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Friday, June 20, 2003

Is the Japanese Labour Market The Default Setting?

Joerg isn't satisfied with my reasoning on immigration. He's sent me a whole bunch of material which I'll break down for ease of digestion. His first point I really agree with, we are in danger of getting into a vicious spiral of 'structural reforms' where we continuously run round and round trying to catch our own shadow. We really need to be very clear what we mean when we talk about 'structural reform'. If this is what Joerg is saying, then I agree.

Andy Xie shares a misunderstanding with you:"Japan’s automobile industry is the only one that still brings home the bacon. Structural labor problems in the US and Europe contribute to Japan’s profitability in this business. Japan’s auto industry would follow its electronics industry into low profitability when (1) low-cost Asian countries start to make competitive automobiles, or (2) structural reform of the labor markets in the US or Europe takes place."

So for him, even the U.S. labour market is in need of "structural reform". In fact, in western terms, the most "unreformed" labour market is the Japanese - which at some time in the past even guaranteed lifelong
employment. Remember Brad´s recent post about the idea to consider the Japanese employer-worker relationship the "default" that western societies unfortunately diverge from?

The problem here I think is another one of those tricky 'chestnuts' associated with neo-classsical theory, the absence of a historical dimension. Probably some version of evolutionary economics has more to say about this kind of problem. Specifically I am thinking of the infancy-adolescence-maturity-senility trajectory. This has often been applied to technological processes, but perhaps less so less to the economic and social system itself, or to the associated question of the occupational structure. Now this I take it is what the debate about high-value, knowledge-based activity is all about. Our societies are on some kind of evolutionary branching-process path. We seem to have become locked-into a situation where in order to maintain our competitive advantage we need to invest more and more resources in preparing our working population in terms of acquired human capital values (this I take it was Eddies point a few weeks ago about children getting too much homework). This investment in the young has the associated consequence that we produce less children, hence the demographic connundrum.

The problem of the car factories is related, but not identical. This goes back to my argument about the accelerating pace of technological change, and the difference between intelligence (or flexibility, or adaptability) and experience. The motor industry - whether in Japan, Germany or the US - has priced into its cost structure the accumulated experience of its workforce. With each passing year there is less and less justification for this valuation. Hence the industry is under pressure to 'reform itself'. In a globalised labour market, what excuse is there for defending the relative affluence of the western worker? What is the moral authority for this point of view? Here I think Andy Xie is absolutely right (see post earlier today: This is essentially telling poor people not to work too hard because it produces pressure on rich people. ).

We reasonably want to defend our standard of living, yet, at the same time we lack candidates to do the more unpleasant work. How many of my readers have the ambition for their children to work in construction, or in domestic cleaning? Logically, if our societies need these activities, we need people to do them. At the end of the 19th century, in western Europe, these people came from the land. In the UK, for the first half of the 20th century they came from Ireland. Now they come from across the planet. Normally those of us working in migration theory operate on a three generation model. The first is the sacrificial generation. The second is the 'lost' generation (the generation which is between two cultures, and never really knows which one it belongs to), and the third is the upwardly mobile generation. Ironically, since I am suffering from major server 'outage' (more on this in another post) I am writing this from a 'locutorio'. I live in a neighbourhood of Barcelona which was composed of 'shacks' forty years ago when my wife's parents came here. Now the houses are mainly owner-occupied flats, built before the boom when property was still cheap by that very 'sacrificial' generation. Now the grandchildren have nearly all moved out to more fashionable neighbourhoods (paying terrible prices for flats - with enormous mortgages - that they think will keep rising in value, but may well turn out to be a terrible millstone round their necks). Now there is a new population here, immigrants from all over the planet Peru, Ecuador, Pakistan, China, Rumania, Russia, and they are all around me in the locutorio (all incidentally using the new tecnologies for communication, I see very little 'surfing'). And the immigrants rent the flats as the grandparents die (no one here wants to turn cement into cash: a preference they may well live to regret). With four, five or six to a flat this is economically viable for them. And I guess this pattern is reproduced the world over.

Now what is the point of all this in connection with Joerg? Well my argument is that economic systems need to be understood both historically and ecologically. They are machines for devouring people, our planet's most precious natural resource. But pretty soon we are going to exhaust this one, so big changes are on the way. Imagine, just for one moment where the 'surplus' labour will come from to fuel China's enormous requirements once the domestic population resources are exhausted?

Clearly, Joerg will reply, we need robots, or following Kurzweil, humans with non-invasive implants, or computers with personality? Who at this stage knows? That is why I do not wish to speculate, I am trying to understand the world we have. The one we are about to get, well there will be time enough for that later.

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