in 1949. Fishing went into decline, and with it a life that was “hard” but where “a man did what he wanted”. Manufacturing rose in its place, offering jobs where men sheltered indoors, away from the elements, and did what they were told. Today, politicians on all sides say that jobs in manufacturing represent good, honest work and lament their demise. Jack thought they were utterly miserable.

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For as long as capitalism has existed people have worried about labour markets. Why is this so? Perhaps it is because they produce inequalities that even the most right-wing know are not really fair. Perhaps it is because they are always changing, and people are resistant to new ways. But it is also because labour markets produce uncomfortable trade-offs. The rise of the factory gave workers more pay but less autonomy. Trade unions boosted workers’ wages but reduced employment. As textual analysis of books shows, at different times authors have worried about different problems linked to work.

The modern labour market has similar trade-offs. Yet this special report has argued that before covid-19, it was working fairly well. Contrary to popular belief, work was both more plentiful and more rewarding. Overall wage growth was not as strong as many hoped; but low pay was falling and job satisfaction was rising. There was no sign of an ever-growing “precariat”.

The pandemic has been catastrophic. Yet it may presage improvements in the world of work. The shift to remote work may make many people happier and more productive. It is unlikely to encourage job-killing robots. And it is forcing policymakers to acknowledge some difficult truths about whose interests today’s economy serves best.

Reform or perish

Politicians have more to do. Some reforms have long been called for. Dismantling occupational-licensing barriers would mean more jobs and lower prices. More liberal immigration regimes would boost innovation.

But the pandemic highlights two other necessary changes. The first concerns welfare. It turns out that in recessions sending cold, hard cash to families, especially poor ones, can do much good. America massively boosted the value of unemployment-insurance payments. Poorer households’ incomes held up, and America’s economic bounceback was one of the world’s strongest because people had money to spend.

Outside recessions, there is still more to do. Boosting in-work payments does a lot to reduce poverty, as America’s latest stimulus package will show. But it is of less use to those who are out of work altogether. Simply lavishing the unemployed with public funds may discourage them from finding work; but…

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