Human resources or human assets

Paul Krugman argues that US jobs policy is deficient in that there really isn’t one.  As he puts it,

Here in America, the philosophy behind jobs policy can be summarized as “if you grow it, they will come.” That is, we don’t really have a jobs policy: we have a G.D.P. policy. The theory is that by stimulating overall spending we can make G.D.P. grow faster, and this will induce companies to stop firing and resume hiring.

He compares this with the German approach which is to provide a short-term work scheme which provides subsidies to employers who reduce workers’ hours rather than laying them off – an approach that didn’t prevent recession but which meant that “Germany got through it with remarkably few job losses“.

One might quibble with the implication that the recession is over but Peter Dorman points out that Krugman misses the really important point about Kurzarbeit.  While giving Krugman credit for seeing the deficiency of the slash-and-burn approach to labour; Kurzarbeit is fundamentally about human capital.

But this is not the main reason Germany has an institutionalized short-work (that’s the translation of Kurzarbeit) program. The Germans have this strange belief that working builds skill: you go through an apprenticeship, you work with master craftspeople, you learn the subtle ins and outs of the particular firm you are attached to (in German you work “with” and not “for”), and lo and behold you become more productive. The key purpose behind Kurzarbeit is to not lose this accumulation of human capital.

Krugman adopts the conventional ‘Anglo-Saxon’ view that European-style employment policies are bad for long-run growth and that in “normal times” there is something to be said for labour markets in which employers are free to hire or fire at will but Dorman gives this view short shrift.

In normal times the US runs a massive trade deficit with Germany, unable to compete in industry after industry on quality-price comparisons. Labor in this country is strictly an expense, not an asset, and therefore quickly shed when sales go down. Note Krugman’s language: it is “occupations”, not workers who are productive. Even our most knowledgeable pundits can’t imagine an economy in which the skill of the average worker is the main competitive advantage, the last resource you would want to shove out the door.

So , do we in Britain have a GDP policy, a skills policy or simply a make-it-look-good policy



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