This might be thought of as the introductory part of a very early draft of a chapter for Globalisation and Welfare State. It was written (about the same time as the book) for another purpose, and repeats some of the material in earlier chapters.

Keywords: Labour Studies;

Unemployment as a Human Problem

It is very easy to focus on unemployment as a statistic, of say 6 percent of the labour force being unemployed, and ignore that for the unemployed the relevant statistic is that each is 100 percent unemployed. The statistics enables us to distance ourselves form the human condition. Saying that full employment is should be X percent, irrespective of what that rate is, ignores the human problem for those who are unemployed.

The research is clear enough. The most vivid research finding, well attested by numerous studies, is that unemployed causes suicide. In addition unemployment causes poor physical and psychiatric health, and higher death rates through other causes. The research suggests that not only do the unemployed suffer from this higher morbidity and mortality, but so do their immediate family, while the children may suffer a loss of educational opportunity and other detriments which will hamper their adult life.

To understand these terrible human costs, we need to recognize that as well as the evident role of employment, in that it provides the worker with an income for material sustenance. In addition, as psychologist Marie Jahoda pointed out employment “imposes a time structure on the working day”, it involves “regularly shared experiences and contacts with people outside the nuclear family”, it “links an individual to goals and purposes which transcend his or her own”, and it “enforces activity”. (1)

This account of unemployment, commonsense though it may be, is subversive to the crude economist’s picture of the employment relationship in which work is an ordeal, traded for remuneration. Certainly sorts of work, and at certain times (Friday afternoon for instance), work is a burden, and the pay a compensation for it. But at other times work is positively enjoyed – most workers like their work, dislike being unemployed and dislike being poorly managed.

The crude models of the economist might suggest that workers should be willing to work for nothing, to pay an employer to give them employment. One problem is that they would not have the income to make the payment, but there are also a couple of subtle issues. The first is there would still be a payment required for the unpleasant aspects of any particular job, and for the awkward times. But second, the rate of a remuneration is a social signal for the worker of the social value of the task, and thus reinforces the latent functions, by giving the activity social value.

This is nicely illustrated in the economic theory of the efficiency wage, where higher payments generate high productivity via a number of mechanism such as better quality workers, greater commitment, increased job stability. Good employers may pay above what appears to be the going rate, and benefit from the resulting greater productivity.

Yet a modern economy cannot avoid unemployment. It needs a process of job changing – of redeployment – as jobs are replaced by new technology, new customer demands, new producers and production process, and as resources deplete and new resources are used. In the dynamic economy which the world increasingly faces it is not possible to have this redeployment without some unemployment. The complexity of the changing workplace means that no worker can be guaranteed there will be a new job in the same worksite to which he or she can transfer. Nor that there will be the immediate prospect of a job in the same location or requiring the same skills as the old one. It may be possible to protect a small number of workers from the possibility of redeployment, but it is not practically possible to protect every worker, to guarantee them a job for life.

How are we to reconcile the economic needs of redeployment in the dynamic economy we are in, while minimizing the human cost of that resulting unemployment? While we may not be able to repeat the experience of the first two decades of the post-war era, there are lessons to be learned from it. By all accounts unemployment was not a problem, and few registered as unemployed with the Labour Department. However the census data shows that there were many more people unemployed, suggesting that as much as 4 percent of the labour force could be unemployed on occasions.

On the other hand if we go to the post-1984 economy, which began with unemployment around 4 percent of labour force. It rose to over 11 percent in March 1992 falling to the 6 to 7 percent range five years later with little prospect of further reductions. Unemployment by now was one of the most serious problems, according to public opinion polls. The difference between the two eras, was not simply the larger level of unemployment. Consider the analogy of the pool of unemployment as a lake. The size of the lake may not be nearly as important the amount of water that flowing in and out. A better indicator may be the amount of time the water remains in the lake. A stagnant lake with little entering a little leaving will have a very different limnology from a lake whose fresh waters are being changed regularly by large inflows and outflows. The same is true for the unemployment pool.

Before 1966, there appears to have been a rapid turnover of the unemployed, so that the period of unemployment was typically short. While any job severance may have been traumatic, the period of unemployment was short, and not stressful. It was not usually necessary to register officially or with a private agency, when personal diligence soon found a new job.

