6 ms·

Labour market reallocation in the wake of Covid-19

38 points by chanind 5y ago

BlackVanilla 5y ago
The 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-portable-would-encourage-people-to-move-into-new-jobs/ https://blogs.lse.ac.uk/covid19/2020/11/05/making-furlough-p...
- rjsw 5y ago
  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.
- tonyedgecombe 5y ago
  It was interesting that retail closures actually fell last year. I’m pretty sure there are a lot of zombie companies out there just clinging on. It will be interesting to see how it all unfolds.
dalbasal 5y ago
This 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.
- bawolff 5y ago
  > 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?
  - dalbasal 5y ago
    "Isn't money just an abstraction over resources?" I think the economics of money tends to compete on which common sense, to follow. Taken to the extreme, you could say that money doesn't matter. Only resources and the real economy matter. That, IMO, is negated by the history of money economics affecting the real economy. Money shortage is a thing. If the economy hadn't been funded, the resource shuffling wouldn't have been possible... or more painful. People don't get compensated for resources and labour in exchange for goods and labour. They get compensated in money, which is at some point down the cascade, credit. If money is short, it doesn't matter what the productive capacity. That reshuffling doesn't happen smoothly. So, no... I think. At least, not in a sense that commons sense implications can be applied. Money isn't just an abstraction over resources. It's a thing unto itself. Money supply issues, hyperinflation, financial shocks, credit shocks and have been more likely to affect major real economy problems than supply of actual stuff like oil. Oil shock is a thing. There definitely are real examples of crippling resource shortages. More often though, money supply is the issue.
    - bawolff 5y ago
      > Money supply issues, hyperinflation, financial shocks, credit shocks and have been more likely to affect major real economy problems than supply of actual stuff like oil Yeah, but all those things describe situations where money and resources got out of whack.
  - alistairSH 5y ago
LatteLazy 5y ago
Maybe 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...
- Aqwis 5y ago
  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.
  - duggan 5y ago
    If you think you're worth 120k to some company, you should find that company. Or found it.
    - Aqwis 5y ago
      I'm quite happy with my current salary – the problem is that I don't know anyone with my level of experience who earns more than me, and I'm certainly not the person among all my friends and acquaintances who provides the most value to his company. I've ended up where I am by spending a lot of time looking for jobs and being very selective, but it would be nice if the general salary level were higher so that more people could get paid according to the value they provide.

38 points by chanind 5y ago

The 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-portable-would-encourage-people-to-move-into-new-jobs/ https://blogs.lse.ac.uk/covid19/2020/11/05/making-furlough-p...

rjsw 5y ago
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.
tonyedgecombe 5y ago
It was interesting that retail closures actually fell last year. I’m pretty sure there are a lot of zombie companies out there just clinging on. It will be interesting to see how it all unfolds.

dalbasal 5y ago

This 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.

bawolff 5y ago
> 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?
- dalbasal 5y ago
  "Isn't money just an abstraction over resources?" I think the economics of money tends to compete on which common sense, to follow. Taken to the extreme, you could say that money doesn't matter. Only resources and the real economy matter. That, IMO, is negated by the history of money economics affecting the real economy. Money shortage is a thing. If the economy hadn't been funded, the resource shuffling wouldn't have been possible... or more painful. People don't get compensated for resources and labour in exchange for goods and labour. They get compensated in money, which is at some point down the cascade, credit. If money is short, it doesn't matter what the productive capacity. That reshuffling doesn't happen smoothly. So, no... I think. At least, not in a sense that commons sense implications can be applied. Money isn't just an abstraction over resources. It's a thing unto itself. Money supply issues, hyperinflation, financial shocks, credit shocks and have been more likely to affect major real economy problems than supply of actual stuff like oil. Oil shock is a thing. There definitely are real examples of crippling resource shortages. More often though, money supply is the issue.
  - bawolff 5y ago
    > Money supply issues, hyperinflation, financial shocks, credit shocks and have been more likely to affect major real economy problems than supply of actual stuff like oil Yeah, but all those things describe situations where money and resources got out of whack.
- alistairSH 5y ago

LatteLazy 5y ago

Maybe 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...

Aqwis 5y ago
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.
- duggan 5y ago
  If you think you're worth 120k to some company, you should find that company. Or found it.
  - Aqwis 5y ago
    I'm quite happy with my current salary – the problem is that I don't know anyone with my level of experience who earns more than me, and I'm certainly not the person among all my friends and acquaintances who provides the most value to his company. I've ended up where I am by spending a lot of time looking for jobs and being very selective, but it would be nice if the general salary level were higher so that more people could get paid according to the value they provide.