Tuesday, December 9, 2008

Keynesian Irrelevance IV: Employment

Keynes assumed a simple employment theory: that a 1% increase in output increases employment by 1%.

1. The reason that the economy must grow each year is more and more graduates and non-graduates are entering the job market and we must create jobs for them. If the labour force increases by 3% a year, the economy must by 3% a year to absorb the new labour.

How do we create jobs for our young people? By employing them.

Even if they are considered "unemployable," they can still be retrained for some simpler jobs. The government must spend money on programmes for our people to find their "calling." Germany has life-long education where some graduates are professional students. Whatever, it is good for the government to be engaged with the youngsters so that their skills can be depoyed into new areas of activity in a positive vein. The sin of the government is to ignore the youth.

Short courses and programmes can be designed to cater to their abilities and interests. The government should pay them subsistence allowance to encourage their training and re-training until they discover themselves. We have become too callous in our approach to our youth. I am sure many are suffering from cultural shock, once they turn away from the TV and into the real world.

Any government programme, of whatever kind (I could fall into the classic "Keynesian literal trap") for the youth is better than building roads that lead to nowhere.

If a road is built that employed illiterate foreign workers and guarantees profit to a man who has already made his million and that road leads to nowhere, I would rather pay money to a fresh secondary school or university graduate to study some course for 9 months or 18 months, with subsistence, so that the young person would have some confidence in a future for himself or herself in this country. The person may do drama or join a rock band or be a poet - and this is a road that leads to somewhere. And it is far better than digging holes and filling them up.

It may not be immediately obvious that the engaged youth is employed - but can be classified outside the labour force, so that being "unemployed" are those actively looking for a job.

2. It is always prejudiced to get industry to dictate to the government which sector should be "stimulated." It is not difficult to imagine that the over-grown and over-sized construction sector will continue to clamour for more money to pile up brick and mortar. This is no doubt driven by land owners who want to capitalise on their assets. But the government should ask final year students and fresh graduates what types of jobs they want to do - and the government should spend money to fund their projects. This may even be in the form of industrial training or in an oversea stint to do volunteer work to gain experience and new insights. This is far better than paying for the overseas trade and investment missions by old men and women who are already quite fed up with seeing the world.

3. I am constantly amazed by the artistic flair of our people. This group should be encouraged through competition which pays a decent prize - meaning sufficient for the winners to survive without earning an income for a year in rented rooms. It is the artists, the poets and the writers who help us as a society to embrace our circumstance and enjoy it rather than harping on how things might have been. (I think the Chinese are too clinical in their artistic pursuits, but they might still be able to make their own mark.)

4. I am fascinated by the infinite ability of individuals and communities to establish their own equilibrium way of life. The social culture is established by people forming their set of habits which they practice day after day. Too much has been pulled to the centre by the central government which is disruptive to traditional societies. This is because some brilliant PM is keen to set up a new town to call his own. It is far better for the common person that the central government decentralises its expenditures so that more is given to the outliers - as a means of creating jobs in areas with lower costs of living.

5. So much talk about ICT. Thanks to ICT, we can actually decentralise faster. It will be interesting if we can have a national IT network that reports news and views from all the little nooks and corners of the nation, to see how our distant cousins are doing at this precise moment at home, so to speak. I am reminded of an observation that the age of globalisation means that we know all about the US financial meltdown but not whether our neighbour is suffering from depression and needed help. We don't need Cyberjaya or MSC to do ICT.

6. Many Malaysians have come to accept a boring way of life. They want a stable job - so they get themselves stuck in the civil service in a boring job for life and end up doing a disservice to themselves and the nation. They want a prestigious job - and get stuck as a doctor in a clinic entertaining rich but miserable clients. They should sample a variety of jobs to see which one gives them the most happiness and just enough cash for their needs and even desires. I think the availability of a wide spectrum of jobs should enrich the job market as well as our culture and the lives of our people.

7. Conclusion

The government could embark on the following mega projects:

i.) The National Battle of the Lead Guitarists with Rock Bands (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

ii.) The National Battle of the Drummers with Rock Bands (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

iii.) The National Battle of the Stand-Up Comic Artists (RM500,000)-first prize: RM250,000; second prize: RM150,000; third prize:RM100,000

iv.) The National Battle of the Comic Book Artists (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize:RM100,000

v.) The National Battle of the Cartoonists (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

vi.) The National Battle of the Short Story Writers (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

vii.) The National Battle of the Novelists (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

viii.) The National Battle of the Poets (RM500,000)- first prize: RM250,000; second prize: RM150,000; third prize: RM100,000

ix.) The National Battle of the Short Film Makers (RM1,000,000)- first prize: RM500,000; second prize: RM300,000; third prize: RM200,000

The total prize money of these 9 mega projects is RM5 million.

If in two languages, RM10 million.

Promotion and related events at RM2 million each would cost RM18 million for one language and RM36 million for two languages.

The entire programme for two languages would cost only RM46 million a year. The programme can be repeated every year until the unemployment rate goes down to 2%.

1 comment:

de minimis said...


This fourth instalment is infused with wisdom. This insight on employment and economic policy is absolutely true to your blog title.

I think the recommendations at the end are actually quite sensible.