Labour Market Impacts Recession Key Info

Key Points for compare and contrast: 1980: • Highly concentrated by sector and geography • Most job losses occurred in large plants in particular industrial areas • Large scale closures in steel, coal manufacturing o Mine closures caused great economic and social cost- coal mines were such a dominant employer, thus when they closed, economic effects were often devastating. When a town is so reliant on one major employer, the closure means that local employment could often be very high, therefore difficulty for unemployed coal miners to find new employment. o Coal miners faced significant geographical and occupational immobilities- reinforcing the geographic concentration of 1980 in comparison to 2008. o Government failure= not promoting economic regeneration in finding new work for the newly unemployed miners. • Labour markets vary internationally • UK recession was part of a synchronised downturn across all major economies • Doubling oil prices in 1979- second major oil price showcases in the decade, generated significant inflation • Resulting policies to control this and reduce government borrowing- major tightening in monetary policy and increases in taxes, pulled down on real disposable incomes and demand across the world • Crisis of Fordism: different impact of labour market- rationalisation experienced in and concentrated in sectors and geography o Industrial regions of UK= manufacturing/ coal/ steel were badly hit by the recession and most job losses occurred in large plants o Hugely concentrated by sector and more particularly in terms of gender- the male workers more affected than female workers due to job type o Gave rise to a set of theories- new era of flexible production and a flexible labour market o UK industrial output was hit hard by the recession of 1981, due to deflationary fiscal and monetary policy and a strong pound which made exports less competitive. • 1980’s GDP fell by 4.6% over 5 quarters/ 1990s it fell by 2.5% over 5 quarters/ 2008 fell by 6.4%- the largest fall • The 1980’s recession took 8 years (32quarters) for employment levels to reach that at the start of the recession and took 8 years 9 months for employment levels to fully recover after 1980s recession (Jenkins, 2010) • There were similar falls in the percentage of job losses in the 1980s and 2008. 1980s there were 1.1 million jobs lost, whilst 2008 experienced fewer job losses of 856,000. • 1980s= attempts were made to reduce the rate of inflation, which had spiked in response to oil prices and an expansionary monetary policy. During this time, policies were directed at meeting targets for money supply growth, however this remained resilient. • (Cox et al, 2009) ‘During 1980 recession, structural change, with employment increasingly concentrated in market services, occurred as the economy recovered. This resulted in relatively heavy job losses in those regions which were more dependent upon production and manufacturing jobs 2008: • Although (Hurley, 2013) claims that they main area of job destruction was the manufacturing and construction sectors’ (which would make it comparable to 1980), the GR is not confined to jobs, but rather is seen as a broader canvas in relation to welfare reforms and the like • • • • • • • • • • • • • • • • • • • • • GR is famous for its longevity rather than its depth- it shows slowest recovery in history Welfare state restructuring, that involve changes in the system of finance take much longer to implement (eg retirement age)- if they take longer to implement, they will take longer to produce savings for the governments Previous crises were concentrated by sector and geography and express significantly in terms of unemployment, whereas GR= much broader scope More generalised in its effects and is felt across the labour market Undermines those accounts of polarisation in the world of work and presents insecurity as a broader experience, not confined to the minority as suggested by Standing’s precariat A global crisis but with differential impacts: IMF reported different mechanisms for transmitting the effects of the crisis- impact of housing market collapse was experienced differently in different countries Radical novelty= 30 years of neoliberalism gave very little room for gaining money through privatisation Very little ‘family silver’ left to sell Steel and coal cannot be replicated in the public sector (Jenkins, 2010) ‘The recession in 2008 was the deepest for several decades’- however this may not be the case. Instead, it is famous for its longevity rather than its depth. Second quarter of 2008, GDP fell for 6 consecutive quarters, recording a total peak to trough fall of 6.4%. As output fell and spare capacity in the economy opened up, interest turned to how recession was passing through the labour market. Came after a period of unparalleled stability in both UK and other global economies NICE (non-inflationary consistently expanding) decade masked growing international imbalances, which became manifest in very liquid financial markets and a world-wide credit boom Short-term money markets closed, as financial institutions became hesitant to lend to each other. Sudden drying up of liquidity endangered the entire global banking system, which may have collapsed had it not been for large-scale government interventions Demand across the world then fell sharply, partly due to hiatus in lending (credit crunch) Unemployment seemed better in 2008 due to the fact inflation was lower, so didn’t have to let as many people go, they could just reduce wages, rather than causing people to be unemployed Lowest interest rates, whereas previously would have been more expensive Labour markets tend to recover slowly after a major financial crisis and usually lag behind economic growth, with unemployment persisting at above pre-crisis levels o Crucial for policy makers to consider various labour market policy measures that both mitigate the impact of the crisis on workers and help reduce the lag between economic growth and improvements in the labour market o In turn, these actions depend critically upon appropriate monetary and fiscal measures to boost demand and encourage job creation, which have been a central part of the stimulus package across the world (Verick et al 2010) (ONS,2018) ‘Having shrunk by more than 6% between the first quarter of 2008 and the second quarter of 2009, the UK economy took 5 years to get back to the size it was before the recession’ – unemployment reached a high rate, but still not as bad as 1980, thus reinforcing the fact that 2008 is noteworthy with regards to length, not depth. Generalisation vs polarisation (Hurley, 2013) o The destruction of employment across Europe during the recession led to polarisation in terms of wage structure o • • Large proportion of jobs destroyed were in mid-paid manufacturing jobs and construction operations- higher paid jobs were more resilient during the crisis, continuing to grow (albeit marginally) even during the peak periods of the GR o First 2 years- the expansion of higher paid jobs was mostly sustained by knowledgeintensive services in the public sector (principally health and education) o Between 2011 and 2012 the focus shifted to knowledge- intensive services in the private sector, which added over 400,000 new jobs to the top quintile of the wage distribution in this period across the EU. o In terms of gender the recession intensified the catch-up process of women in the labour market, both in terms of employment share, particularly in ‘mid-paid’ and ‘good’ jobs (those in higher quintiles) o Women were overrepresented in certain growing sectors, such as health and underrepresented in declining sectors, such as construction. (Cox et al, 2009): Institute for employment studies: Impact of the recession on the labour market in the south east: o Whilst it is theorised that alike to 1980 recession, whereby construction and manufacturing were the most affected sectors, constructionskills intelligence confirmed that ‘some large construction projects in both private and public sectors… are reportedly finding it easier to recruit workers, after a period of skills shortages’ Gender: The financial crisis and subsequent austerity policy reawakened debate on the gender impact of the economic cycle (Rake, 2009) o Women’s vulnerability & commitment to the labour market: ‘women may act as a flexible labour reserve that is more likely or more willing than men to retreat into inactivity at times of low economic demand’ o ‘Gender segregation is still a pervasive characteristic of all labour markets, including the UK’ (Bettio and Verashchagina, 2009)- if women are regarded as a flexible labour supply, they may be more likely to be employed in buffer jobs o (Bettio, 2002) claims that segregation may protect women against job loss by shielding them from competition from men and placing them in protected sectorsthis type of segregation acts as a source of labour market rigidity. This is referring 1980 recession, but can compare to Bettio’s 2009 comment (draw comparison between the 2 recessions about gender impacts) o At the aggregate labour market level women’s employment rate continued to rise as overall they tended to be overrepresented in the more protected sectors.