From the late 1970s the stressfulness of unemployment rose, as the period unemployed increased, (2) as did the numbers of unemployed. Over the period from October 1988 to June 1993, 754,312 enroled on the New Zealand Employment Service register. (To give some idea of this magnitude, the average size of the labour force was about 1,612,000 people, so the enroled unemployed represent about 47 percent of that total, or around 10 percent of the labour force each year, over an almost five period in which the average rate of unemployment at any point in time was 8.7 percent. (3)) Those who enrol more than once, are counted but once in the above total. In fact over 45 percent were enroled at least twice, and 2.1 percent more than 5 times. This suggests that at least 21 percent of the labour force experienced repeated unemployment in the 4¾ year period, and 1 percent experienced it on five or more occasions. The average number of enrolments was 1.78 times for non-Maori, and 2.18 times for the Maori. The average cumulative duration on the register was 59.2 weeks, the Maori averaged 68.8 weeks. For many people, including some who did not register and so dont appear in the data, unemployment around the beginning of the 1990s must have been a very stressful experience.

How then can we define “full employment”. It is evident from this discussion, that the unemployment rate is a very inadequate measure. What is needed is some measure of the degree of stress, which is related, among other things, to the period in which a person expects to be unemployed. An expectation is difficult to measure, but a correlate might be the proportion of the labour force that is unemployed for in excess of some period. Ideally that period would be chosen to reflect the point where stress begins to rise above a level which is judged to be psychologically problematic. We do not know what that period might be, so for illustrative purpose let us assume it is 3 months, equivalent to everyone who has been unemployed for more than three months is under excessive stress.

The numbers of those who have been unemployed at least 3 months are shown in Figure 1 [Not included], as are the very long terms unemployed (who have been unemployed for more than twelve months), together with total unemployment. (4) On the whole the series follow each other reasonably closely. The secular trend is discussed in the next section. Observe that the number of workers who are unemployed for more than three months has been rising proportionally faster total unemployment (as is occurring for the very long term unemployed).

In particular the numbers reporting they have been unemployed for more than three months has risen from 17,600 in December 1985 (the first quarter of the Household Labour Force Survey) to 65,400 in June 1997 (the last available). This is an increase of almost 4 times, while total unemployment increased from 62,200 to 118,700, not quite doubling. (The numbers who had been unemployed for over a year increased from 3,700 to 25,000 – almost seven times – over the same period.)

Note this measure is an indicator of the underlying notion of stressful unemployment. Stress also occurs at redundancy and also before, when it is anticipated. And stress will be higher in the early stages of unemployment if the expectation is long term unemployment (perhaps indicated by a high proportion of long term unemployed, and/or a rising level of unemployment). Even so in a dynamic economy in which redeployment is central, some measure of long term unemployment is probably the best measure of stressful unemployment that is currently available.

There is no doubt a political attraction to use long term unemployment as the indicator of unemployment stress, since it is smaller than total unemployment. However there are policy implications which the definition forces on the politicians.

First public attitudes (especially those responding to policy and politicians) should aim to minimize stress. Examples of failure include the unemployed are attacked for not being able to find a job, and the administration of assistance to the unemployed is careless.

Second, the notion of stressful unemployment places a greater emphasis on policy to deal with the stressed. Third, as Figure 1 shows, the numbers of long term unemployed has shown stronger secular growth over the last decade. Thus the long term measure indicates that unemployment stress seems to have been rising faster than the total suggests.

However the key point is to move away from the abstraction of some number of unemployed, and focus on the state of being unemployed, for each person who is unemployed. At best the measures of numbers of unemployed – be they long term or total or any other definition – are crude indicators that are available, rather good measures.

Conclusion

1. Redeployment in an integral feature of a modern economy. Some unemployment is inevitable as a result of the redeployment.

2. Because unemployment can be stressful, as indicated by its physiological and psychological consequences on the unemployed and their family and close associates, the need is to minimize stressful unemployment.

3. There is no good measure of stressful unemployment. However period of unemployment may be used as a crude measure.

4. The use of a goal of stressless unemployment, indicated by a long term measure, has the following major policy implications:
– public attitudes affect the unemployment experience;
– employment policy needs to target on the most stressed, and minimize increases in severe stress;

5. As measured by long term unemployed, stress has been increasing faster than total unemployment – almost quadrupling between December 1995 and June 1997, when total unemployment did not quite double. (Those unemployed over 12 months increased almost seven times.).

There are no further chapters

Endnotes
1. M. Jahoda, The Impact of Unemployment in the 1930s and 1970s. Bulletin of the British Psychological Society, 1979 vol 32, p.309-314.
2. There are no direct estimates before 1986, when the Household Labour Force Survey was increased. However the statement seems almost certainly true on the basis of anecdote and indirect estimates.
3. While this overestimates the likelihood of being unemployed because of inflows (from school leaving, returning to work, and immigration), it underestimates it insofar as not all unemployed registered.
4. The data source is the Household Labour Force Survey. There is also data from the Department of Labour’s registered unemployed series but it is not as statistically reliable.