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Tuesday, July 29, 2003

Downward Mobility, a New Craze Sweeping the Planet?

Are you downwardly mobile yet? Well, if you aren't don't worry, your turn will come, you just aren't old enough yet. What am I on about? Well just read Eddies latest piece from Singapore:

Downwardly mobile: a new job reality

ABOUT a decade ago, a study by the National Research Council in Washington concluded that the time it takes to lose half a worker's skills due to changes in technology and knowledge had declined from between seven and 14 years to between three and five years. This loss of a worker's competence, of course, differs from occupation to occupation. It is, for example, particularly true for engineering. An engineering friend of mine told me that within the first five years of work, half of what he learned at university had became obsolete. And now, he cannot remember much of what was taught because he does not use it any more.

Unlearning information that is no longer relevant has become a real challenge. It brings to mind what Albert Einstein once said: 'Imagination is more important than education.'
The dot.com stock-market bubble may have burst three years ago, but technology's progress is relentless. Technological change is not just growing, it is growing at an accelerated pace. The rate of progress is doubling every decade. And it leaves us with a thorny question: If the worth of a worker's acquired skills is diminished within five years, what value would you place on experience? Perhaps the question is better put this way: Would you place more value on the ability of a worker to adapt, or on his years of experience? This is turning Asian values upside down. Confucian beliefs place a premium on seniority, and that forms the basis of wage structures in many East Asian countries. But in a market economy, seniority is becoming hard to justify. Even as Singapore debates the need to change its wage structure, the marketplace is already making the changes.

The gap between the minimum and maximum wage for a job has been reduced to 1.7 times, on average, over the years. It used to be as high as three times. The Government's recommendation of 1.5 times for most rank-and-file jobs is mere tinkering compared to what has already occurred. And lest we believe this is an event unique to our shores, look at what is happening in Japan, that supposedly most rigid of labour markets. In a paper two years ago, titled 'Changing Seniority-based Wages', the Ministry of Health, Labour and Welfare (MHLW) in Japan noted that about a sixth of leading Japanese companies had already revised their wage systems by expanding the portion that was determined by 'performance, ability to execute duties and by content of work'. Another fifth of companies planned to do so over the next three years.

The attitudes of workers were shifting too. More than 85 per cent of respondents in a survey commissioned by the MHLW believed that the revision of the wage system was 'unavoidable', and that in fact, 'basic revision is necessary'. JTB Corp, a leading travel agent in Japan, has introduced a new wage system which essentially stipulates that an employee's basic wage peaks when he is 35 years old. JTB launched the new system for its employees back in April 2001. Household names such as Hitachi, NEC and Fujitsu are introducing performance-based systems. Mr Hiroshi Okuda, chairman of the influential business organisation Nippon Keidanren, which groups Japan's largest companies, told The Straits Times four months ago that, from an economic standpoint, 'it is odd that wages should rise automatically'.

Yet, one can equally understand the worker's point of view. As Mr Allan Wee, 59, noted in an interview with The Straits Times last month: 'A worker who stays with a company for 20 years should count, as compared to someone else who works just two years and is always thinking about job hopping.' But there is little that can be done to compel an employer to pay older workers more if he does not choose to. The company always has the choice to pack up and go elsewhere.

This is not to deny that adaptability is necessarily harder for the older worker. There will be those more able to adjust, but for most, age, as the saying goes, catches up. The AFP wire agency carried a story recently on the diverging fortunes within the Doi family in Japan. Mr Kojiro Doi, aged 24 and with a master's degree in social psychology, had just accepted a job at one of the top management consulting firms. His starting salary: six million yen (S$88,000) a year. His 58-year-old father, Mr Kuniyoshi Doi, on the other hand, took early retirement two years ago from consumer electronics giant Matsushita. He is now employed at a Matsushita subsidiary. His pay? three million yen a year, or half of what his son is bringing home.

Ultimately, many workers will have to accept second 'downwardly mobile' careers, with lower salaries, and perhaps, worse working conditions. And it does not just stop there. As more companies restructure their wage systems, there will be a gradual impact on the economy as a whole. The consequences for the economy may have a deeper undertow that has less to do with simply misaligned wage structures than what an ageing population, faced with these wrenching wage changes, means for household expenditure.

While a company can restructure its wage system to lift the bottom line, a country finds that its workers are also its consumers, and consequently there is less demand for the goods produced. The goods may, of course, be exported. But there is no reason to expect an increase in overall spending worldwide since older workers facing reduced salaries and early retirement are a global phenomenon. What is exported comes at the expense of reducing jobs elsewhere, because consumers will only buy foreign goods by reducing their consumption of local goods. In 1992, a worker in the United Kingdom's shrinking motor-car industry was interviewed on BBC Television's 'Nine O'clock News' and the reason he gave for the industry's predicament was 'when no one's buying cars, there's no point in making them'. When you view wage restructuring from a global perspective, that just about sums up why the Singapore economy is finding it so hard to pick itself up this time round.
Source: Eddie Lee: Straits Times

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