Re: [OPE] Employment outlook

hang on, juriaan:

how can a 1% increase in employment (i guess that you mean work force,
not just people who are employed), earning world average wages, cause
an increase of 5% in gdp? surely 1% increase in employment at average
wages translates into a 1% increase in gdp? (that is assuming the
labour share of gdp is constant).

michael

On 11 January 2011 11:18, Jurriaan Bendien <jurriaanbendien@online.nl> wrote:
> >From the Statement by Ben S. Bernanke, Chairman Board of Governors of the
> Federal Reserve System before the Committee on the Budget United States
> Senate Washington, D.C. January 7, 2011:
>
> "The projections submitted by Federal Open Market Committee (FOMC)
> participants in November showed that, notwithstanding forecasts of increased
> growth in 2011 and 2012, most participants expected the unemployment rate to
> be close to 8 percent two years from now. At this rate of improvement, it
> could take four to five more years for the job market to normalize fully."
> http://budget.senate.gov/democratic/testimony/2011/Bernanke_010711_SenateBudget.pdf
>
> I think it is more likely though that a higher unemployment rate will become
> "normalized" in most of the OECD countries, i.e. an official standard rate
> closer to 8 percent of the labour force (much the same would apply to the EU
> and Japan).
>
> In the words of PIMCO chief Mohamed El-Erian whom I cited before on OPE-L on
> 3 July 2009 ("American jobs data are worse than we think", FT July 2, 2009):
> "The US faces a material probability of both a higher Nairu (in the 7 per
> cent range) and, relative to recent history, a much slower convergence of
> the actual unemployment rate to this new level."
> http://www.ft.com/cms/s/0/1e06911c-6719-11de-925f-00144feabdc0.html
>
> Unsurprisingly, the ILO notes that, in the wake of the GFC, globally the
> increase in average gross wages has been halved. If you factor in price
> inflation, average gross wage rates are actually decreasing (negative) in
> many countries according to the ILO. These countries include France,
> Germany, Korea, Japan, United Kingdom, Hong Kong, Singapore, Indonesia,
> Thailand, Russian Federation, Ukraine, several East European countries,
> Mexico, Bahrain, Palestine... You can find the anual increase/decrease in
> inflation-adjusted gross wages by country on p. 111f of the Global Wage
> Report 2010/11
> http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@publ/documents/publication/wcms_145265.pdf
>
> Countries with strong average wage growth include mainland China, Armenia,
> Azerbaijan, Kyrgyzstan, Tajikistan, Turkmenistan, Bosnia and Herzegovina,
> Bulgaria, Argentina, Ecuador, Panama, and Uruguay. But most of these have
> had rather low average wage levels to start off with; if you leave out
> China, the population of these countries represent only 1.5% of the world
> population. The only quantitatively very significant player in the world
> market on this score is China.
>
> Assuming the total wage bill of China is about US$5 trillion, then a 12%
> rise in the average wage per year equals about $600 billion extra income
> (but a lot of it is not spent on final consumption). $600 billion is like
> the GDP of Turkey or 1.5% of world gross product.
>
> If the level of real wages is mostly rather stagnant globally, and upward
> job mobility is reduced, final demand can really grow only by increasing the
> number of wage and salary earners. Aside from population growth, and thus a
> natural increase of the (employed) labor force, ILO labor participation
> rates show no sign of increasing very significantly in most countries across
> ten years or so (in mainland China, it's actually decreasing somewhat!).
> http://kilm.ilo.org/KILMnetBeta/default2.asp
>
> The global employment-to-population ratio is 60.3%
> http://kilm.ilo.org/KILMnetBeta/pdf/kilm02EN-2009.pdf so if there is
> currently a world population of 6,892.7 million, the employed labor force is
> about 4,156 million. Assuming a natural growth of 1.14% of the world
> population, the population increase is about 78.6 million a year, and there
> are world wide ceteris paribus an extra 47.7 million employed people per
> year (that's equal to the whole labour force of Mexico). Assuming a world
> average wage of $7,000 a year, the natural increase of the population,
> alone, would imply - disregarding tax - an increase in consumer final demand
> of somewhere near $334 billion a year. So the natural increase in population
> would contribute 5-6% to world GDP per year. Just a thought.
>
> Jurriaan
>
>
>
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-- 
Michael Webber
Professorial Fellow
Department of Resource Management and Geography
The University of Melbourne
Mail address: 221 Bouverie Street, Carlton, VIC 3010
Phone: 0402 421 283
Email: mjwebber@unimelb.edu.au
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