Message-ID: <3216683.1075843091293.JavaMail.evans@thyme> Date: Thu, 4 Nov 1999 17:14:00 -0800 (PST) From: levine@haas.berkeley.edu To: e201b-1@haas.berkeley.edu, e201b-2@haas.berkeley.edu Subject: readings: Electronic & FT Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "David I. Levine" X-To: e201b-1@haas.berkeley.edu, e201b-2@haas.berkeley.edu X-cc: X-bcc: X-Folder: \Jeff_Dasovich_Dec2000\Notes Folders\Mba--macroeconomics X-Origin: DASOVICH-J X-FileName: jdasovic.nsf 1. Be sure to read the country sections on Brazil, Ghana, and Ireland in this week's FT. You do not need to read each sectoral article (gold, real estate, etc.) but read the overall articles and 2-3 others. Typical questions for material we have covered: * What has Ghana done right concerning growth? What more should they do? We have not yet covered the material, but think about for weeks to come: * Why does the article claim that Ireland fears a weak British pound? * Why does ECB policy on interest rates not match Ireland's needs? Does that mismatch mean joining the Euro-zone was a bad idea? * Will Brazil or Ghana grow faster over the next generation? What contingencies might affect your answer? 2. Thida contributed this article on unemployment from the Economist, 2-Oct= -99 The economy: Work ethic ON THEIR way to winning the general election in 1979, the Conservatives put up posters claiming that =0F"Labour isn=0F't working=0F".= Next time, Gordon Brown told the Labour Party conference this week, the message =0F"Labour is working=0F" should be splashed across the nation=0F's billboa= rds. Since Labour returned to office in May 1997, the number of people in work has risen to 27.4m, a record high, and unemployment has tumbled. No wonder that the chancellor had the confidence to proclaim that =0F"Britain can deliver,= in our generation, employment opportunity for all... full employment for our country.=0F" Were the unemployment figures your guide, you might think that Britons were already fully employed. The proportion of the workforce claiming the dole, 4.2%, is the lowest since February 1980. The proportion who are =0F" ILO unemployed=0F"=0F-the definition used by the International Labour Organisat= ion in Geneva which, in essence, means those looking for work=0F-is 5.9%, the lowe= st since records began in 1984. There is, however, more to the labour market than the unemployment rate. Th= e government=0F's Labour Force Survey divides the population into three: the employed, the ILO unemployed, and the =0F"economically inactive=0F"=0F-ie, = those who are neither in work nor looking for it. Statistics for all three groups taken together paint a less pretty picture than do the unemployment data alone. Start with employment. Although the number in work is higher than ever, the proportion is lower than at its peak in 1990. Then, 75.2% of people of working age (men aged 16 to 64, women aged 16 to 59) were employed. Now, 74= % are. With the employment and unemployment rates both down, it follows that inactivity is higher=0F-by 2% of the working-age population=0F-than in 1990= . In part, this is because youngsters are spending longer in education. Their absence from the labour market is temporary, and they should join it better equipped. However, inactivity has also increased among workers (actually, men) over 25. As the shows, the unemployed comprise a smaller share of the population tha= n in 1990. Women are more likely to be in work and less likely to be inactive than they were. But men have become less likely to work and more likely to be outside the labour market altogether. Much of this is a hangover from th= e recession of the early 1990s: since 1990, the male inactivity rate has rise= n by 4.4 percentage points: half of this rise had occurred by 1992, and more than two-thirds by 1994. Many of the men who lost jobs in the early 1990s never returned. Plenty retired early. Many were pensioned off as long-term sick or disabled rather than continuing to seek work. Although the population as a whole was no les= s healthy, the number of long-term sick rose from about 300,000 in 1992 to more than 750,000 last year. How much has this depleted the labour force? It is impossible to be exact, but suppose that the same proportion of men aged between 25 and 50 was economically active now as in 1990. Then labour supply would be higher, by around 330,000. Were the employment rate for these men the same as it was then, an extra 218,000 would be in work. For men aged 50-64, labour supply is short by 152,000 and employment by 64,000. This trend is not peculiarly British. Most developed countries have seen me= n =0F's employment and activity rates fall and women=0F's rates rise. And Bri= tain has fewer inactive men, relative to its population, than most other OECD countries. Nonetheless, Britain still wastes too many workers. The government=0F's main answer to long-term joblessness, the New Deal, has= so far mainly been aimed at those aged under 25, and at those of that group wh= o say they are seeking work rather than the inactive. Ministers claim that this programme is achieving great things. In fact, it is too early to tell. Yes, long-term unemployment has fallen among the young since Labour took office. But then it has fallen for all age groups, and most of the decrease came during the party=0F's first year, before the New Deal was in operation= . So far, however, less has been done for older workers. A programme to help them into work, New Deal 25-plus, has been running in pilot form since June= . A scheme is also being set up for over-50s. In his conference speech this week, Mr Brown promised to extend the New Deal to become a =0F"Permament De= al=0F": a recognition, perhaps, that =0F"full employment=0F" as the chancellor defi= nes it may be a long time coming. David I. Levine Associate professor Haas School of Business ph: 510/642-1697 University of California fax: 510/643-1420 Berkeley CA 94720-1900 email: levine@haas.berkeley.edu http://web.haas.berkeley.edu/www/levine/