What no-one tells us about the jobs crisis

By Neil Patrick

Your vote won't help solve the jobs crisis - as long as politicians pull on the wrong levers.

Three big things have happened in my life in the last few months.

First, I finished writing my book, Careermageddon with Dr. Marcia LaReau of Forward Motion Careers. What started as a small project to try and create a helpful guidebook for people frustrated about their work opportunities, grew and grew as we uncovered layer upon layer of complexity as we sought to understand the real mechanics of the jobs crisis.

Then political events took over.

On Thursday 23 June last year, the EU referendum in the UK returned a result that almost no-one expected. Over 65% of registered voters voted, and the die was cast. Despite 'experts' warning that such a decision would be economic suicide for the UK, large swathes of the UK especially those who felt let down by their political leaders, voted to leave the EU.

The outcome of the US election was no less of a shock to most expert observers. Donald Trump campaigned largely on an anti-globalization platform. Jobs for US citizens and stricter border security were to be high priorities. These policy promises resonated with large numbers of non-metropolitan people in the US, left behind in a globalized economy which delivers immense wealth for a few, and less and less for most who either have a job or those who cannot get one.

The shocks of these two outcomes are still reverberating. I am not going to argue for or against Donald Trump or Brexit. Yes I have my opinions, but the point is they really do not matter.

I’ll say it again. My personal opinions and political beliefs do not matter.

Yet I’m very much in a minority. People on both sides of these arguments are endlessly busy championing their support for their choice, and denigrating those who have the opposite view. Meanwhile, the mainstream media under assault from Mr Trump is railing against fake news, quite oblivious to the fact that they are doing nothing at all to help provide greater understanding of the realities of the jobs crisis. They report ‘news’ (in reality arguments and scandal) but are truly hopeless at conveying insight.

These political outcomes have divided societies in the UK and the US, like none before. The reason it is pointless for me to argue for one political side or the other, is that the thing I care most about is jobs and incomes. Not about winning political debates. And jobs are not primarily made or lost by decisions about immigration, or who wields political power.

The jobs crisis is not fundamentally an outcome of political decisions. Yes Donald Trump is committed to getting jobs back for US workers. Yes the Brexit campaign succeeded because many people in Britain felt that unrestrained migration into the UK was creating unbearable pressure on our nation. They believed (contrary to much evidence), that immigrants were ‘taking our jobs’ and altering the fabric of our society for the worse.

The real drivers of falling incomes, long-term unemployment, and social unrest are nothing to do with immigration, or the UK’s membership of the EU, or who is in the White House.

We have a jobs crisis because the world is undergoing changes so immense that policy makers have no reliable models they can turn to with confidence that tell them what to do.

Pulling the traditional monetary levers of interest rates and money supply have proved completely incapable of reigniting sustainable economic growth. They have failed in the Eurozone, failed in Japan, failed in the UK and failed in the United States.

And that is because the changes going on are deep and structural. They are so deeply rooted that even the most sophisticated economic forecasting models and policy levers are completely inadequate to represent and remedy the complexity of what's happening and worse what will happen. They just don’t work in times like these.

In January this year, in an almost unheard of admission of failure, none other than Mark Carney, Governor of the Bank of England was forced to admit that the Bank’s economic forecasting models just didn’t work when a change as great as the Brexit vote occurred. These models work reasonably well in period of slow and gradual change. They fail completely when changes are large and rapid.

He went even further as I reported here. He admitted that up to half of all jobs in the UK would be eliminated by technology in the coming years.

The real drivers of job creation and destruction are what Marcia and I describe in detail in our book. We call them The Six Engines of Change. They are:

  • Globalization and offshoring 
  • Technology, artificial intelligence and robotics 
  • Disruptive business models 
  • Education and the speed of institutional change 
  • Demographics and the aging population 
  • Fiscal policy 

Firms are able to control their decisions about the first three of these. And they will make decisions based on their raison d’etre. I.e. they will do whatever makes the most money.

Government can do little other than play around the edges of these things unless we wish to submit to a centralized and totalitarian state. On the other hand, education, demographics and fiscal policy are areas where government policy can achieve greater leverage.

Yet none of these are a silver bullet which can reignite economic growth. They are blunt instruments as the central bankers would say. They impact slowly. Which is not helpful when people are struggling to make ends meet week in week out.

In a world which is changing faster than ever before, and where more and more people are feeling that their governments have failed them, we should not be surprised that politicians who promise sweeping change are able to win more votes than those who can only promise more of the same.

We can only hope that instead of playing to the gallery, they grasp the real fundamentals of what is happening and implement policies which truly reflect these complex realities of the 21st century world.

I really cannot predict what is going to happen next, but I have nagging feeling that real change is going to be harder to deliver than we’d all like.

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